Top 15 university endowments – 1994 compared with 2004

Parents Forum
21

<p>Mini:</p>

<p>You probably picked a bad example in Haverford. Haverford encountered some rather serious financial problems in the late 60s/early 70s that required spending down the once large endowment. They are financially stable today, but the lack of endowment relative to their peers still impacts the college according to their Financial Officer and their accreditation self-study.</p>

<p>The comparison with a very heavily endowed school like neighboring Swartmore is fairly stark:</p>

<p>Per student spending (inc financial aid):
Swarthmore $78,967
Haverford $61,155</p>

<p>Per student spending from endowment:
Swarthmore: $29,295
Haverford: $14,162</p>

<p>Average Full Professor Salary:
Swarthmore $109,000
Haverford $94,200</p>

<p>Financial aid (per student):
Swarthmore $10,663
Haverford $7,972</p>

<p>Note that finanical aid spending is signficant to diversity fiends like you and I. Haverford only has 39% of its first year students qualifying for finanicial aid verus 51% at Swarthmore. This has a direct impact on diversity of all kinds. Haverford is 72% white American versus 63% at Swarthmore. Haverford is only 2% international versus 5% at Swarthmore. These are all endowment related issues. Simple fact of the matter: diversity costs money.</p>

<p>Plant and Equipment (per student):
Swarthmore $136,678
Haverford $89,617</p>

<p>Note that this impacts every aspect of college life, from sports to campus common areas to dorms to academic buildings to fine arts performing theaters to science centers and libraries. In the past year, Swarthmore has completed a $73 million science center, a $15 million dorm, and a $14 million renovation of the main administration/dorm building (Parrish). In the last 15 years, Swarthmore has also built the Lang Performing Arts Center, a major new academic building (Kohlberg), a new indoor tennis/fitness center, plus major renovations on another main academic building (Trotter). Haverford has built a new science center (about half the budget of Swat's) and is in the process of building a new gymnasium. However, they still lack some of the basic ammenities -- like a swimming pool. Their library was built in the 1860s.</p>

22

<p>evitajr1:</p>

<p>UChicago is an interesting case. It has historically been one of the wealthiest universities. However, they made the decision to increase their enrollment by 25% over the last ten years. This has the effect of an immediate reduction in per student endowment and, therefore, per student expenditures.</p>

<p>When a college undertakes a signficant increase in enrollment, the financial underpinnings of the school will suffer, unless they were operating below capacity. You can't make it up on volume when tuition and fees represents less than half of the total revenues.</p>

<p>Williams did the same thing when they went co-ed in the 1970s and increased the enrollement by over 33% over the course of just few years. However, they clearly recognized the strain this was putting on their competitive position (per student spending) in an analysis done by the econ department ten years ago outlining the relatively weak financial position viz a viz Swarthmore, Amherst, and Wellesley.</p>

<p>Since then, they have held enrollment to zero growth for more than a decade. By doing so, they have restored their per student endowment to one of the highest in the country. Normally, you would slowly grow your enrollment by a few students a year to keep pace with endowment growth.</p>

23

<p>
[quote]
My recollection is that in the 2005-6 budgets, Princeton books about 37% of the operating budget from endowment earnings, Harvard 34%, and Yale 32%. I think this is based on a 5% "draw" at Princeton and Harvard, and a 5.25% draw at Yale.

[/quote]
</p>

<p>Swarthmore is at 37% of the operating budget from endowment revenue. </p>

<p>They aim for an average long term "draw" of 4.25%, but it can float anywhere from 3.25% to 5.25% to stabilize the operating budget even with market fluctuation.</p>

24

<p>Intereresteddad,</p>

<p>Your Chicago comment is interesting. It is common lore in higher ed that at a properly run uni, undergrad education should make a profit, graduate science education should make a big profit (since most grad research is funded off grants with significant overhead etc.) and the social sciences and humanities grad programs lose a ton of $$.</p>

