Sen. Edward M. Kennedy, fresh from an investigation of the student loan industry, is out with a plan he says will "help reverse the crisis in college affordability." Kennedy’s Robin Hood approach takes $18 billion from lenders and applies it to reducing loan repayment costs for students, among other purposes.
The student loan business is a lucrative one. But the senator is going after the wrong folks if he’s trying to rein in the biggest “fat cats” in academe. That mantle should rest on the shoulders of colleges and universities themselves. Legislators setting policy with regard to higher education should realize that colleges and universities are our nation’s richest -- and possibly most miserly -- “nonprofits.”
Colleges and universities are sitting on a fortune in tax-free funds, and sharing almost none of it. Higher education endowment assets alone total over $340 billion. Sixty-two institutions boast endowments over $1 billion. Harvard and Yale top the list with endowments so massive, $28 billion and $18 billion respectively, that they exceed the general operating funds for the states in which they reside. It's not just elite private institutions that do this; four public universities have endowments that rank among the nation’s top 10. The University of Texas’ $13 billion endowment is the fourth largest nationwide, vastly overshadowing most of the Ivy League.
These endowments tower over their peers throughout the nonprofit world. The Metropolitan Museum of Art is America’s wealthiest museum. But the Met’s $2 billion endowment is bested by no less than 26 academic institutions, including the University of Minnesota, Washington University in St. Louis, and Emory. Indeed, the total worth of the top 25 college and university endowments is $11 billion greater than the combined assets of their equivalently ranked private foundations -- including Gates, Ford and Rockefeller.
Higher education endowments also are growing much faster than private foundations. The value of college and university endowments skyrocketed 17.7 percent last year, while private foundation assets increased 7.8 percent. Just 3.3 percent of the increase in academic endowments is attributable to new gifts. Most of the gain is a result of stingy, outdated endowment payout policies that retain and perpetually re-invest massive sums. This widespread practice results in a hoarding of tax-free funds.
A recent survey of 765 colleges and universities found they are spending 4.2 percent of their endowments’ value each year. Meanwhile, private foundations -- which are legally required to spend at least 5 percent of their value annually -- average 7 percent spending.
Higher education endowments differ from private foundations in one particularly important respect. Private foundations exist to give their money to others, while college and university endowments support just one charity -- their school. But isn’t being your own sole beneficiary reason to spend more, not less? Particularly when a substantial area of spending -- financial aid grants to current students -- targets precisely the people you expect will be your future donors?
Paradoxically, it is precisely the meager financial aid outlays of endowment-rich colleges and universities that make the true miserliness of low payout practices most apparent. Stanford University spends $76 million on undergraduate financial aid, a sum that sounds generous but amounts to a mere 0.5 percent of the value of its endowment. The university spends just 4 percent of its $14 billion endowment toward operating expenses. If the 5 percent payout rule required Stanford to spend another 1 percent of its endowment, and that money was directed toward financial aid, students would enjoy $211 million in additional support. That is precisely the cost of letting all 6,600 Stanford undergraduates attend tuition-free.
The University of Texas’ nine campuses enroll 147,576 undergraduates who each pay on average $5,903 in tuition. All of U.T.’s undergraduates could attend school tuition-free if the system spent half the amount the university’s endowment grew just last year.
Of course just because a college can afford to offer education tuition-free doesn’t mean it should. Giving a free ride to students who can afford to pay obviously would cut into the bottom line in other ways. Also, education is a real service for which people should pay. And a higher quality education should command a steeper price.
But college and university endowment spending practices should reflect the public responsibility that adjoins tax-free status. When people donate to a school they get a tax break because their donation is supposed to serve the public. When those untaxed funds sit unused, piling up for decades, taxpayers are making a sacrifice and getting nothing in return.
College and university endowments currently are exempt from the 5 percent annual payout requirement. Institutions of higher education aren’t even required to publicly report endowment payout rates or the purposes for which funds are spent. And the only organization that collects that information, the National Association of College and University Business Officers, does not make it public, except on an aggregate basis. Congress should require payout rates and specific expenditures for individual institutions to be made public each year. And if this “sunshine” fails to drive up endowment spending, a minimum payout requirement should be established.
