Tilghman: Endowments allow for highest quality education at lower cost to students
In remarks prepared for a roundtable discussion on endowment spending on Capitol Hill Monday, Sept. 8, Princeton President Shirley M. Tilghman said it would be a serious mistake to take any step, including governmentally imposed mandatory payouts, that risks undermining the ability of American colleges and universities to compete globally in the 21st century.
Tilghman was one of 24 higher education leaders and financial experts asked to participate in the series of discussions, titled "Maximizing the Use of Endowment Funds and Making Higher Education More Affordable."
The session was convened by Sen. Charles Grassley and Rep. Peter Welch. Grassley is the ranking member of the Senate Finance Committee, which early this year requested information from Princeton and 135 other universities on policies and practices relating to endowment management and spending, college costs and student aid.
"For many of the leading public and private colleges and universities in this country -- which are also among the leading colleges and universities in the world -- these donations allow them both to provide the highest possible quality of education for their students without having to charge its full cost and to conduct the research that is the economic engine of our country," remarked Tilghman, who said she was speaking both as president of Princeton and as vice chair of the Association of American Universities.
With carefully determined spending policies, she noted that colleges and universities seek to provide as much support as possible for this generation of students and faculty while also ensuring that they can meet the needs of future generations.
She further pointed out that colleges and universities use their endowments to reduce costs for all students and to provide substantial financial aid.
"At Princeton, for example, students who pay full tuition cover less than half the cost of their education," she said. "But fewer than half of our undergraduates actually pay full tuition. The average grant of financial aid for a freshman at Princeton this year is more than $33,450 (more than 97 percent of tuition), and for families with incomes below $75,000, their aid fully covers tuition, room and board. Even families earning between $180,000 and $200,000 receive average grants of more than $22,000. When adjusted for inflation, the average cost of attending Princeton over the last 10 years has actually declined more than 25 percent."
She also noted that Princeton's scholarship budget last year was $81 million, $6 million more than its net revenue from tuition, and 80 percent of its scholarship budget came from the endowment.
Finally, she said that Princeton's policies provide for a 5 percent increase in spending each year per unit of endowment regardless of market performance and that in the last two years the University made special upward adjustments totaling $105 million on top of the 5 percent annual increases. She said a mandatory payout requirement would decrease the flexibility of colleges and universities to respond to market volatility, observing that they need to make long-term commitments in hiring faculty, creating programs and constructing facilities.