<p>So, there is no reason Chicago should be losing money on undergrads. Your comment "when tuition and fees represents less than half of the total revenues." is a good fund raising sound bite, but not relevant to the actual finances. It's a bit like concluding that, because a company overall is operating at a loss, that each product line in the company is operating at a loss - often not so, but the data is not broken out in a way that we can come to that conclusion. In truth, the marginal cost of an extra student (or a few hundred or thousand) need not be very high, but the revenue gain can be. It depends on a lot of other factors.</p>

<p>FWIW, I do not see a burst of construction around U. Chicago related to the enrollment increase. Yes, new, self funding dorms have been built, to consolidate the undergraduate life, free up space for the new GSB building etc. Yes, an new interdisciplinary research building is being completed, almost all lab space and unrelated to undergrad education. You get the idea.</p>

<p>Now, U. Chicago does have real financial issues. It has an old physical plant with a lot of deferred maintenance that has come due, and with high continuing costs. Security expenses are nontrivial. It has academic strength in areas that are not well funded by the feds, unlike science powerhouses.</p>

25

<p>"You probably picked a bad example in Haverford."</p>

<p>I think it is an excellent example, and for precisely the reasons you stated. Despite some of its financial trials in the past, it is as diverse as Williams (which has more than three times its endowment.) (Macalester manages to attract a much more diverse student body than Swarthmore, as does Occidental, and spends well more per student on aid, with one fifth the endowment.) Haverford's academic program plays second fiddle to none of the schools stated. It's faculty are virtually interchangeable with Swarthmore's, attended the same graduate schools (and I think you'd find faculty "longevity" - which means they weren't lured away) virtually identical.</p>

<p>In other words, the differences made possible by the triple endowment are, in the total scheme of things, so trivial as to be hardly worth mentioning.</p>

<p>Supposing you have two schools, one with 1500 students and one with 5000 students. The first school has a library with 500,000 books and adds 100,000. The second has a million books, and adds 100,000. The first school has many more books per students, spends significantly more to maintain the library, and spends more of its "endowment earnings" per student to add the books to the library. But no matter how you slice it, the "poorer" school has the better library.</p>

26

<p>
[quote]
FY 1994 </p>

<ol>
<li>Harvard U $6,201,220 </li>
<li>U of Texas System 4,549,214 </li>
<li>Yale U 3,529,000 </li>
<li>Princeton U 3,446,818 </li>
<li>Stanford U(1) 2,750,774 </li>
<li>Emory U 1,691,166 </li>
<li>Texas A&M U System and Foundations 2,055,808 </li>
<li>Columbia U 1,918,148 </li>
<li>U of California 1,750,203 </li>
<li>Massachusetts Inst of Technology 1,777,777 </li>
<li>Washington U 1,737,957 </li>
<li>U of Pennsylvania 1,464,455 </li>
<li>Rice U 1,278,524 </li>
<li>Cornell U 1,248,980 </li>
<li>Northwestern U 1,275,412

[/quote]
</li>
</ol>

<p>Shouldn't it be:</p>

<p>FY 1994 </p>

<ol>
<li>Harvard U $6,201,220 </li>
<li>U of Texas System 4,549,214 </li>
<li>Yale U 3,529,000 </li>
<li>Princeton U 3,446,818 </li>
<li>Stanford U(1) 2,750,774 </li>
<li>Texas A&M U System and Foundations 2,055,808 </li>
<li>Columbia U 1,918,148 </li>
<li>Massachusetts Inst of Technology 1,777,777 </li>
<li>U of California 1,750,203 </li>
<li>Washington U 1,737,957 </li>
<li>Emory U 1,691,166 </li>
<li>U of Pennsylvania 1,464,455 </li>
<li>Rice U 1,278,524 </li>
<li>Northwestern U 1,275,412 </li>
<li>Cornell U 1,248,980</li>
</ol>

<p>Either some of the ranks were wrong, or the dollar amounts were wrong.</p>

27

<p>
[quote]
In other words, the differences made possible by the triple endowment are, in the total scheme of things, so trivial as to be hardly worth mentioning.

