College Endowments: Student Loan Guarantee

College Endowments: Student Loan Guarantee

Colleges and universities in the United States have been raising tuition rates for many years. As a result, students are increasingly burdened with significant student loan debt. Alarmingly, many graduates leave school either unprepared for their chosen profession or with degrees that hold little value in the job market.

Many colleges and universities in the U.S. manage substantial financial endowments, which are invested in assets like stocks, real estate, and other instruments. The returns generated from these investments help cover a portion of the institution’s operating costs while the principal remains untouched. American universities hold some of the world’s largest endowments, with many exceeding $1 billion in value.

• The top five private university endowments belong to: Harvard ($52B); Yale ($41B); Princeton ($37B); Stanford ($34B); and, M.I.T. ($24B).
• The top five public university endowments belong to: Texas ($47B); Texas A&M ($20B); Michigan ($19B); California ($19B); and, Virginia ($10B).
• Even smaller colleges have large endowments. For example, Bowdoin College (Maine) has an endowment valued at $1.4M per enrolled student, and Amherst College (Massachusetts) has an endowment valued at $1.8M per enrolled student.

Universities with sizable endowments should bear responsibility for ensuring the student loans issued to those attending their institutions. This is comparable to banks backing the mortgages they issue, service providers guaranteeing their work, or manufacturers offering warranties on their products. It is more logical for universities—who are directly responsible for education quality and closest to the students—to share in the financial risk associated with student loan repayment.

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by Roger Culpepper