And 5 percent should be considered just a starting point. College and university endowments exist to support current operations. But if that only requires a mere 4 percent draw, clearly there is ample room to use additional endowment funds for purposes that serve the public directly. For example, why not take some of the burden off students, families and taxpayers by providing more financial aid to needy students? After all, why should taxpayers be subsidizing an ever-burgeoning number of student loans while schools can afford to provide more scholarships?
For too long the government response to skyrocketing tuition has been to increase the size and number of student loans. Now the plan is to make loan repayment easier and increase grant aid again. But making it possible for students and parents to go more deeply into debt only encourages endowment hoarding and runaway tuition. It is time for legislators to come up with a smarter strategy for addressing college affordability -- one that will pressure colleges and universities to better serve students, families, and taxpayers. And getting schools to stop hoarding billions in tax-free funds would be a good first step.
The high cost of education has consequences. When asked to name an expense that is beyond their reach, people cite “paying for college” more than buying a home, retirement, or anything else. The intimidating effect of high tuition is the largest “access” problem in American higher education. If colleges and universities truly want to open their doors to all, they will begin by sharing their riches.
Lynne Munson, an adjunct research fellow at the Center for College Affordability and Productivity, served as deputy chairman of the National Endowment for the Humanities from 2001-5. She is at work on a book on endowment hoarding.
For more than 20 years I had been an award-winning journalism teacher with former students ranging from mega star Garth Brooks at Oklahoma State University to the late E! network movie critic Anderson Jones at Ohio University, with a few Pulitzer Prize winners in between. So it surprised hundreds of alumni when I took an administrative job with no teaching duties but plenty of fund-raising ones.
“Won’t you miss the classroom?” asked colleagues who knew my love of students and doubted I would succeed as a fund-raiser when I became director of the Greenlee School at Iowa State University.
I, on the other hand, was eager to raise funds for professors who often lack the resources that they need to be effective educators and researchers.
Unhappy with budget cuts and reversions, I had reached that stage of academic life when I had to decide my fate: Make do with my sliver of the legislative pie chart and fade into retirement, or chart a bolder plan of my own.
That plan was to work with the ISU Foundation to enhance programming, boost professional development and maintain first-rate facilities.
Fact is, external support, always vital at private schools, is increasingly so at public institutions as lawmakers allocate fewer dollars to higher education, forcing institutions to raise tuition. That also motivated me to hone my skills as a fund-raiser to attract scholarships and paid internships so that students could afford a degree.
To be fair, however, I knew the fundamentals of fund-raising before I took a job as a full-time administrator. Before relocating to Iowa State, I had the advantage of working closely with some of the best development officers in business in the president’s office at Ohio University.
I didn’t deal directly with benefactors under former President Robert Glidden and Len Raley, then executive director of the Ohio Foundation. I did something more educational concerning fund-raising: I helped write annual reports and edit other documents recognizing and thanking benefactors. I put to practice in my current post what I learned at OU. In the past five years, the Greenlee School has raised millions in pledges, cash and in-kind support from individual donors and media corporations. As our first priority, we increased giving to programming and faculty development. Then we focused on scholarships. Now, with a new Ph.D. proposal under review, we’re emphasizing assistantships and fellowships. The theme of any effective campaign is to align it with the strategic plan of the unit and institution. I learned that at OU, too.
At the moment we are using additional funds to complete our building renovation with state of the art technology augmented by interpersonal space -- part of the original design before I arrived at ISU -- which gave me insight into the culture of the place. Professors wanted their students to think of our building as their second home. The more students remain in our midst, the more opportunity we have to interact with them face to face. That does wonders for climate especially during Iowa winters.
The open area in the central part of our building is furnished with lounge chairs and café tables and stools where students congregate in luxurious environs. Vending machines are nearby. The furniture and walls look new although they are almost five years old because our students consider Hamilton Hall, where journalism and communication are housed, their shared property.
We want them to share more than that -- a legacy with faculty and alumni founded in lifelong learning. This relates to any program at any college or university.