[/quote]
</p>

<p>It is true that the differences between a Toyota and a Lexus version of the same platform are trivial on one level. They both have an engine, four wheels, and drive you from place to place very well. However, there are differences, mostly luxury touches, that are real, even if they are just icing on the cake.</p>

<p>Here's the odd thing about colleges. The schools with the largest endowments (and most luxury touches, like a swimming pool or an art history department or a library built in the last 150 years or student diversity) charge their customers less!</p>

<p>The key figure that Haverford looks at in the financial sections of their self-study is the "tuition discount rate": the total finanical aid grant expense divided by the full tuition sticker price. Swarthmore's discount rate is 36%. Williams is 32%. Haverford's just hit 28% in 2004, a jump up from the 24% it had been running. Thus, not only do Williams and Swarthmore spend more per student than Haverford, they charge less tuition. Thus, the Lexus (with the leather seats and surround sound CD Player and the alloy wheels) is actually cheaper than the Toyota.</p>

<p>Haverford's discount rate in 2004 triggered a provision in their Board authorization. At the authorized max of 28%, the college must automatically begin looking to reduce the discount rate by increasing the loan component of financial aid or by moving away from need-blind admissions. In a nutshell, they have reached the point where their endowment doesn't permit them to continue offering a major luxury item -- "need-blind/full-need" admissions.</p>

<p>BTW, Haverford is not as diverse as Williams by any measure. They have a higher percentage of full-fare customers and a lower percentage of non-white and international students. For example, Haverford's budget only includes financial aid equivalent to 2 full-tution discounts for international students in each class. By comparison, Haverford gives financial aid to 8 international students, Swarthmore to 45, and Williams to 91. Compare Haverford's international aid budget of about $240,000 to Swarthmore's of $1.5 million. That is why Williams and Swarthmore have 3 times the percentage of international students compared to Haverford. That diversity is a "luxury item". Some would view it as trivial; others would not.</p>

<p>BTW, don't get me wrong. I think Haverford is a terrific college. But, my adage still holds: if you are choosing between two colleges that you like equally, pick the one with the larger per student endowment. On purely economic terms (spending per student), you will get more for your money.</p>

28

<p>ID, where does one find the data on the tuition discount rate? Is the information availabe for all schools? Or just a few?</p>

29

<p>Newmassdad:</p>

<p>The year-end financial reports are available for most colleges by searching their websites or looking for the Finance Office under Administration.</p>

<p>In the operating Revenue/Expense table, there is an entry for Tuition Revenues (this is is the actual full-sticker price billing number) followed by a negative entry for Financial Aid discounts. Just divide the Fin Aid discounts by the Tuition Revenues to get the ratio. There is also an entry for Room and Board revenues, but this isn't part of the calculation.</p>

<p>BTW, if you want to calculate per student expeditures, be careful that you are comparing apples to apples. You can either count the fin. aid discounts as a reduction in revenues (not included in spending per student) or as an expense item (included in spending per student). If you want to include it, you have to add that amount to the total Operating Expense line item before dividing by enrollment. Or, sometimes a college will give "per student spending" with and without financial aid in the discussion section of the Annual Report.</p>

<p>On Chicago, I wasn't trying to suggest that the increased enrollment necessarily creates financial strain -- it's a very wealthy school. I just pointed out the enrollment increase because, in the context of per student endowment, it explains why such a wealthy school is not higher on the list. I agree that it is very difficult to analyze per student spending at universities. It is a much cleaner exercise when looking at an undergrad-only college. At an undergrad-only college, it is virtually impossible to "make it up on volume" in the short term; although the larger alumni base may provide dividends decades down the road if they bequeath their estates to the ol' alma mater.</p>

30

<br>


<br>

<p>Goodness! Did mini just make an argument based on economies of scale? Looks like it to me.</p>

<p>Anyone who has acted in a play at Haverford, worn its costumes, hung its lights, and built its sets, can only feel envy watching an equivalent production at Swat. Their theater is a palace, and it shows on stage. (What I can't figure out is why their food is so mediocre...)</p>

31

<p>
[quote]
What I can't figure out is why their food is so mediocre...

