Home > 2015 > Students

Colleges Have the Cash. Time to Start Spending More of It Helping Students

Advertiser Disclosure Comments 0 Comments

In a recent New York Times op-ed, Victor Fleischer, a professor of law at the University of San Diego, raises legitimate concerns regarding one university’s nearly half-a-billion-dollar payment to private equity fund managers for overseeing the investment strategy on a portion of its endowment fund. In particular, he calls into question the extent to which higher-education institutions with significant financial resources are using enough of that money for educational purposes, including easing the financial burdens of students who, left to their own devices, are borrowing increasingly large sums of money to pay for their schooling.

I agree with him, however the scope of the problem isn’t limited to the schools and universities with $100-million-plus bank accounts that Fleischer targets.

Certainly, nary a week or two goes by without word that a significant gift has been made to a prominent university. The much-heralded donations are often earmarked for specific projects, such as a new building, the modernization of an existing structure, the support of a new academic undertaking or, perhaps, the sponsorship of unique research. Less publicized smaller contributions, which are routinely made by parents and alums, may also be held in reserve to fund building projects or targeted academic pursuits, or, as is often the case, to bolster the school’s rainy day fund: the endowment.

A look at the typical not-for-profit school’s annual financial statements, however, suggests a slightly different story: Institutions are increasingly using the investment income (including interest) generated by these endowments (and, sometimes, principal amounts from the fund itself) to offset operational shortfalls.

Said differently, rather than taking steps to address the problems of spiraling administrative expenses, the dubious strategy of meeting enrollment goals by discounting tuition prices for some (which is analogous to marking down an exorbitantly-priced item to the level of “expensive”) and, perhaps, relaxing admission standards for others, school officials have instead chosen to bridge the widening gap between revenues and expenses by compromising the financial generosity that was intended to assure institutional longevity.

Which brings me back to the philanthropic activities on the part of those at the top of the income-earning food chain.

Although I understand the pride that comes from having a building named after an especially generous benefactor, I would argue that a more worthy use of his or her money would be to reduce the cost of tuition across the board. In fact, automatically restricting a meaningful percentage of all donations to that purpose (including the investment income that comes from that) may even inspire boards and administrators to take corrective actions that are long overdue, because fewer freshly-contributed dollars will be available to offset the red ink.

In other words, rather than battling with reluctant managers over how much to draw down existing endowment funds for educational purposes (including tuition assistance), as Fleischer advocates, why not control the flow of money at the source: when the donation checks first arrive in the mail?

The federal government can also help stimulate tuition-specific gift-giving by redirecting a portion of its annual financial aid budget to match the value of these restricted donations, dollar for dollar. It can do even more by incenting colleges and universities within this vastly overbuilt and redundant network of higher-educational facilities to combine.

If policymakers lack the political courage to reconstitute the Department of Education’s entire higher-education budget so tuition-free degrees become a reality for in-state students attending the nation’s public colleges and universities, they should at least agree on a plan to foster tuition-specific public/private partnerships that have the potential to at least get us part of the way there.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

More on Student Loans:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team