Taking in part what I had learned at OU, we have codified 10 best fund-raising practices outlined below for chairs, directors and deans:
1. Spend an hour a day on alumni relations. Keep contact by letter, phone, e-mail and personal visits, asking how benefactors are doing and what is new in their lives. Relationship building requires a genuine interest in why a benefactor feels that his or her home department is special. Soon you come to understand the culture of your unit better than you thought you did and grasp, conscientiously, why the focus on benefactor relations not only generates external funding but new friendships based on shared values.
2. Send a "Good News" e-mail to your alumni and friends about faculty, staff and student achievements. Each month I ask colleagues to send me word on their latest contributions in the areas of teaching/advising, research/scholarship, professional service and community service. We’ve been doing this now for four years and so can chart productivity with data from previous years. It has risen each year in most categories. This has been an effective tool because we can document empirically a direct connection between support and achievement. Moreover, benefactors want to keep in touch and help celebrate success. So we provide the contact numbers of faculty and students to foster continuing dialogues within our unit because fundraising is a collective endeavor. No administrator should take full credit for annual giving levels as all activities in academe require a team approach, and that includes staff members whose daily contributions typically go unsung. Moreover, benefactors usually remember professors, not administrators, when they feel the urge to give back to the institution that made a difference in their lives. Here is an example of "Good News from Greenlee" from our archives.
3. Put out a newsletter and invite alumni and friends to network with each other through it. The Greenlee School newsletter, really an annual yearbook, is shared in print and online. You can check it out here. We also publish and post a monthly newsletter that focuses on faculty, students and alumni. That newsletter goes in faculty boxes with agendas and items of the next faculty meeting. Here is an example. In these and other publications, profile projects that alumni may want to underwrite, and otherwise use these forums to thank benefactors for their support as well as acknowledge anonymous giving without identifying benefactors, of course, but by showcasing how their gifts have helped faculty, students and staff.
4. Use your online home page for alumni and benefactor relations. We do profiles of alumni each month in addition to "Good News from Greenlee" and monthly newsletters. Here are two from our online archives: Louis M. Thompson and Edith (Lillie) Bartley.
5. Send a mass mailing that doesn’t ask for money. We do a holiday letter between Thanksgiving and New Year's, and we do not ask for donations or support but use the opportunity to express our gratitude, in keeping with the season. We also send an annual report at the end of our spring semester or quarter, noting productivity of faculty and students in addition to alumni achievements.
6. Create an advisory council and, if the unit is large enough, national chapters in major cities sanctioned as official by the Alumni Association. Bylaws of the Greenlee School’s Council and part of its more recent structure were based on successful bodies such as found at Syracuse, Georgia and Ohio University journalism and communication schools and colleges. We are opening alumni chapters around the country, thanks to the leadership of two Council members and our assistant director Barbara Mack. See our online Web site.
7. Write letters of thanks rather than send mail merge letters. We use ISU Thank You cards for this purpose, and I enclose a business card with each individual hand-written note to foster increased contact with the vast majority of our donors. We have anywhere from 500 to 750 every year, so this is a year-round activity. Our students also write thank-you letters when they receive word that they will receive scholarships, or else we withhold their awards -- a practice that another colleague, Kim Smith, recommended when he was undergraduate director. Benefactors not only appreciate these letters; students often benefit as well, making important mentors who share with them a culture and common interest in their alma mater.
8. Invite alumni groups to interact with students and faculty. We asked our major benefactors what they would be willing to do -- guest lecture, invite job shadowing, judge contests, etc. -- and compiled a booklet with contact numbers, distributing that to the faculty. Professors and alumni network all the time now without my requesting or scheduling this. After all, as mentioned previously, our benefactors typically give because of teachers. They want to work with them still. While administrators don’t have to monitor this, they do have to support it, to the extent of providing travel and professional development accounts for each faculty member. Thanks to the level of giving of our benefactors, each faculty member in the Greenlee School enjoys a $3,000 professional development account as well as a $2,000 account for grant- and external giving activities.
9. Use homecoming and graduation ceremonies as benefactor opportunities. Host open houses, brunches, etc., and acknowledge college and university alumni awards. Take pictures. Post them. Moreover, try to schedule award presentations around pivotal seasonal events so that alumni and/or council members have additional reasons to visit their alma mater. We use homecoming as an occasion to present our coveted Schwartz Award, the highest honor ISU bestows on alumni and friends who have made significant accomplishments in journalism and communication.
