<p>meanwhile, tufts also receives a $100 million donation!</p>
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By the same token, if a generous donor endowed MIT with enough money to make it tuition-free . . .
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<p>At what point would that be? It is my belief that a number of well endowed schools could go this route now. In the background they may already be doing this, i.e. Princeton's no loan financial aid policy. Why go to no tuition when you can continue to stockpile more resources?</p>
<p>The average private school costs over $40K/year. This enables only those at the top of the income range to afford the education at that school without financial aid. The schools can then package their financial aid toward those that they really want . . . just like Olin.</p>
<p>The Atlantic Monthly article called it admit-deny. Admitting a student but not providing them enough to attend. Other students are more desirable and get a larger package. The schools can remain "need blind" in their admissions while getting the students that actually increase their endowment.</p>
<p>My question is, at what point is the endowment big enough so they can all go tuition free?</p>
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My question is, at what point is the endowment big enough so they can all go tuition free?
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<p>It's not just a question of big enough endowment. </p>
<p>Most existing endowments are heavily encumbered with very specific restrictions on how it can be used. When donors give large chunks of money to endowments, they like to think that they are leaving a lasting imprint on the place, so they typically attach strings that state that income their donation is to be used for a very specific purpose.</p>
<p>So, it would take a very generous donor with a specific vision to attach the strings stating that proceeds from the donation would be used to replace student tuition charges.</p>
<p>"Most existing endowments are heavily encumbered with very specific restrictions on how it can be used.</p>
<p>First of all, that's just plain false - and you can usually check to see what part of an endowment and donations are for unrestricted use. Remember, we are talking 0.4% of the endowment here, or roughly 6% of annual endowment earnings. Secondly, and far more importantly, MIT (like many of the Ivies) virtually every year receives contributions in alumni donations ALONE (forget the earnings) greater than it would cost them to provide free tuition to all of their current full-freight customers.</p>
<p>This has nothing to do with strings attached, or the need for large donations, but simply MIT (and other schools) making what they consider to be the most rational use of funds.</p>
<p>I think it may be time to put some real numbers on these proposals.</p>
<p>I'll use figures from some of the top LACs because their financial reports are clear-cut in terms of undergrad pricing.</p>
<p>The big endowment schools currently charge net tuition and fees in the range of $20,000 per student, reflecting the fact that tuition is already free for a significant percentage of their students.</p>
<p>So, to go ahead and make the entire school "tuition-free" without reducing current levels of educational expenditures, the school would need additional endowment to provide $20,000 per student.</p>
<p>The most liberal endowment spending policies suggest a maximum annual spending rate of 4.5% of endowment. Thus, the schools would need a donor to come forward with more than $400,000 per student in additional funds. To put that number in perspective, there are only 2 dozen colleges and universities in the country that currently have an endowment of $400,000 per student.</p>
<p>For free tuition:</p>
<p>A school with 2,000 undergrads would require $800 million in new endowment. </p>
<p>A school with 4,000 undergrads would require $1.6 billion in new endowment. (As of June '04, only 25 colleges and universities in the US had total endowments of $1.6 billion)</p>
<p>A school with 6,000 undergrads would require $3.2 billion in new endowment. (As of June '04, only 18 colleges and universities in the US had total endowments of $3.2 billion)</p>
<p>Virtually of the income from that new endowment money would go to eliminate tuition that students are currently willing and able (with varying degrees of sacrifice) to pay, with the vast majority going to students who are currently willing and able to pay full sticker price. </p>
<p>Speaking realistically, eliminating tuition for those students who are currently willing and able to pay would almost certainly require a signficant reduction in current levels of per student spending. In the world of higher education cost structures, this almost certainly would mean a significant reduction in faculty numbers.</p>
<p>Here are the June 04 endowments for reference:</p>
<p>It doesn't require one penny in new endowment if the school chooses to make it a priority. And (for some schools like MIT), it doesn't require one penny in endowment in any case. Alumni giving from undergraduates alone at MIT last year was $139 million, way more than is necessary to provide free tuition for everyone (and have plenty left over) without touching the endowment.</p>
<p>But I can't really see why they would want to.</p>
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It doesn't require one penny in new endowment if the school chooses to make it a priority. And (for some schools like MIT), it doesn't require one penny in endowment in any case. Alumni giving from undergraduates alone at MIT last year was $139 million, way more than is necessary to provide free tuition for everyone (and have plenty left over) without touching the endowment.</p>
<p>But I can't really see why they would want to.
