Donald Trump, the Republican nominee for president, on Thursday outlined his first specific idea on how to make colleges more affordable. He said that he would work with Congress to pressure institutions with large endowments to spend more on students -- or to face a loss of their tax-exempt status.
A detailed plan was not released, but Trump said in a speech in Pennsylvania that college debt is having a devastating impact on many students and graduates. And he criticized the spending decisions of colleges and universities with "multi-billion dollar endowments."
According to a Washington Post account of the speech, he said that endowment spending should focus on students. "Instead these universities use the money to pay their administrators, to put donors' names on their buildings, or just store the money, keep it and invest it. In fact, many universities spend more on private-equity fund managers than on tuition programs.... But they should be using the money on students, for tuition, for student life and for student housing. That's what it's supposed to be for.”
On student loans, he said: “The students are choking on those loans. They can't pay them back. Before they start, they're in trouble. And it's something I hear more and more and it's one of the things I hear more than anything else,”
Trump has suggested for weeks that he would be making proposals on college affordability.
Hillary Clinton, the Democratic nominee, has made college affordability a major part of her campaign and has been talking about it quite a bit on the campaign trail. Her proposal would make in-state public higher education free for students with family income of up to $125,000. She has also proposed a three-month moratorium for all federal student loan borrowers on repaying their debt, during which time borrowers would get help refinancing their loans or moving into income-driven repayment plans.
Trump's proposal comes at a time that some Republicans in Congress and some experts who focus on low-income students have been suggesting that wealthy colleges should be spending more of their endowments on financial aid.
Regardless of what one thinks of those approaches, a key fact is that the overwhelming majority of college students enroll at institutions without large endowments. Further, some of the colleges and universities most generous with student aid -- including those at which low-income students do not have to borrow at all -- are among those with multi-billion endowments.
While endowment values fluctuate, about 50 colleges and universities are in the category of "multi-billion" cited by Trump. Close to another 50 may have endowments of $1 billion but less than $2 billion.
Large Endowments Reporting Losses
Trump's proposal also comes as some of the largest endowments in higher education are reporting losses for the last fiscal year.
On Thursday, Harvard University's endowment -- the largest higher education endowment -- reported that it lost 2 percent in the fiscal year that ended June 30, 2016. A report released by the Harvard Management Company blamed a "low interest rate environment and market volatility," but also admitted that "execution was also a key factor in this year’s disappointing results."
The value of the endowment on June 30 was still enormous compared to the rest of higher education: $35.7 billion.
But an analysis by Bloomberg said that the most recent returns are part of "a decade of lackluster returns compared with the school’s elite rivals."
And Harvard is not the only university with a significant endowment reporting losses. Many large public universities -- including the Universities of California, Colorado, North Carolina at Chapel Hill, Iowa, Washington and Virginia; and Ohio State University -- are reporting losses in the last year.
Response From Pro-Clinton Group
Correct the Record, a pro-Clinton group, released a statement Thursday denouncing the Trump proposal:
“Trump introduced what appeared to be an attempt at a college affordability proposal, which is ironic coming from the man behind the student-swindling Trump University and Trump Institute. He has no credibility to speak about affordable and high-quality education when his own employees were told to target single parents desperate to feed their children and encourage students to drain their retirement accounts. Americans deserve better than Donald Trump.