Yale tuition increases are unjustified

Sacrelicious
    By Carl Bialik

"It just seems like the right thing to do," Jim Kolesar, director of public affairs at Williams College, said in an interview. "We could afford to do it." Kolesar was talking about Williams' decision to keep tuition and fees unchanged for the next academic year, marking the first time the school has kept student costs level for two consecutive years since 1954. Williams' endowment and other investments, which total $1 billion, have grown in value so dramatically that, according to Kolesar, "We could keep fees level while meeting 100 percent of [financial aid] need, being need-blind, and enhancing our academic programs."

ERIN LEWIS/YH

Williams' tuition, like that of most elite U.S. colleges, has increased rapidly for decades, usually outpacing inflation. "There's a sense that people feel it's outrageous," Kolesar said of private-college tuition. David W. Breneman, Dean of the Curry School of Education at the University of Virginia, agreed, saying in an interview, "It's gotten modestly embarrassing to some institutions how well off they are."

Apparently, not all institutions are embarrassed quite so easily. While Williams' administrators recognized the college's wealth, Yale University President Richard Levin, GRD '74, and Provost Alison Richards have continued increasing tuition. Richards said in an interview that she could not comment on whether she would advocate keeping tuition level, but said, "I see no evidence that there is a sea-change in the philosophy of the universities in the country." The Yale College term bill increased 2.9 percent for the 1999-2000 academic year, the smallest increase since 1968, and the smallest increase in the Ivy League in two decades. However, consumer inflation was only 1.6 percent in 1998.

In the next two months, when Yale's administrators announce college tuition for next year, they will have an opportunity to follow Williams' lead. "Higher education has come under a lot of criticism for tuition increases in the face of endowment run-ups," Breneman said. "We're now in a nice position where we can afford to back off for a year or two and get some public credit for it."

But then, Yale has been in such a position for a few years, as a result of the same economic boom that has benefited Williams. From June 30, 1991 to June 30, 1999, Yale's endowment rose from $2.59 billion to $7.18 billion. This is an inflation-adjusted increase of 112 percent. Yet, during that same period, the Yale College term bill rose from $20,820 to $30,830, an adjusted increase of 13 percent. While Yale bolstered financial aid for the 1998-99 year, Yale's net revenue from tuition still increased from $105 million to $147 million from 1991 to 1999, a seven percent increase after adjustment for inflation.

Why has Yale continued to increase tuition? Because Yale's administrators have bound themselves by policies that have caused them to do so. Most notable of these was the 1980s policy of "deferred maintenance," in which needed building renovations were delayed. Yale has had to spend heavilyin recent years to catch up—$216 million on capital projects last fiscal year alone. In addition, Yale sets expenditures from the endowment according to a strict formula based on last year's spending and the current year's rate of return. While the rule is intended to yield a long-term spending rate of five percent, the actual spending rate has remained at 4.3 percent or below throughout the last decade of astonishing economic growth. Williams' more flexible spending policy allows administrators to decide how much to spend each year, while still preserving endowment value in the long term.

Moreover, it often seems that Yale's officers care less about maximizing the quality of education and student life than about increasing the endowment and operating at a suplus—which was $700,000 in the last fiscal year. While Yale is contractually obligated to preserve the value of gifts to the endowment, it has another, little-known stockpile of assets that comes with no strings attached. Known as the "quasi-endowment," this $1.6 billion fund has been built up from surplus and unrestricted donations, and is invested and counted with the endowment. Yale has not hesitated to increase tuition while hoarding these unrestricted funds.

In 1998, Congress weighed in on the rapid increase in private-college costs and university endowments by convening a commission on higher education. While this commission did little other than release a report documenting recent tuition increases, the commission's existence sent the message that "measures could be taken," Kolesar said. Such measures could include removing lucrative tax exemptions for property and bonds, withholding grants, or sanctioning universities that do not spend a certain percentage of their endowment each year. "You don't want the federal government and its agencies mad at you," Breneman said. Richards said, "I think you'd be a fool not to keep a watchful eye on federal decision-making on higher education," adding that Yale has done so.

"My guess is that [Williams] is trying to send a signal to its peer institutions," Breneman said of Williams' decision. Yale's administrators have already chosen to ignore previous signals from a robust economy, an outraged public, and a concerned Congress. We will find out soon if they also ignore Williams' signal.

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