Schools with $1B or more in endowments should be forced to underwrite loans of students that go to their schools Everything else is bullshit.
Rutgers Cracks $2B In Endowment
- Thread starter bigmatt718
- Start date
True, but clearly heading in right direction after years of mismanagement with regard to alumni engagement, corporate sponsorship and focus on growth in this area. The medical school merger will help tremendously as investment in life sciences and medical research continues to grow. Rutgers now needs to focus on research and development in this area and develop opportunities for professors to procure IP protection and allow some to move into industry and develop/grow companies, which the goal of having them give back.
The government underwrites those loans. There is no need to when schools are sitting on billions of dollars.
What do you know about endowment? Their origins, the laws governing their management and the actual management of the funds? From your statements it is clear that you know nothing.
So this is what mental illness looks like…
Forget about college, did you graduate high school?
At least part of the endowment is unrestricted.
The alternative would be for the college to make the loans directly on a non-recourse basis, though that could well turn into additional financial aid.
Enough to know that any entity sitting on that much cash yet still has it's customers taking loans from taxpayers is wrong.
What laws are would be broken under that scenario?
A very small amount is unrestricted. Why would they make loans with this versus paying out 5% a year to directly fund scholarships or other university needs? Or use unrestricted to build at will new buildings etc?
Define very small amount. It's not usually a pittance. And if the loans are repaid it's cost free as they are underwriting. If the university is making the loan directly, it would be earning interest.
They are not sitting on cash. This is not a slush fund. Endowments are given by alumni many of which have been the greatest capitalists this county has ever seen. Also everyday people looking to help fund scholarships for people who may have difficulty funding their education. They have given this money in perpetuity meaning it’s meant to fund scholarships forever. Universities are perpetual institutions. People who give money don’t want to give to fund one scholarship for one year. They don’t want it spent in one year because it will be needed forever given perpetual nature. Laws have been created to guide how these funds are managed and one can be seen as breaking their fiduciary responsibilities by spending too much as it would deplete the real value of the money given by a donor who expressly stated in their contract that this is for perpetual purposes. Endowments fund the operating expenses of universities. The largest ones fund 30 to 40 percent of their operating budget from endowments. The management of these endowments are critical for survival. If they spent all in one year they would shrink by 30 percent the next year and into perpetuity. The endowments are governed by laws and overseen by investment committees and boards of trustees all of which are vested in their schools as alumni and donors who created this wealth from capitalist endeavors.
the nonprofit community is one of the great pillars of America helping alleviate some the the inequities created by capitalism. The greatest donors have been the greatest capitalists, Rockefeller Buffett etc. they all recognize it. You should too.
No I'm not. That's just you setting up a straw man. But no endowment is invested 100% in equities, and providing loans as part of a financial aid package is clearly in keeping with the goals of the university. In fact, 100% equities would be questionable from a fiduciary responsibility aspect. Beyond that, unrestricted funds can be depleted if it is justified though it's clearly not desireable. A number of universities did so during the great recession of 2008-9.
You are saying to loan endowment funds out and earn interest. Using unrestricted funds. Instead of investing in a predominantly equity portfolio (average fixed income and cash allocation in large endowments is about 10%). In that case you spend 5% on those funds and maintain the real value over time. You also keep flexibility to use unrestricted for other needs if needed. Tying up capital in loans at low interest rates isn’t a good idea. Likely depleting real value and reducing flexibility.
I'll tell you why this will not happen.
The University of Pittsburgh is a medium sized school about 1/3 the size (student body) of Penn State.
Pitt has an endowment of about $5.6 billion.
Anyone who decides to donate to a University has the right to specify how their money should be used. If the donor wishes are not honored they can give the funds to another school who will.
A couple of examples:
In November 2021, The Richard King Mellon Foundation announced a $100 million gift to the University of Pittsburgh to create a Bioresearch and Development facility on Hazelwood Green
that will offer Pitt research teams as well as commercial & research partners high tech manufacturing capabilities. It will also deliver easy access to Pitt's established research environment and UPMC clinical activities.
In September 2021, the University of Pittsburgh Football Program received a $20 million gift from 1997 alumnus Chris Bickell. Pitt will use the funds to make capital improvements that will benefit the total Pitt Football student athlete experience.
In 2011, Pitt alumnus (MA/PHD) William S Dietrich II well known and highly respected businessman and philanthropist gave Pitt $125 million.
Most donations to endowments come with requirements on how the funds will be spent.
Rutgers especially now with its Medical School and Hospitals can now forge partnerships (pharmaceutical industry etc) that can benefit the school and its endowment
going forward. Alums (alumni engagement) are proud of their University and want to contribute.
HAIL TO PITT!!!!