[/quote]
</p>

<p>A running joke among the Swat '09ers: the bad food is due to a good majority of the class being vegetarian. The rest of us meatarians just can't stomach the green goodness of the earth. I personally figure there has to be something not perfect about the school to prove that something so good can exist. And you know, a little creativity goes a long way. If you put ice cream in your soda, you've just made an ice cream float. Yummy...</p>

32

<p>My son will be a sophomore at Swat this Sept. and he thinks the food is mediocre too...yup, he is a meatarian, and pretty much has bad food habits. He's learning about (gasp, gasp) salad only now from his enlightened friends there. Not that we're not enlightened at home; but we managed to spoil him quite a bit.</p>

<p>So the only food he has is at Tarbles. He almost never goes to Sharples. I don't see what's soo bad at Sharples, btw.</p>

33

<p>I thought Haverford didn't need an art history department because Bryn Mawr has a really good one, and Haverford students just take courses at Bryn Mawr. And there were some other departments like this too.</p>

<p>Those two schools seem somewhat intertwined that way. It didn't seem like a problem to me. Is it?</p>

34

<p>Yes, Haverford and Bryn Mawr are quite intertwined that way; Chinese is only at Bryn Mawr; Japanese and Astronomy at Haverford; etc. In fields like biology where both schools have departments, students can major on either campus. I didn't think it was a problem at all.</p>

<p>The relationship with Swat is much more distant, literally and figuratively. You need to get passes to eat there; the only Swat department you can major in is Linguistics; etc.</p>

35

<p>Yes, there departments that are exclusively allocated to one school or the other:</p>

<p>Courses offered exclusively at Bryn Mawr:</p>

<p>Archaeology
Art History
Russian
Dance
Theater</p>

<p>Courses offered exclusively at Haverford:</p>

<p>Astronomy
Studio Art
Music
Religion</p>

<p>BTW, Bryn Mawr's finanical reports look a lot like Smith's. Both have seen their finanical aid discount rates skyrocket to unplanned and unsustainable levels in the last few years -- to the point where both schools found themselves projecting budget deficits in the '04, '05, '06, '07 timeframes. </p>

<p>Both schools have reduced their expense budgets, including faculty and staff reductions, to bring their budgets into equilibrium.</p>

<p>It appears that the financial aid discount rates have been skyrocketing across the board just in the last three or four years, an indication that colleges may have finally priced themselves above the market. When the echo-boom glut comes to an end in a few years and demand drops, look for some serious belt-tightening. This is part of why I think "need-blind" admissions will become a thing of the past at all but maybe a dozen schools with the highest per student endowments. Nobody else will be able to afford it, particularly as applications drop and it becomes more difficult to hold median SATs at the current levels.</p>

36

<p>
[quote]
The relationship with Swat is much more distant, literally and figuratively. You need to get passes to eat there; the only Swat department you can major in is Linguistics; etc.

[/quote]
</p>

<p>Swarthmore is in the same position viz-a-viz Bryn Mawr/Haverford as Pomona in the Claremont Colleges.</p>

<p>With double or triple the endowments and significantly higher per-student spending compared to their fellow consortium colleges, both Pomona and Swarthmore have less incentive for increased cooperation. In any shared arrangment, both Pomona and Swarthmore are likely get more kids coming "in" than going "out", thus they end up subsidizing the shared resources.</p>

<p>It's a shame, in some ways. But, the old adage still applies: follow the money.</p>

37

<p>The situation is similar at Harvard. They share with other colleges, but on a selective basis. For instance, they seldom share library resources on ILL. They are selective w/r/t library access. Cross enrollment is done, but easier with MIT, for example, than with BU.</p>

