The College Post
The College Post -- Covering Higher Education in America

Why Endowments Can’t Cure COVID-19’s Tuition Problem

While the upcoming fall semester will look very different than most college students had hoped, the price will stay the same for many.

As a leading research institution and prestigious university, Harvard University has announced that they will only allow up to 40 percent of their student population back onto campus, but still charge their full tuition amount of nearly $50,000.

One of the most secretive and misleading parts of higher education has come into question: endowments. Is it possible for universities to use their endowments for the purpose of lowering tuition? And has Harvard set a precedent for universities in the time of COVID-19?

Harvard’s decision comes as tuition fees are being challenged due to student loan pressures and huge amounts of untapped endowment funds. For example, Harvard’s endowment for the 2019 academic year was $40.9 billion – higher than any other university.

This means Harvard has a lot of money, even though the university itself has limited access to the endowment and determining what it is able to spend the funds on. Because endowments are meant to help institutions last forever, not just till the end of the pandemic, Harvard has less to spend than what students think.

The Endowment Misconception

There are common misconceptions around university endowments that lead to misinformation in regard to university budgeting.

Endowments are highly planned out pools of money. They work to build a sustainable future for the university in which they are able to provide scholarships to those who need and qualify for them, along with other initiatives. Due to this, it is extremely challenging for universities to get access to their endowment funds for emergencies such as a global pandemic.

Only 35 percent of Harvard’s annual operating budget is covered by their endowment. The rest is covered by donations made directly to the school and, of course, tuition. It’s necessary to look at how Harvard’s endowment breaks down for the purpose of showing how much the school itself depends on tuition.

Dr. Helen Carasso of the University of Oxford’s Department of Education explained to The College Post that universities don’t expect most students to pay full tuition. Many universities have a model of pricing in which they have a “sticker price” on their website to reflect the cost of tuition but as Dr. Carasso explains, “that [price] is discounted for the majority of consumers.”

It’s critical to take this into account when looking at universities that have received criticism for the price of tuition that they advertise to analyze the actual profit that they make from tuition.

Harvard depends on tuition. If tuition greatly decreased, the university wouldn’t be able to provide the services that they guarantee to both their students and the faculty.

Risks of Decreasing Tuition Amounts

Dr. Shaun Dougherty, Associate Professor of Public Policy & Education at Vanderbilt University, explained that universities have much more at risk than just losing money if they decrease the amount of tuition.

He told The College Post that, “there are real lives on the other side that are also impacted: people cleaning resident halls, those who provide meals and services for students for when they live on campus.”

Dr. Dougherty highlighted an important point that often fails to be included when calculating tuition this fall: the idea that there are people that depend on what you’re paying. Millions of adults in the US are employed by universities and thousands of those adults are facing layoffs, and a discounted tuition at any school – Harvard or less – will result in more layoffs.

Dr. Dougherty said, “you can’t flip these things on and off like a switch. If I fire 50 people who work on campus in the fall – when students return, I can’t hire those 50 people back seamlessly because of the way expenditures and revenues work.”

Even though, Dr. Dougherty – a Harvard graduate himself – is able to see the direct economic impact that would occur if Harvard discounted its tuition, he understands the frustration and confusion around the conversation.

“If I were a student, I would feel I am not getting the same experience online as I would be having if I were on campus,” he said. “I don’t think it’s unreasonable for students [to hope] for discounts in tuition or fees that students 100 percent can’t access when only online learning.” 

Examples of these fees would be gym fees, dining hall fees, and dorm room fees. 

While Harvard’s tuition stays stagnant, hundreds of smaller US colleges are trying to figure out what to do – with the cards stacked against them.

Miana Plesca, Associate Professor of Economics at the University of Guelph, explained that smaller, liberal arts colleges are going to have to make their own plan. “Harvard can afford to keep their tuition the same and still have a lot of applicants – other universities can’t,” she told The College Post.

As enrollment dwindles and the cost of higher education is questioned, it’s clear that it won’t be the large universities that close down but the smaller ones that fail to have the same resources and status of larger universities.

Harvard may have not set a precedent for all four-year colleges and universities but despite this, there is a clear message from Harvard’s announcement that Professor Plesca sees: “There are going to be a lot of changes – through all universities.”

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