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<p>I agree that the school has other higher priorities for that alumni giving. </p>
<p>I don't think the impetus for a tuition-free policy will come internally from within a school. I think it will come a determined donor with a "bee in his or her bonnet" to make a splashy impact on a particular school.</p>
<p>Something like Mr. Axline did at Caltech--though his wealth didn't allow him to make a gift sufficient to make tuition free for everyone there. He gave a gift that allows Caltech to offer 30 generous merit scholarships a year (half of them full rides and half of them full tuition.) If he'd had enough money to allow Caltech to fund merit scholarships for everyone in the entering class, I'm sure Caltech would have been happy to accept.</p>
<p>Caltech does offer a huge number of non-need-based scholarships, especially considering their very small size (entering freshman class somewhere in the mid 200's.) In addition to the Axlines, they offer quite a few full-ride scholarships to attract URMs. The yield rate is quite low on both of those offers. In addition, Caltech offers a lot of merit scholarships to upperclassmen who've done well in their early years. (Obviously the "yield" on those is close to 100%, since the students are already at Caltech and thriving there!)</p>
<p>Obviously Caltech has no problem with commiting funds to non-need-based scholarships. I think they'd be delighted to accept a gift that allowed them to offer free-tuition merit scholarships to all students.</p>
<p>Why should MIT be any different---if the right donor came along to make them available to ALL students at MIT?</p>
<p>(Both MIT and Caltech are happy to offer all RSI students full-rides-all-expenses-paid for those summer programs for high school students, regardless of family income.)</p>
<p>I do think there is a potential problem with a campus culture in which SOME students get merit scholarships and others do not--if MIT is trying to create a collaborative community, where all students help one another, it is potentially divisive and uncomfortable for the institution to designate some students as "merit scholars" and others not.</p>
<p>So I think it would take a really wealthy donor willing to give enough money to fund tuition scholarships for EVERYONE in order for MIT to be willing to take it.</p>
<p>There is building pressure from below--just about EVERY college in the country EXCEPT the Ivies, MIT, and a very small number of LACs openly offers non-need-based scholarships.</p>
<p>The Ivies have an explicit agreement not to offer non-need-based scholarships (as part of their highly detailed athletic league provisions.) It's a pretty effective cartel--a school that might otherwise be tempted to deviate by openly offering merit scholarships would have to leave the league, which is pretty much unthinkable.</p>
<p>But there are schools whose academic quality and student bodies are comparable to many schools in the Ivy League (Berkeley, Michigan, Chicago, Duke, WUSTL, etc.) that have no problem with openly offering non-need-based merit scholarships.</p>
<p>Stanford, interestingly, does not offer academic merit scholarships, but has no compunction about offering non-need-based athletic scholarships. (It plays in a league with other schools that offer athletic scholarships, so I presume it feels it needs to match them in order to be competitive.) Stanford's willingness to offer non-need based scholarships in the athletic realm suggests that it's in a poor position to "stand on principle" in refusing to offer them based on academic criteria.</p>
<p>It's a very interesting market to watch. A lot has already changed in recent decades. The situation is potentially unstable.</p>
<p>There used to be an "overlap" group of financial aid officers from highly selective schools who met to make sure that everyone was defining "need" in the same way. Justice Department intervention forced an end to that practice.</p>
<p>Some schools have banded together to create a common set of guidelines for "institutional methodology" in determining need, but some key schools that were originally part of that overlap group have chosen NOT to participate in that group--notably including Harvard and Princeton.</p>
<p>So...as game theoretic economists would say, the current situation is unstable and potentially volatile.</p>
<p>If I were running a college and a donor came in riding on a white-horse with a huge gift for the endowment allowing me to offer free tuition to all students (and which would also allow me to get out of the messy business of poking into the financial details of all my students!) WITHOUT any decline in the quality of the product I was offering, I'd be very happy to accept! </p>
<p>EDIT: Added thoughts: mini keeps talking about how "need-blind" doesn't actually exist anywhere. In a college which does not have to charge tuition, there's no need to worry about attracting a sufficient mix of full-pay students. (The service academies are currently a good example--they don't need to worry about attracting enough students from wealthy families.)</p>
<p>interesteddad,</p>
<p>Thanks for the post, you understood what I was getting at. However, I question one bit of the math. If it requires $800M for a school of 2000 students wouldn't it take $2.4B for a school of 6000, not $3.2B. Or am I missing something.</p>
<p>Clarification: When I said, "I'd be very happy to accept" a donation allowing me to offer full-tuition scholarships to all my students if I were running a college, I'm saying that from the pragmatic position of a single decision-maker concerned about the viability of its own institution to compete in an unstable and volatile market in which virtually all the other players are manovering in various ways.</p>
<p>It should be noted that I'm profoundly glad I'm NOT running a college--the responsibility for maintaining financial viability in the current unstable situation is challenging.</p>
<p>Also, I'd insist on far more funding than interesteddad computes in order to feel confident I can fund full tuition scholarships permanently---there are rising health care costs, rising fuel costs, uncertainty about continued Federal and state financial aid programs, etc. </p>
