Harvard has more money in its endowment than any other college by at least ten billion dollars, and the top 40 richest colleges and universities have seen their assets increase by as much as half in recent years despite the Great Recession. While these hefty endowments mean the ability to offer need-based scholarships to low-income students, wealthy colleges and universities enroll low-income students at far lower rates than colleges with smaller endowments.
Although the top ten wealthiest colleges have a combined endowment of about $180 billion, the share of low-income students they enroll is quite small. Only 16 percent of students enrolled in these top schools in 2012-2013 received Pell grants, according to federal data (that’s the median figure). Pell grants offer need-based federal aid to low-income students.
While Harvard has an endowment of $43 billion, only 19 percent of students enrolled in the college receive Pell grants. Just 12 percent of students enrolled at Yale University, which has a $25.4 billion endowment, and the University of Notre Dame, with $9.5 billion, received Pell grants. Of the top ten wealthiest universities, Columbia University did the best: the college has a $9.9 billion endowment and 30 percent of students enrolled receive Pell grants. To put this into context, 36 percent of all college students in the United States received Pell grants in the year measured.
Some colleges do better than others in terms of making their campuses accessible to students from less wealthy backgrounds, especially when the schools have large endowments. In 2013, the Century Foundation reported that for every 14 rich students at the most elite, competitive colleges, there was just one low-income student. This imbalance creates inequities among universities, but also exacerbates inequities on campuses. Coming from a low-income background is often really hard on elite campuses like Harvard’s where low-income students are clearly a minority.
When students from better-off backgrounds are the only ones with access to top-tier college experiences, the opportunity gap widens. Ronald Ehrenberg, director of the Cornell Higher Education Research Institute pointed out, “the students who are able to go to these wealthy institutions will have extraordinary resources devoted to them, relative to the students who are everywhere else.” This is thanks to the large sums of money colleges hold in endowments.
“We are spending the most money as a society educating the wealthiest people. The people who need help the most are the most disadvantaged,” said Ehrenberg. “They end up going to universities that spend the smallest amount per student.”
Much of the large endowments held by these wealthy universities actually comes from public funds. The higher education research group Nexus indicated in an April report that rich universities get millions of dollars in public support through their endowment gains and land holdings. And since the colleges are nonprofit institutions, none of the this money is taxable.
The difference in what wealthy colleges spend per student versus other schools can be large. In 2013, for instance, Princeton University spent $105,000 per student, while Rutgers University had $12,300 per student in public appropriations, and Essex Community College close by had only $2,400 to spend per student.
One policy solution, offered by Nexus, is to tax the wealthiest colleges on their endowments. This isn’t actually a new concept. In 2008, Senator Chuck Grassley (R-IA) pushed to require wealthy universities to spend a certain share of their endowments per year on financial aid, instead of “hoarding” their funds. University representatives argue that instead of punishing wealthy colleges, talented poorer students should be encouraged to apply to elite colleges. Wealthy colleges also argue that they “do more” to support low-income students than other institutions.
While there are many competing policy options, what’s clear is that there’s currently a gap. And as wealthy colleges continue to bask in the all the public funds added to their endowments, it’s evident they’re not doing enough to enroll and serve an economically diverse population.