Are endowments to blame for rising tuition? Or state governments?

More evidence for the effect of state funding cuts

Recent focus on universities' management of their endowments has distracted from a major cause of tuition increases: state funding cuts, David Brodwin argues in U.S. News & World Report.

An op-ed in the New York Times singled out Yale University for "hoarding money" in its endowment, and frequent Ivies critic Malcolm Gladwell followed up with a tweetstorm calling out the potential conflicts in interest of hedge fund managers donating hundreds of millions of dollars to endowments—run by hedge fund managers.

But, according to Brodwin, the universities with the wealthiest endowments offer some of the most generous scholarships to low-income students.

For example, students whose families make under $125,000 per year receive free tuition at Stanford University. Stanford, which has the fourth-largest endowment in the country, also reports that 77% of their undergraduates complete their degrees without debt—more than twice the national average.

Brodwin acknowledges that it's "easy to criticize the huge endowments that have been built up by [a few schools] over centuries," but he says that's a distraction from the real problem: state spending per student declined by 38% from 2001 to 2012, forcing colleges to raise tuition.

A recent post by policy analyst Michael Mitchell at the Center on Budget and Policy Priorities also blames state funding cuts for tuition increases. Mitchell notes that, overall, states have reduced funding by $1,800 per student per year—or a combined $13.3 billion—since 2008.

Mitchell also notes that, according to a Demos report, reduced state spending accounted for 79% of tuition increases from 2001 to 2011 at public, four-year institutions; the remaining 21% is spread among administrative spending, construction costs, and instruction costs.

And at two-year public colleges, state funding reductions were completely to blame for rising tuition costs in this time period, Mitchell states; spending on instruction, administration, and student services actually dropped (Brodwin, U.S. News & World Report, 8/24; Mitchell, "off the charts," Center on Budget and Policy Priorities, 8/24; Snider, U.S. News & World Report, 1/13).

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