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Don't feed the troll.
None of that means you can't underwrite loans to your customers with earnings from investments.
You seem to be assuming that the loans would not be repaid. There would only be depletion if they're not.
You are wrong and your idea makes no sense for endowment capital. Sure most will pay back the 100 they borrow from you today in the future. Real value is the risk. Plus not all will be paid back so you actually won’t collect the 100 dollars, maybe 98 or so. Either way they are better off investing the capital and funding operating expense and scholarship at 5% a year. That way the maintain real value. Which is what they do.
You know a 5% requirement only applies to private foundations. Universities, even private universites, are not private foundations. And any debt securities only pay back 100 % in the future. The question is who should get stuck with the bad debts, the school or the taxpayers? And should the schools be able to increase tuition etc. at will, knowing the increased risk of default will be bourne by the taxpayers?
Endowments spend the same about the same amount as private foundations.
If debt securities only pay back 100% (which they dont) why are you talking about losses?
You are conflating several issues.
universities are not banks and don’t have the ability to issue these loans nor do they have the ability to take the losses associated with bad debt.
Here’s another example for UPenn to provide free tuition for nursing students from a private donor and alumnus. 125 million will go into the Penn endowment and will be managed with all of the other gifts providing free tuition into perpetuity because we are always going to need nurses.
Penn receives record $125 million to offer free tuition to nurse practitioners to work in underserved communities
The $125 million gift from Penn alumnus Leonard A. Lauder will be used to create a tuition-free program to recruit, train and deploy nurse practitioners.
www.inquirer.com
A university with a $2 billion endowment doesn't have the ability to deal with some debts going bad? I'd say say a lot of taxpayers who fund, or are paying the interest on US treasury debts that guarantee those student loans are not any more able to do so.
Here’s another example for UPenn to provide free tuition for nursing students from a private donor and alumnus. 125 million will go into the Penn endowment and will be managed with all of the other gifts providing free tuition into perpetuity because we are always going to need nurses.
Penn receives record $125 million to offer free tuition to nurse practitioners to work in underserved communities
The $125 million gift from Penn alumnus Leonard A. Lauder will be used to create a tuition-free program to recruit, train and deploy nurse practitioners.
That's wonderful. And I'm m sure my sister, who is a Penn Nursing grad Class of 80, wishes that restricted gift around back then. Would have saved her a hell of a lot of time typing term papers for a dollar a page. But that restricted gift is what, 1-2% of the Penn endowment?
What is your point? The vast majority of penns endowment is restricted for various purposes.
Gee. I guess that means that there is only a billion or two to fund student loans currently underwritten by the taxpayers.
Holy hell. You don’t get it. Universities don’t have pools of capital like a bank. Or the government to issue loans. They can’t use endowment assets that were given and are for specific purposes. Unrestricted endowment to issue loans is an asinine idea.
It shouldn't be based on a total number but a per student number. A school of 50,00 students, with 2 billion in their endowment, shouldn't be held to the same standard as a school with 4000 students and a 2 billion dollar endowment. IMO
You’re right, his arbitrary number isn’t ideal. More importantly, the whole idea doesn’t make sense or work.
With what? Are we going to have to through this again? Are you just sticking your head in the sand?
Who the BuckRU?
Sorry, couldn't resist making the childish pun on your board handle, given my general immaturity and poor impulse-control. No offense intended. 🙂
What do you call stocks and bonds? I say they represent a pool of capital. And they are bought, sold and/or redeemed regularly, which means they will be reinvested. Isn't a loan an investment on the part of a lender? You might like the fact that currently the school have no risk with student loans. I say that with high endowment schools, however you define them, the institution should share the risk with the taxpayers.
The pools of capital are already being used. In the case of restricted to fund specific designated purposes. In the case of unrestricted to fund general operating expenses or capital projects. They are invested mainly in equities which will generate better returns than making loans and earning interest. Putting it in loans also reduces operating flexibility and moving that capital to loans would reduce the current dollars used to fund the aforementioned needs. How will they replace that? Also bonds do poorly with inflation. So the 100 dollars paid back 20 year later will only finance a lesser amount of tuition dollars.
its a terrible idea.
If your pissed about federal student loans than stop the program. But their shouldn’t be risk sharing as the university is not the lender. Do car companies share the risk for loans made to purchase their cars etc? Of course we then reduce the ability for some to go to college and likely put stress on operating expenses of schools because their fixed costs are high so they would likely have to dip into any reserves or unrestricted funds to plug the gap. Reducing the ability for those to go to college is probably not a great long term plan and investment in the future which is of course why they started doing it in the first place.
Agreed. Endowments in the billions ought to go reduce tuition to zero
