MIT Drafts Response To Senate Inquiry On Endowment, Tuition
MIT is compiling data to respond to the Senate Finance Committee’s request for information about the school’s endowment, financial aid, and tuition rates.
The committee sent this request to MIT and 135 other universities in the country with endowments over $500 million on Jan. 24, in light of increasing concerns regarding hikes in tuition and unprecedented endowment growth.
The request indicates that the Senate plans to more closely monitor university spending policies. Iowa Senator Charles Grassley (R), ranking member of the committee, described the purpose of the request in a Finance Committee press release: “We’re giving well-funded colleges a chance to describe what they’re doing to help students.” “More information will help Congress make informed decisions about a potential pay-out requirement and allow universities to show what they can accomplish on their own initiative,” he said.
MIT Vice President and General Counsel R. Gregory Morgan, who was unavailable for comment, is coordinating the Institute’s effort to provide a response within 30 days, as the committee requested.
The MIT administration has expressed concern at the possibility of increased government monitoring or control over tuition rates. The Senate press release mentions that college tuition is rising faster than inflation, and that college endowments are exempt from a requirement that private foundations pay out five percent of their assets each year.
President Susan Hockfield said at a February 20 faculty meeting that, in its request, Congress is being “over-simplistic” about how schools manage their endowments. She said that MIT has “a strong position on financial aid,” by, among other examples, supporting a need-blind admissions policy and providing 62 percent of students internal need-based scholarships.
She said that MIT cannot be compared with similarly ranked universities such as Harvard University and Yale University because MIT has a much higher percentage of students studying science and engineering, which are, in general, more costly than study in the humanities. She also noted that the financial backgrounds of MIT students are different than those of students at similarly ranked schools. MIT cannot match Harvard and Yale’s recent financial aid increases for middle income families without “eroding support” for lower income families.
She told the faculty that MIT will make a public statement on financial aid in early March but that they should not expect any sweeping changes in financial aid, such as those announced by Harvard, Yale, and, most recently, Stanford University.
Regarding the Senate’s mention of pay-out rules, Hockfield explained how endowment spending cannot be simplified to just a simple percentage, as MIT must take into account its various needs and the requirements of the 2000-plus individual accounts within the endowment. She said those factors may cause the appropriate pay-out rate to fluctuate above and below five percent from year to year.
Vice President for Institute Affairs and Secretary of the Corporation Kirk D. Kolenbrander said “Five percent has been regarded as this magical line for what universities ought to spend.” He said that although MIT has spent more than five percent per year for the past nine years, “It’s crucial that universities maintain the capacity to manage their own resources.”
Kolenbrander said, “The nation has come to accept as fact that a college education is of fundamental importance and an opportunity that should be broadly available. MIT must do its part to give the nation confidence that this opportunity is well stewarded.”
The request, which was sent as a letter and not a subpoena, is comprised of eleven multi-part questions that ask for specific data, ranging from investment manager bonuses to the percentage of the endowment invested in hedge funds, and explanations of policies and processes — such as setting tuition increases and putting restrictions on endowment spending.
As a letter to the Senate, MIT’s response will be a public document. While metrics similar to the ones the Senate has requested are already publicly available, the Senate has asked for specific statistics that MIT must compute, according to Executive Director of Student Financial Services Elizabeth M. Hicks. For example, the letter asks for the percentage of students receiving university grants that are greater than or equal to 25, 50, 75, and 100 percent of tuition and fees, as opposed to the average grant that a student receives — a number that MIT already posts on its financial aid Web site.
Despite their concerns about the possibility of increased monitoring, both Kolenbrander and Hicks said they saw the Senate’s request as an opportunity to communicate to Congress and the public that MIT is spending its endowment well and financing its students generously. “We view this as a great opportunity to tell our story,” said Hicks. “We believe we are using the endowment to help students,” she said, noting that the average debt for students who have taken loans has decreased from $23,000 to $15,000 over the past 10 years.