10. In speeches, annual reports and other correspondence -- even ones not necessarily directed at benefactors -- mention their legacies and build a culture around a common theme embraced by all. Our graduate program embraces communication with practice, a take-off on ISUs “science with practice” motto. Our undergraduate degree programs are known for “hard-hat journalism” and “hands-on advertising.” Those monikers represent our 400-hour required internship, one of the toughest in the nation. Alumni and council members represent both our graduate and undergraduate programs, and we link their contributions to our mottos so that our culture can be embraced by newly hired professors when we continuing ones are long gone. This is why an emphasis on "culture" is more important than on "vision" when hiring or appointing new unit heads and explains why benefactor relations is vital in any leadership position. As an example, the Greenlee School is known for international communication across our graduate and undergraduate degrees. We are in the early stages of creating a foreign correspondence internship program in the name of one of our legacies, World War II combat reporter Jack Shelley -- who at age 95 is still a member of our Advisory Council.
An administrator embodies the culture that alumni have built. I typically wear a 1915 pin from then Iowa State College, which reminds me of the legacy of which I am a part. I have requested lapel pins and memorabilia of our most senior distinguished alumni, past and present, and we will display them in Hamilton Hall and wear them with the knowledge of where these pins have been or who has worn them since World War II. Our alumni include the late Robert Bartley of The Wall Street Journal, who won a Pulitzer Prize and Medal of Freedom, and the late Hugh Sidey, long-time White House bureau chief for Time Magazine. When students ask about these donated items, we can tell them the story of our most successful journalists and continue their legacies.
You can enhance these practices or develop your own, remembering that alumni, faculty and students are the foundation of any program. Enlist them in your efforts, and you will raise funds as well as consciousness of your unit’s contributions to society, ensuring your culture for future generations.
Michael Bugeja’s looking for Garth Brooks at the moment to sponsor a scholarship for aspiring music critics. After leaving Oklahoma State in 1986, Bugeja served as professor and later as associate director of the E.W. Scripps School of Journalism and as special assistant to the President at Ohio University. In 2003 he became director of the Greenlee School at Iowa State University.
There are over 1,500 private foundations that support public universities and colleges in this country. Their collective assets are enormous – 25 have endowments of at least $1 billion each. Yet little is known about them. Journalists, with few exceptions, rarely bother to find out how they support their universities and colleges.
What we do know is that many are not transparent and publicly accountable; allocate substantial funds to supplement CEO and senior administrators’ salaries and benefits; provide superfluous benefits unrelated to academics such as country club memberships, leased cars, housing allowances, housekeepers, spousal travel, lawn care and other perks to coaches and administrators; engage in self-dealing relationships with their trustees and university regents; and pay their executives high salaries.
In difficult financial times, when state support of higher education is being cut, tuition costs are rapidly rising and financial aid for needy students is declining, such expenditures are increasingly hard to justify. That is why parents, public officials, students and the general public have the right to know what is going on in these institutions.
The Nebraska foundation provides the Nebraska president with most of his perks and a growing amount of his salary, including a 19.3 percent increase in 2008. It also gives the president a $700,000 discretionary fund every year.
In 2003, also in Nebraska, the Peru State College foundation made a secret deal with the Peru State College president to give him $455,572 in deferred payments if the president agreed to continue in his position for five additional years. This transaction was never reported to the state, a violation of the law for which the president was fined all of $1,200.
In California, Sonoma State University's foundation made a $1 million loan to a board member. The most recent California State University scandal occurred a few weeks ago at the Stanislaus campus where the Stanislaus foundation refused to reveal how much it was paying Sarah Palin to speak at a fundraiser and to divulge the names of the donors to the event. The foundation claimed that its charity status exempted it from the state disclosure laws. Several state legislators have introduced a bill that would bring public university foundations under the state record rules.
And the list of questionable activities could go on and on. What is clear is that much of what is happening at these public college foundations is the result of a lack of transparency, strict guidelines and oversight.
