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August 5, 2014 at 11:05 pm

Vedder & Denhart in Forbes: 22 Richest Schools In America

Dr. Richard Vedder, Distinguished Professor Emeritus of Economics at Ohio University, and Ohio University alum Christopher Denhart ’14 wrote a July 30 column in Forbes about the “22 Richest Schools In America.”

Vedder and Denhart are director and administrative director of the Center for College Affordability and Productivity. Denhart earned a B.S. in Economics from the College of Arts & Sciences at Ohio University in 2014.

The 22 schools holding half of U.S. endowment wealth enroll just 5% of higher education students.  If anything, that’s an understatement. The concentration of wealth of the 22 schools includes three large public university systems with multiple campuses. The eight Ivy League schools in the top 22, for example, alone have over 21% of the total American endowment assets, but well under 1% of the students. Assuming a conservative 4% payout rate out of endowments, the two richest schools, Harvard and Yale,  are spending well over $2.1 billion a year  for 35,000 students, or  about $60,000 a student, about eight times the average appropriations state governments provide four-year public universities.

Moreover, many highly endowed schools also receive huge federal subsidies to support research. For example, Harvard and Yale in the 2011-12 academic year together received over $1.262 billion in federal support. Adding that on to endowment spending  (assuming a 4% payout), these schools are spending well over $96,000 per student –without considering revenues from tuition fees, foundation grants or alumni support. The typical state school spends less than $25,000 per student from all sources.

Contrast the highly endowed schools with those holding the other one half of endowments. The second half serves nearly 10 times the number of students as the top 22 schools. One of us attended one of the top endowed schools (Northwestern) as an undergraduate and teaches at a typical state school (Ohio University) today. Both have similar enrollments, but Northwestern’s endowment is nearly 18 times that of Ohio University. Assuming the same 4% payout rate, Northwestern has about $16,800 per student in annual endowment income, compared with less than $800 at Ohio University. Additionally, Northwestern receives vastly more in federal grants and contracts than Ohio University to support large research programs….

These universities at the top are extremely successful in raising funds and managing their wealth.  We do not have a problem with large endowments, however, we do question whether the U.S. government should expend public resources to further this disparity. Favorable tax policies and exemptions, unequal research funding and donor tax write offs all play into reinforcing disparities between rich, elite private schools and poorer public institutions.  The federal government’s mission is to further education and research for the good of the broader public. Yet its tax and subsidy policies are akin to give tax exemptions for donating money to the members of the top one percent.

Read their entire article at Forbes.

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