<p>Interestedad's calculations were based on funding the current "net cost to students" of their education. But some of the current tuition discount is coming from external sources (Pell grants, state tuition aid grants, external scholarships) and those might not continue to be available if the college went to a zero-tuition policy.</p>
<p>It would take a phenomenal amount of money to make me feel I could permanently commit to a zero-tuition policy. (Consider if a college had tried to make this kind of calculation in the late 1960s, before inflation took off. With inflation charging into double-digts--while the stock market stagnated in the 70s, a college would have been hard-pressed to stick to its zero-tuition plan.)</p>
<p>Thanks Eagle. My math was incorrect.</p>
<p>Wisteria:</p>
<p>Now, we are in agreement.</p>
<p>I agree that the rise in merit-aid discounting to wealthier students has de-stablized the market.</p>
<p>I also agree that any move towards "free-tuition" will come from market pricing pressure, i.e. a school feels the need to go to the most extreme form of merit-discounting to get the students they want.</p>
<p>Offsetting that, I would make four points:</p>
<p>a) The "big boys" have felt a little pressure from the merit-discounters, but that pressure has, so far, not really put a dent in their ability to assemble a class. For example, we have a parent here who ultimately chose to pay MIT $180,000 versus a free-ride at Olin. Think about that in terms of the power of the brand identity in elite college purchasing decisions.</p>
<p>b) The merit-discounters are finding that all they have really accomplished is increasing the cost of competing with each other for the students they all would have shared anyway.</p>
<p>c) Although merit-discounting was originally conceived as a means to maximizing revenue (a little aid to four rich kids costs less than need aid to one poor kid), that theory only works as long as your school is one of the few doing it. Now that everybody below the "big boys" is in the game, these schools are screaming bloody murder about the loss of revenues from tuition discounting. They are all trying to figure out how to increase net tuition revenues (higher loan components, etc.).</p>
<p>d) Don't think the "big boys" missed seeing the noise Harvard made with what was essentially an empty PR stunt in announcing the end of loans for students under $40,000 in annual income. Big whoop. They only had about 80 of them in a freshman class to start with and the load components for a Pell Grant level student were already next to nothing. That program probably cost them $150,000 tops. They would have spent that much in recruiting commissions (at $4,000 a pop) if they had hired Questbridge to go find them 40 new low-income students out of a freshman class of 1600+. Or, the revenue from 2000 additional application fees generated by the headlines (and resulting false hope) would cover the cost. I look for the big boys to all follow suit with a series of creative empty PR gestures of their own.</p>
<p>So, with all the math we are throwing around on how much it may cost, how is Olin doing it? The started with how much? Built the buildings with what? Hired faculty with how much? Provides free tuition for 300 students?</p>
<p>I would note that many schools, in particular the Ivy League schools are expanding their engineering schools. At these schools that are the bastions of liberal arts what is the rationale behind his effort?</p>
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For example, we have a parent here who ultimately chose to pay MIT $180,000 versus a free-ride at Olin. Think about that in terms of the power of the brand identity in elite college purchasing decisions.
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Why do I feel as if I am continually at the business end of a subtle put-down every time you mention this? Do I need to explain again why my son made his choice and how fortunate I feel that we can support his choice?</p>
<p>The Olin Foundation's grants to the school total about $460M (which included all costs of building the college from scratch, as well as the tuition endowment).</p>
<p>Why do you think it's a put down? Every one of us has to make the same kinds of decisions, factoring price versus tangible and intangible perceived value from various college options. I'm saying that MIT clearly offers very strong perceived value to consumers in order to overcome a $180,000 price differential. I think that it is fair to say that, to date, MIT is not feeling insurmountable market resistance. It's current product, at its current price, is quite attractive.</p>
<p>To answer the question, how does Olin do it? The answer lies difference between multiplying by 300 and multiplying by 4000. Plus, at $40,000 per student, Olin would have significantly less demand and, therefore, would not be able to put together the same student body. Having a very strong student body is a key element in their strategy to quickly build prestige.</p>
<p>More power to those of you who know Olin so intimately. I confess I hadn't heard of until 2001 when I noticed several students had listed it as their destination, and we didn't have a college code for it. I was like "Where?!?" What I read really captivated me. </p>
<p>One factor in the general discussion that hasn't been addressed is personal investment in education. (Unless I missed it earlier, in which case I apologize to the poster who first brought it up!)</p>
<p>Right now the "free" deals are competitive enough that students who land these offers are pretty well-screened. These deals are offered to the best, the most prepared, most motivated, etc. </p>
<p>However, if free tuition became a wider practice, available to more students on more campuses, might it diminish the sense of commitment and personal investment those students (or their families) feel in a college education? Might there not be something about the "price" of college (and the charging of tuition) that increases its value to the students?</p>
<p>I'm not sure where I come down on this question, myself.</p>