Reporters, regents, and the public should be asking these foundations and their boards some tough questions, including:
1. What expenditures did the foundation make during the year, including cash and in-kind contributions to the CEO, administrators, coaches and faculty?
2. Were any building contracts or services provided to the university, eg., fund-raising, legal, etc., from foundation funds tied in any way to firms with which foundation board members or university regents had relationships? How much money was involved?
3. What were the salaries and benefits paid to foundation staff?
4. What contributions were made to a president’s discretionary fund, and what expenditures were made from this fund?
5. What percentage of the money distributed by the foundation went to student scholarships and academic programs?
6. How much money did the foundation give to the university’s athletic programs?
7. What reporting requirements are demanded from these foundations by their boards, the universities and colleges and the state regents, legislatures and governments?
In short, we need a much more accurate profile of this vast universe of private foundations: their assets, their priorities and programs, the activities they support and the extent to which their boards and state regents are holding them accountable.
Should this huge network of foundations be permitted to operate as private institutions supporting but not a part of public universities and colleges, and therefore immune from the latter’s transparency and accountability requirements? Or should they be absorbed into public universities and colleges as fund-raising entities subject to state regulations? If one could start from scratch, one could easily make the case that the second alternative would be in the best interest of taxpayers and the public. The entrenched nature of these foundations and political realities, however, would probably doom any such radical restructuring of the system.
But state legislatures, with major public support, should demand that these private foundations are publicly accountable, free of self-dealing and no longer the incubator of special perks for administrators and athletic departments. The Internal Revenue Service should alter its regulations and practices to make certain that these foundations serve the public and the universities and colleges they are supposed to support. It’s a challenging task, but the time to begin is now.
Pablo Eisenberg is a senior fellow at the Georgetown Public Policy Institute and a columnist for The Chronicle of Philanthropy.
In 1981, Grey Poupon took the nation by storm. Although the little-known Dijon mustard had been manufactured for more than a century, in the early ’80s it went from a minor six-figure business to a retail powerhouse.
Most people remember the famous TV ad in which one Rolls-Royce pulls up next to another. An aristocratic-looking passenger rolls down the back window to ask, “Pardon me. Would you have any Grey Poupon?”
In the cities where the ad ran, sales of Grey Poupon shot up 40 to 50 percent -- a remarkable leap in the largely static condiment sector. Today, the Grey Poupon success story is frequently invoked as a highly successful “rebranding,” and an example of a singular advertising triumph.
Within the retail world, plenty of products have had their sales driven up, and their images buffed, through focused ad campaigns and catchy slogans: Don’t Leave Home Without It (American Express), Just Do It (Nike), and Got Milk? (California Milk Processor Board).
These successes -- reinforced today by the hit cable TV show “Mad Men” -- have led to an onslaught of branding consultants currently setting their sights on American universities. Many of these firms, battered by the recession and seeing higher education as a wealthy untapped sector, are coming to a campus near you.
The primary problem with their pitch is that it undervalues the very essence of a large educational institution. Universities are, by definition, complex, decentralized, multidimensional places with many disparate audiences. To attempt to rebrand these institutions as if they are one-dimensional retail products is to misunderstand what makes them exceptional.
Some university leaders are eager to buy the promise of a quick fix. The branding consultants tap into a low-level frustration on nearly every campus -- “No one knows how great we are” -- and make flashy presentations that promise fast results.
These campaigns provide all of the trappings of success: highly varnished collateral materials and new websites, all stamped with a focus-group-tested tagline. Internal constituencies are put through a time-consuming discovery process, which helps achieve a sense of internal buy-in, even if the effectiveness of the “deliverables” is suspect. In the end, most of these efforts are like Chinese takeout: initially satisfying, but with no long-term nutritional value.
So, if empty branding campaigns aren’t the answer, what is? For most institutions, a sustained and thematic flow of credible messages to your key constituencies will produce real results. Three principles should drive this approach:
Build on strong facts: Bob Dylan said, “All I got is a red guitar, three chords and the truth.” Without denigrating Dylan’s guitar chops, it’s fair to say that he relied primarily on the truth. University marketing and communications programs should do the same.
