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Ask yourself: Would the $20 million gift that Bloomberg Philanthropies gave to Princeton in 2021 to support the university’s first-generation and low-income students have a greater impact at Tougaloo College, an HBCU with a $10 million endowment?

The very question—posed by educational historian Bruce A. Kimball and Sarah M. Iler, assistant director of the University of North Carolina’s School of the Arts—answers itself.

By way of contrast, consider the University of Pennsylvania’s 2020 pledge to contribute $100 million over 10 years to the Philadelphia School District to renovate decrepit schools. At least that might assist a more diverse student body.

As Kimball and Iler show, the wealthiest 1 percent of the nation’s 3,285 four-year colleges and universities holds 54 percent of campus endowments. The top 3 percent holds 80 percent. The consequence: the richest institutions can fully fund the education of lower-income students, while the vast majority of working-class and lower-middle-class undergraduates must take out loans to pay for their education.

To make matters worse, the most highly resourced campuses exacerbate institutional inequalities by absorbing a disproportionate share of government, philanthropic and foundation resources. These institutions also distort the standards by which colleges and universities are measured—and which lesser-resourced institutions cannot possibly meet. The awful truth is that the wealthiest institutions are so flush with resources that they are deforming the entire system of higher education.

I’m not referring here to faculty salaries or reduced teaching loads or class size or breadth of programs or extensive support services—all of which are good things (within limits). Nor am I referring to the wealthiest institutions’ lavish amenities and outrageous administrative salaries, though I do feel that those salaries and the size of the administrative staff are unconscionable at a nonprofit campus.

What I do object to, first, is the shameless, snooty flattery, at elite colleges, of their undergraduates as “the best and the brightest” (in Evan Mandery’s words), especially since these schools could admit three or four classes that would be indistinguishable in terms of academic potential. Statements like those help perpetuate the illusion that their students are uniquely gifted and talented. They’re not.

I’m also annoyed by the implication that the quality of the education that these institutions offer is superior to that found elsewhere. It isn’t. Then, there’s the failure to acknowledge that the value that these institutions add is largely a product of exclusivity, pedigree and connections.

More seriously, I’m angered by the audacious and obnoxious claim that these campuses need donors’ and foundations’ money more than institutions that serve much larger population of socioeconomically disadvantaged students. More than that, I’m appalled by their failure to do more to assist the higher ed ecosystem as a whole.

What inspires these grim thoughts is Kimball and Iler’s richly researched, provocative and pivotally important history of college endowments, campus fundraising campaigns, university finances, institutional spending and student debt. Their book is, in part, a highly persuasive critique of the “cost disease” argument advanced by William Baumol and William Bowen, that the rising cost of college tuition is (in Bowen’s words) “inexorable and unpreventable”: that it is impossible to increase productivity in higher education without reducing quality.

Such an argument, the authors show, is grossly exaggerated. The history reconstructed in Wealth, Cost and Price in American Higher Education demonstrates that at various points over the past century the total cost of providing a college education per student plateaued or even declined over prolonged periods of time and that the sustained rapid rise in costs above the inflation rate dates to the 1970s—coinciding with an elite campaign to assure their campuses’ pre-eminence.

If the cost disease isn’t to blame, what is? Here, the authors turn to former Harvard president Derek Bok for an answer: that elite institutions have become so consumed by efforts to generate revenue, increase their endowments and raise their competitive profile that these endeavors seem to have become their dominant aim. To put it bluntly: the wealthiest colleges and universities began to engage in a positional and spending arms race, with a goal of maximizing their reputation and prestige.

Much of the book details the wealth advantage of the richest universities, which can raise tuition at will—stoking public resentment—and which don’t have to discount tuition, while expending a lower proportion of their endowment than poorer institutions. At the same time, in the face of shrinking public investment, public institutions raised tuition, which they tried to offset with increased financial aid for lower-income students. The result was to anger middle-class parents while failing to increase net revenue.

Please note, as the authors do, that the elite universities’ wealth advantage mirrors the wealth advantage enjoyed by the most affluent Americans. In both cases, the returns to capital far outstrip increases in salaries and wages over the past four decades.

As the authors show, between 1870 and 1930, campus leaders embraced the idea that colleges and universities were engaged in fierce Darwinian struggle for survival and that their long-term success depended on the size of their endowment. In order to build their endowments, campuses launched the first alumni appeals followed by national fundraising campaigns (the first was introduced by Harvard in 1915).

Before the 1950s, most elite campuses invested their endowments conservatively in bonds and mortgages. But faced with rising expenses after the war, the institutions with the largest endowments increasingly invested in stocks and equities. During the 1970s, the wealthiest institutions adopted a “total investment” strategy that entailed investing in small and foreign businesses as a way to generate higher returns in response to escalating inflation. The 1990s saw the rise of a much more aggressive strategy, pioneered by Yale’s David F. Swensen, taking advantage of alternate assets, including hedge funds, private equity and natural resources. This strategy resulted in unprecedented returns on investment that greatly enhanced elite institutions’ financial advantages, but such an approach was only available to the wealthy institutions able to weather significant volatility in returns.

In addition to tracing shifts in development and investment policies, Kimball and Iler make several important arguments that higher education faculty and policy makers ought to reckon with.

