As Virginia universities’ tuitions continue to climb, they do so amid calls from Republican U.S. Senator Charles Grassley, ranking member of the Senate Finance Committee, for universities to spend more of their endowments to make college more affordable.
The total price of education for in-state students at UVA will increase next year by 7.3 percent. Meanwhile, from 2006 to 2007, UVA’s endowment netted $560 million.
UVA is hardly alone in tuition increases. Virginia Tech increased in-state costs for 2008-2009 by 10.8 percent. George Mason University announced last week that its in-state price tag will jump 9.8 percent. While the state’s universities cite decreasing financial support from Richmond as a reason for the increases, there is mounting pressure from the federal government for colleges to dip into endowments to help cover the spiraling cost of higher education.
“Parents and students have a right to expect these universities with big endowments to end the hoarding and start the helping with skyrocketing tuition costs,” said Senator Charles Grassley (R-Iowa) after Yale upped its endowment spending.
In June, UVA’s Board of Visitors will decide if it will increase the payout from the University’s endowment. In fiscal years 2006 and 2007, the Board approved payouts of 4 percent of the endowment’s market value in the previous year, $87.4 million in 2006 and $97 million in 2007. Grassley has floated the idea of requiring universities to spend at least 5 percent of their endowments each year.
Carol Wood, spokesperson for UVA, says the University hasn’t felt any pressure from Grassley’s probe to increase payouts from the endowment.
“The University is extremely thoughtful in how it uses its endowment,” she says, and points out that 72 percent of the funds are restricted by donors for designated purposes. “While the endowment has reached $5 billion,” Wood says, “you’re not free to use that money. Our responsibility is to invest it wisely in order to build a perpetual source of strength for the University.”
Other universities, however, aren’t as immune to the pressure from the feds. Yale recently announced that it would begin spending more money each year from its $22.5 billion endowment, a change that is in part, said Yale President Rick Levin, a response to Grassley’s criticism.
At its core, Grassley’s criticism questions why students face rising tuition costs while university coffers continue to swell. UVA’s endowment does partially fund AccessUVA, a University financial aid program. This school year, 11.5 percent of AccessUVA money comes from the distribution of unrestricted endowment funds, those not designated for specific use. The two largest expenditures of endowment funds go toward instruction (48 percent) and financial aid (25 percent).
The program is also funded by tuition. Wood says 3.7 percent of the coming tuition increase is tied to both AccessUVA and salaries.
Four years ago, the Board and UVA committed $20 million a year to AccessUVA. Since then, that commitment has grown—next year’s project budget for AccessUVA will increase by $2 million from last year, topping out at almost $62 million.
If the Board decides next month to increase endowment distribution, it will likely point to a desire to fund recommendations from the President’s Commission on the Future and not to pressure from Grassley.
“A number of Board members feel very strongly that this is the time to increase the endowment,” says Wood. “The Board is thinking that [the recommendations] would be a good use of endowment money.”
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