38

<p>The argument about "tuition discounting" is a red-herring for schools that are committed not to run their institutions that way. Berea (with a very small endowment) has 100% tuition discounting, as does Cooper Union, and several others, and both are more highly selective for candidates who would require financial assistance than Harvard, Williams, or Swarthmore. Smith's financial aid budget, roughly 2 1/2 times that of Swarthmore, and Amherst's, are a function of commitments to fund low-income students. Swat or Harvard could do the same from endowment income, if they chose, of course, but they choose not to. The reality is that the Williams airline model for running a college (where 73% of their Caucasian students receive no financial aid whatsoever), is NOT everyone's model (thank heavens!) In the case of Smith (which is one I know well of course) Jill Ker Conway set them on a different course in 1976, from which they haven't deviated. What is true is the commitment to fund 28% of the student body which is on Pell Grants, coupled with a drop in endowment through poor investments, was mitigated by contributions in 2004 being roughly 3X Swats. They have just completed raising $450 million, the largest capital campaign in the history of liberal arts colleges, to be used primarily for the new engineering and science centers. They could use the endowment for other things, and, for better or worse, make their strategic choices.</p>

<p>Hanna - the argument for economy of scale was simply that "spending per student" can be a deceptive measure when it doesn't add to student satisfaction with the academic program or the quality of campus life. Notwithstanding your decision to transfer from Bryn Mawr to Harvard, which I am glad has worked out well for you (and I very much understand and appreciate your reasoning, and Bryn Mawr would have been too small for me too, even if I had the right chromosomes), Harvard's endowment doesn't seem to have helped raise them from 26th in student satisfaction with the quality of academics. And it's certainly not for lack of endowment, but because of institutional choices.</p>

<p>The main point to all of this is that, at a certain point, how you spend your endowment is what counts, and what you spend it on, rather than its size. Macalester is debating whether to get rid of its so-called "need-blind" admissions because of costs, but the reality is that, either way, they will still spend more of their endowment on low-income students than Swarthmore or Harvard because they CHOOSE to do so.</p>

39

<p>Tuition discounting is not a red herring when it contributes to a projected deficit of $7 million in 2005/06 increasing by 10% a year thereafter. Here's the most recent letter from the President to the Smith community on the fiscal imbalance:</p>

<p><a href="http://www.smith.edu/president/letters/012904.html%5B/url%5D"&gt;http://www.smith.edu/president/letters/012904.html&lt;/a&gt;&lt;/p>

<p>Note that one of the three factors outlined as prime contributors is an unsustainable level of financial aid spending. Two of the actions taken to address the problem are a net cutback of 25 faculty positions (8.7%) and a change in the financial aid program to shift $1.1 million from grants to loans.</p>

<p>You are absolutely right that Smith has made a choice to spend more than most colleges on tuition discounting, both in terms of percentage of need students and merit aid discounting. Swarthmore has chosen to spend it on a lower student to faculty ratio. The difference in priorities is shows up in the following comparison:</p>

<p>Per student spending (not inc. financial aid):</p>

<p>$68,300 Swarthmore
$57,600 Smith </p>

<p>Per student spending (inc financial aid):</p>

<p>$78,900 Swarthmore ($10,600 per student in aid)
$70,600 Smith ($13,000 per student in aid) </p>

<p>Smith is spending $2,400 more per student in tuition discounts.</p>

<p>Swarthmore spends more despite being a more conservatively managed college. They have been operating with a balanced budget without faculty cutbacks. The extent of their response to several years of negative endowment growth was to ask departments to hold their budgets at existing levels. And, even in the last few years with declining markets, they have been spending a full percent less of endowment value on operating budgets each year (4.2% versus 5.2%), again more conservative than most colleges.</p>

<p>Keep in mind that Smith has a huge endowment, essentially the same as Swarthmore's. However, their per student endowment is less than half of Swarthmore's because they have nearly double the enrollment. Although Smith would not be able to offer the same breadth with a smaller enrollment, they would probably enjoy a more stable financial position with fewer students.</p>

<p>It's interesting how the financial statements of these colleges reveal different styles and priorities.</p>