Effective marketing (or public relations -- the terms mean different things to different practitioners) should be thought of as an accelerant. It’s the lighter fluid we pour on a fledgling fire to create a full-blown blaze. As a result, even the strongest communications program will fail if it is not built on strong facts -- on the truth.
Within your institution, find three to five strong institutional assets -- the ideas, initiatives, and people that differentiate you from the rest. These could be research programs, student successes, or an innovative approach to admissions. The point is, you should fan the flames where you have the potential to outshine others.
In the late 1990s, I was appointed director of communications at Harvard Law School. At the time, Harvard Law was viewed by many as an elite institution coasting on its laurels. There were those who believed that Harvard Law, arguably the largest law school in the country, was too big and impersonal. The faculty considered shrinking the size of the student body; ultimately that proposal failed, and we decided that the school should embrace its bigness. A “legal metropolis” and “the New York City of law schools” were messages we began promoting. These efforts, combined with a public-service renaissance and tremendous fund raising success, helped Harvard Law reassert its preeminence. (Some might argue that a trained chimpanzee could enhance Harvard’s reputation. The truth is that it can be even more difficult to shift and update the image of an institution that is so deeply marbled in the public’s consciousness.)
Don’t give up on the press: A popular joke in media circles today is: “What do pimps and the newspaper industry have in common? Both are being put out of business by Craigslist.”
While it’s true that the financial model of the commercial media is being severely tested, many traditional news organizations still maintain significant readership. (The problem is that online readers don’t translate into the same kind of revenue that print readers do.)
For example, The New York Times actually has more readers today than it did a decade ago, if you consider print and online readers together. In 1998, the Times had 1.06 million readers of its print edition. Today, in part due to a top-notch web presence, the Times has more than 1.5 million print and online readers.
Even The Boston Globe, viewed in recent years as a news organization in serious trouble, has maintained approximately 460,000 daily readers when combining print and online.
Most important is that these and other news organizations remain credible sources of information. New research by the Nielsen Company shows that people have become increasingly savvy consumers of information. In a recent credibility-of-sources survey, Americans placed many forms of direct communication -- advertising, printed materials, mailings -- well below media coverage in terms of what they believe. The concept of “third-party validation” is still compelling.
Put in simple terms, a good article about your university in a national newspaper is worth more than a dozen paid display ads in the same paper.
Persistence pays off: When it comes to reputation-building, patience is indeed a virtue. So is persistence. An old rule in political campaigns is that voters should see or hear something about a candidate at least seven times between Labor Day and Election Day -- the homestretch of any election. The truth, for better or worse, is that most audiences require a steady drumbeat of consistent information to shape their perceptions.
In addition to sustaining the flow of information, use the “show, don’t tell” rule. Instead of producing print materials and web pages that tell the world how strong your programs are, show why this is true.
At Northeastern University, where I currently oversee marketing and communications, we are a leader in experiential learning, anchored by our renowned co-op program. Showcasing real students in experiential learning programs around the world will move the needle far more than dispensing platitudes about our leadership position. We have used this principle in recent newspaper ads designed to build awareness about our expanding research enterprise.
This steady, brick-by-brick approach has been used by a broad range of American universities (Duke, Emory, and Washington University in St. Louis, to name just a few) that have moved dramatically up the academic food chain. These institutions and their leaders made many tangible, undisputed good moves. But they are also each known for complementing these good moves with strong, sustained communications efforts.
To be fair, there are plenty of thoughtful, idea-based communications firms out there doing good work across different sectors. I differentiate these firms from the bumper-sticker branding agencies that focus solely on the sizzle, not the steak.
Whether or not your institution relies on outside counsel to promote itself, remember that you’re not selling mustard, Big Macs or running shoes. Your university is a churning, diverse and complicated place. Tell this story in a smart and truthful way -- with unrelenting persistence -- and you will succeed.
Michael Armini is senior vice president for external affairs at Northeastern University.
A foundation created by Western Kentucky University to manage its dormitories does not have the university's immunity from lawsuits, a Kentucky appeals court ruled Friday.
The ruling sends a lawsuit against the foundation back to a lower court for additional hearings, and the ruling could complicate the arrangements some public colleges have set up with foundations or related entities to manage some of their operations.