By Greg Forester, Staff Writer
U.S. lawmakers mulling legislation that would require colleges and universities to annually spend at least 5 percent of their endowment have found opposition in the hallowed halls of Princeton University.
The lawmakers, including U.S. Rep. Peter Welch, a Vermont Democrat, say that the cost of college education has become too expensive for many American families. Institutions of higher learning, which receive federal funding and tax exemptions, need to be forced to spend endowment money to keep costs down for students and their families, Rep. Welch has said.
”College costs must be brought under control. It’s time to call the question and better understand how endowments are being used to improve affordability for students,” said Rep. Welch in a statement. He plans to introduce such legislation as early as January.
But mandates are not the right solution, according to officials at U.S. colleges and universities like Princeton, who have made their feelings known at federal roundtables convened by Rep. Welch and others, and in official university communiqués.
”This is not something that’s broken, that needs to be fixed,” said Robert Durkee, vice president of Princeton University, during an interview Thursday. “If your goal, as a member of Congress, is to encourage institutions to provide more financial aid, these aren’t the institutions you should be focused on.”
Officials like Mr. Durkee say that endowment mandates like Rep. Welch’s will damage a system that has worked quite well for a long time. This is especially so at universities with large endowments, like Princeton’s $15.7 billion, that also happen to be where incoming students are greeted by the best in financial aid packages.
Backing up those sentiments are university statistics, which demonstrate that Princeton is already using its endowment in the way that legislators are calling for, according to Mr. Durkee.
He said legislators haven’t paid attention to statistics provided by Princeton and other universities that back up that view, showing generous aid packages and an overall decrease in the cost of school for Princeton students.
Mr. Durkee cited the following statistics, which were also used by university President Shirley Tilghman during a discussion with Rep. Welch in early September.
In 2008, the average financial aid grant given for a freshman was $33,450, a figure that represents 97 percent of tuition. For families making anything lower than $75,000 a year, aid grants cover everything — tuition, room and board.
Even for students coming from families with significant income — between $180,000 and $200,000 — the average grant is $22,000, or more than half of tuition costs.
For the year, the university actually handed out more in financial aid grants than it took in from tuition bills, officials said.
Fully 55 percent of the university’s student body is on financial aid, and at Princeton, that does not mean students emerge from college with thousands of dollars in debt. Beginning in 2001, the university eliminated loans as part of the aid process.
”The only reason we can do that is because we have a substantial endowment,” Mr. Durkee said.
Maintaining such aid packages was made possible through financial strategies that might very well be disrupted by some sort of endowment-spending mandate, according to university officials.
Princeton’s plan actually relies on spending 5 percent more of each of the endowment’s 3,500 or so separate accounts than the prior year. The university then reviews how much was spent against the overall size of the endowment, and adjusts spending rates to fall somewhere in a range of 4 to 5.75 percent of the total endowment per year.
”This policy works very well, for everything we’re trying to accomplish,” said Mr. Durkee. “It allows us to grow steadily over time, and it’s flexible and focused on making sure we can make long-term commitments and meet them.”
But such a system, which has grown the university’s endowment to one of the five largest in the nation, would be constrained by Rep. Welch’s proposal, according to Mr. Durkee.
Mr. Durkee agreed that on the whole, the cost of college education was spiraling out of control, but federal mandates, he said, are not the proper solution.
He noted that both presidential hopefuls, Sen. Barack Obama and Sen. John McCain have addressed college costs and using the power of the federal government to deal with the problem.
”The government is going to think about how to provide more help for families to go to college, but they shouldn’t focus on places like Princeton because Princeton can provide very significant resources,” Mr. Durkee said.
He said the area of focus should be federal assistance to institutions without large resources and endowments, where the only place to raise extra cash is through tuition hikes. Ironically, he said, an endowment-spending mandate at a school without a large fund would probably result in a tuition spike.
Andrew Savage, a spokesman for Rep. Welch, said that the congressman was aware of the opposition to the bill.
”The higher education community in Washington was very quick to criticize the proposal,” Mr. Savage said.
Rep. Welch is open to listening to the views of university officials in trying to work toward a way of making college more affordable, according to Mr. Savage.
Mr. Savage mentioned that one possibility was removing an annual 5 percent spending requirement and replacing it with a rolling requirement, so that the spending totals over a longer period would be mandated to hit 5 percent.
”That was a very positive development out of the (recent) roundtable,” Mr. Savage said.

