Synopsis[ edit ] This essay is widely held to be one of the greatest examples of sustained irony in the history of the English language.
While state schools suffer and middle-class students drown in loans, elite universities are only getting richer. We seem to have stumbled into a system that subsidizes the college educations of a tiny few. Photo illustration by Lisa Larson-Walker. Photos by Wikimedia Commons.
Of course, normal hedge funds have to pay taxes on their earnings. The same goes for Stanford endowment: Advertisement Aiding wealthy research universities that cater to largely affluent undergraduates might have been acceptable in a more flush era.
But at a time when state colleges are still suffering from deep budget cuts that have driven up tuition and politicians are stretching for ways to make school more affordable for middle-class students, clawing back some of that cash to spend on needier schools is starting to sound awfully appealing.
Which is why it might just be time to start taxing Harvard and its cohort. Take your best guess in this quiz. Earlier this year, he and Jorge Klor de Alva, a former president of the for-profit University of Phoenix, released a report that compared the approximate amount of money private colleges saved from not having to pay tax on their endowments with the funding state schools received from government appropriations.
Though the authors were comparing different kinds of subsidies, the contrasts were nonetheless jarring. Chart by Slate In short they showed the extent to which some very rich colleges are getting richer thanks to tax benefits most Americans scarcely think about when we consider the resources devoted to higher education in this country.
In the past Nexus has produced dubious research boosting for-profit schools which are notorious for predatory business practices that made similar points about the subsidies received by wealthy, traditional colleges.
There are obvious reasons to be skeptical about a report by a think tank associated with for-profit colleges claiming that nonprofit schools are leaching on the system.
That said, Schneider, a former commissioner of the National Center for Education Statistics, is a generally respected figure in higher education policy associated with the center right. Slate is owned by Graham Holdings Company, which also owns Kaplan, itself a big player in for-profit higher education.
And, perhaps most importantly, it probably overstates how much money colleges are saving thanks to their nonprofit status each year, because it treats all increases in the value of their endowments as taxable income, whether or not they were actually realized. In the real world, the government only taxes capital gains when investors sell their assets.
Chart by Slate In other ways, though, the study may actually undercount subsidies to wealthy colleges. Private colleges and universities are sitting on hundreds of billions of dollars in their endowments.
But that wealth, along with the sizable tax subsidies that help it stack up, is concentrated in the hands of a tiny few. Of course wealthy universities see things quite differently. If a railroad magnate in endowed a classics professorship, then the school needs to keep spending the returns on his money on Latin instructors, not a new biology lab.
Moreover, they note, the money needs to grow at a regular rate to make sure they can keep up with the fast-rising cost of running the equivalent of whole towns while offering generous financial aid and ensuring that professors can keep conducting cutting-edge research, from now until forevermore.
Advertisement And some of these are fair points. So what, exactly, should we do about it? Some critics of large endowments have argued that schools should simply be forced to spend more of their money hoard.
Chuck Grassley caused a minor uproar in higher education circles by proposing that colleges should be forced to spend 5 percent of their endowments every year, the same way private charitable foundations are. Recently, Victor Fleischer, a law professor at the University of San Diego, caused a similar stir with a New York Times op-ed demanding that schools spend 8 percent per year.
Maybe schools would bolster financial aid and start paying adjunct faculty a living wage. About 95 schools would be affected— with institutions like Harvard and Yale at the high end, and ones like Marquette and Villanova at the low end—and they would be allowed to cut their tax bills by deducting dollars spent toward financial aid.
Chart by Slate Some might object to the idea of taxing a few colleges to fund others. But progressives have lots of spending they would like to do, and there are only so many new taxes Washington will ever pass.
Redistributing resources within higher education might not just be fair, but also necessary if we want to find ways to fund our public institutions. For starters, why tax giant endowments at colleges but not other nonprofits? Top Comment Top universities, centers of education and learning, stockpiling incredible wealth?Tiny Beautiful Things: Advice on Love and Life from Dear Sugar - Kindle edition by Cheryl Strayed.
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