  1. Fundraising and revenue generation have, for the wealthiest and most selective institutions, become ends in themselves—an ever-escalating reputational and spending campaign that has had the effect of intensifying higher education’s stratification and distorting spending priorities across the higher education ecosystem.
  2. These institutions’ fanatical pursuit of revenue and reputation has had a number of ironic consequences: it sparked a populist backlash, evident in the endowment tax, and has fueled labor activism among grad students, postdocs and research assistants, who see their institutions’ growing endowments and question how it is being spent.
  3. The wealthiest schools discovered in the 1970s that they could raise tuition for higher-income students well beyond the inflation rate; these institutions drove the escalation in tuition and created a situation in which lesser-resourced private colleges had to raise tuition to compete while simultaneously discounting tuition to attract students.
  4. The most richly resourced institutions have lost sight of their public purpose and act in precisely the neoliberal ways that their critics decry: sending a substantial minority of their graduates into consulting and finance while refusing to expand their student bodies and introducing expensive cash cow programs without regard to students’ return on investment.
  5. The 35 most prestigious U.S. public universities, which are members of the AAU, measure their reputation in somewhat similar terms—in terms of fundraising, number of members of national academies, of Ph.D.s granted, breadth of programs and funded research (which generally requires a medical school), plus success in revenue sports. Eager to protect their own status, these elite public campuses set a high bar that less well-funded public institutions are under intense pressure to match.

There are other important points that grow out of Kimball and Iler’s research.

  1. Over time, as Howard R. Bowen demonstrated, a declining share of institutional revenue at the wealthiest institutions has been spent on instruction. Meanwhile, expenditures on administration, even excluding student services and student life, have increased markedly.
  2. The dramatic increase in student debt is driven by loans to graduate and professional students, those who attend predatory for-profit colleges and those in the lowest three income quintiles, especially the bottom 20 percent, whose family income has lagged behind the rising cost of living and who attend the institutions with the fewest resources, which aren’t able to adequately subsidize the cost of their education.
  3. In real dollars, public spending on higher education has risen, but because of a slowdown in economic growth after 1970 accompanied by a rapid increase in student numbers, public subsidies have not kept up with campus costs, partly because colleges and universities expanded their mission and took on more functions and responsibilities.
  4. In recent years, resource constraints are driving more and more rural, regional and private and public urban campuses to cut programs, mainly in the liberal arts, limiting access to the kind of well-rounded education that students at more affluent institutions take for granted, which may well help drive expansion of online courses serving multiple institutions.

In their book’s conclusion, Kimball and Iler make the case that just 73 presidents or provosts, by dint of their leadership positions at elite universities, could set higher education on a different course. For example, they could share some of the funds raised in capital campaigns with needier institutions or act more collaboratively to serve the interests of society and higher education as a whole.

Any chance that could happen? None. The preceding 277 pages reveal that campus leadership has, for a century, placed narrow institutional self-interest above the greater good, even in instances when it might redound to their university’s credit. One example the authors cite is Yale’s penny-pinching approach to negotiating with the city of New Haven. Another is the University of Michigan’s decision to raise tuition during the pandemic after just completing the largest capital campaign in its history.

Higher education isn’t the only sector where gross resource inequalities are a problem, but it is the sector that has done the least to address this challenge. Many states, often under court order, have adopted Robin Hood plans to redistribute funds or have introduced categorical aid targeted at lower-resourced school districts. Many major urban school systems require schools to split revenue raised by fundraising campaigns or grants.

It is certainly the case that many Robin Hood plans tend to level down rather than level up, as Caroline Hoxby has shown. But elite institutions should treat that as a warning. Failure to do more to share the wealth is likely to provoke a policy backlash.

The solutions aren’t a secret. The better-resourced institutions should:

  • Make all lectures and conferences and as many courses as possible available online at no charge.
  • Invite neighboring faculty and graduate students to participate in campus workshops.
  • Create or expand mentored summer research programs for faculty and undergraduate and graduate students at lesser funded institutions.
  • Encourage your own undergraduates and graduate students to participate in online tutoring programs.
  • Offer to manage the endowments of poorer institutions at low cost and guarantee bond issues by selected underresourced campuses.
  • Spend residual endowment income (that is, a small amount over the current 5 percent outlay) in ways that can assist higher education more generally.

At the same time, government policy should:

  • Fund undergraduate education according to demonstrated student need.
  • Take steps to distribute research funding more equitably.
  • Require grant recipients at the best funded institutions to actively partner with faculty at underresourced institutions.
  • Make sure to target loan forgiveness at the undergraduates who are from families in the bottom three quintiles.

I’m well aware of the cliché: competition made American higher education the envy of the world. There is no doubt that alumni and local and regional pride and campus competitiveness have driven institutional improvement. I’m also cognizant of another chestnut: we mustn’t kill the goose that lays golden eggs.

But it’s time to move beyond the platitudes and come to grips with a harsh truth: it is possible for a nonprofit institution to have too much money. A case could be made, half a century ago, that the faculty at the elite privates and publics was far superior to the faculty elsewhere measured in terms of publication and influence. That’s not the case today. The awful job market has distributed talent far more equally. There are great publishing scholars everywhere.

At the same time, the gap between institutions in program availability and student needs and even in cost for lower-income students have widened in ways that aren’t morally or socially acceptable. Fairness and justice demand greater equality in resources. As the educational sociologist Sharon S. Mayes observed back in 1977, higher education was becoming a filtering device for a stratified society. True then, even more true now—with even less justification.

Elite campuses have made “equity” their watchword. It’s past time for those schools to live up to their pretensions.

Steven Mintz is professor of history at the University of Texas at Austin.

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