Spending the Endowment Could Decrease The Cost of Tuition Would This Approach Work at Choate?
By Lauren Vespoli ’09
News Reporter
As the cost of college tuition rises each year, more and more families struggle to send their children to institutions of higher learning, and the government has decided to get involved. On Thursday, September 27, the Senate Finance Committee heard a panel of experts who suggested making universities spend at least 5% of their endowment in order to make college more affordable for the average American. At the hearing, senators considered revoking the tax-free status of university endowments, as well as having universities make yearly payouts from their endowments to lower tuition costs. According to an article in the Harvard Crimson on October 3rd, university endowments have increased by 17.7% in 2006, while the average cost of tuition for college has increase 35% since 2002. Harvard, which rejected the Senate’s proposal, harbors a $35 billion endowment, while its cost of tuition rose 3.9% this year to $48,550. UPenn’s student newspaper, The Daily Pennsylvanian, summarized many schools’ implicit response to the Senate’s discussions in the title of an opinion piece: “Mind Your Own Business.”
Complaints at Choate
People are not just complaining about the tuition cost of universities, however. “[Choate’s] tuition is really high,” said Ali Smith’ 09. “ I feel like it’s necessary, but it’s a shame it costs so much.”
What, then, does Choate do with its endowment, and will the school do anything to decrease the cost of tuition?
As of June 30, 2007, Choate’s endowment was calculated at $267 million. Each year, the school must take out a certain percentage of the income generated by the endowment to spend on things such as Financial Aid, the Athletic Department, and the Library. Choate uses an average of 4.6% of the endowment value each year, according to Mr. Rick Saltz, Choate’s Chief Financial Officer. “The Board of Trustees is very critical of how much we take out each year,” Saltz said. “The goal of the endowment is to preserve the school for [current students] and future generations.” The endowment is also used to help with donations. Saltz explained, “If a donor has made a specific request, for example, he wants to build a new laboratory facility, then some of the endowment must be used for that.” In addition, endowment funds help balance the difference between Choate’s operating expenses and revenue. Choate’s yearly operating budget is $45 million, but the school only receives $32 million in revenue. According to Financial Office figures, the cost to educate each student is approaching $52,000 per year. About $11-12 million dollars are pulled out of the endowment to bridge the gap between annual expenses and revenue.
Planning for the Future
These facts bring up another important question: if Choate were to spend more of its endowment, would tuition decrease? It could at first, but according to Choate’s Controller, Mr. Ed Griffin, “Taking out more money would shrink the endowment, and it wouldn’t be able to support the school in future years.” The endowment can also be used in case of an emergency at school. If an academic building burned down, money would be used from the endowment to rebuild it, but if funds were already being used to lower tuition costs, it would be a lot harder to get the money for the building.
Furthermore, decreasing tuition isn’t even a priority at the financial office. “Our priority is to increase financial aid money, not to decrease the cost of tuition,” said Saltz. Griffin added, “We want a diverse student body, not just kids from families that can pay full tuition.” Even the Choate website states: “Choate Rosemary Hall seeks motivated, talented students of strong character regardless of their family’s ability to pay…the school commits more than $6.8 million to need-based financial assistance.”
Even if some students and parents may complain about the high cost of tuition, what Choate charges is really just “the market price for going to a New England boarding school today,” says Griffin. Choate’s tuition is on the high end of the range for New England boarding schools, but Choate also one of the smaller per student endowments.
Choate students may like to complain about the high cost of tuition at Choate and other boarding schools and universities, but there really isn’t much that can be done. As prices rise, there will still be families who can afford to pay full price.
