Stopping Universities From Hoarding Money 274
HughPickens.com writes: Victor Fleischer writes in the NYT that university endowments are exempt from corporate income tax because universities support the advancement and dissemination of knowledge. But instead of holding down tuition or expanding faculty research, endowments are hoarding money. Last year, Yale paid about $480 million to private equity fund managers for managing about $8 billion, one-third of Yale's endowment. In contrast, of the $1 billion the endowment contributed to the university's operating budget, only $170 million was earmarked for tuition assistance, fellowships and prizes. Private equity fund managers also received more than students at Harvard, the University of Texas, Stanford and Princeton.
Fleischer, a professor of law at the University of San Diego, says that as part of the reauthorization of the Higher Education Act expected later this year, Congress should require universities with endowments in excess of $100 million to spend at least 8 percent of the endowment each year. Universities could avoid this rule by shrinking assets to $99 million, but only by spending the endowment on educational purposes, which is exactly the goal. According to a study by the Center for College Affordability and Productivity a minimum payout of 5 percent per annum, would be is similar to the legal requirement for private and public foundations. "The sky-high tuition increases would stop, and maybe even reverse themselves. Faculty members would benefit from greater research support. University libraries, museums, hospitals and laboratories would have better facilities," concludes Fleischer. "We've lost sight of the idea that students, not fund managers, should be the primary beneficiaries of a university's endowment."
Fleischer, a professor of law at the University of San Diego, says that as part of the reauthorization of the Higher Education Act expected later this year, Congress should require universities with endowments in excess of $100 million to spend at least 8 percent of the endowment each year. Universities could avoid this rule by shrinking assets to $99 million, but only by spending the endowment on educational purposes, which is exactly the goal. According to a study by the Center for College Affordability and Productivity a minimum payout of 5 percent per annum, would be is similar to the legal requirement for private and public foundations. "The sky-high tuition increases would stop, and maybe even reverse themselves. Faculty members would benefit from greater research support. University libraries, museums, hospitals and laboratories would have better facilities," concludes Fleischer. "We've lost sight of the idea that students, not fund managers, should be the primary beneficiaries of a university's endowment."
Colleges are not for education (Score:5, Insightful)
They are for empowering a small group of people.
College level should be 100% free to citizens in the USA, there is no reason at all to have to charge for classes up to associates, and it should be inexpensive to get to bachelors and beyond.
No the dean does not deserve $980,000 a year salary, he doesn't do shit. If you want to pay the coach well, base his salary on ticket sales for games.
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"College level should be 100% free "
TANSTAAFL
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What GP clearly means is that University education should be at no (or little) cost to the students. You're being willfully obtuse here.
Re:Colleges are not for education (Score:4, Insightful)
Then in effect the student is taking a loan from himself (if a future net taxpayer) or a grant from others (if not a future net taxpayer).
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Society benefits from an educated workforce? Is that the entire workforce? At what point are communications degrees not benefiting society anymore? Do we really need every person in the US with a 4 year degree for every potential career out there? We already give everyone in our society access to free education through a high school diploma. That is an educated workforce. College was supposed to be higher learning for careers that required above and beyond a high school education, not just a 4 (or 5) year p
Re: Colleges are not for education (Score:3)
Education isn't only a path to higher paying jobs. There's more to life than a bigger salary.
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You are correct on both points. If you can get a higher paying job without education, power to you and society doesn't need to provide you with a "free" education. If you value something more than a bigger salary in life, more power to you, but don't expect the rest of society to provide for you so you can pursue your dreams.
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Re:Colleges are not for education (Score:4, Insightful)
Is that true or are people who are less likely to be on welfare, more active in their communities, wear seat belts at higher rates, and practice healthy behaviors more likely to get a college degree? Correlation is not causation. I don't think we could end welfare, improve communities, have everyone wear seatbelts, and have a healthier society by forcing people to graduate from college... But I could be wrong.
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I'm questioning what level the benefits of education pay off for a society. Is a grade school education enough? Is a high school education enough (what we currently provide for free to all citizens)? People are now suggesting college be paid for too. Why not insist that everyone in society get a PhD? At some point the returns for education the entire population decrease while the costs continue to increase.
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An educated populace is a social good. It doesn't have infinite value but the value is much more than zero which is what you seem to be proposing.
The conservatives are insanely focused on the value of specific education (see this discussion, hell see ANY discussion.) It is the liberals that actively want to just cast the concerns of value aside, waving their hands insisting that somehow obviously the value is greater than whats already spent and not surprisingly no matter how large the increases in education spending by the State, it is still somehow obvious to them that they should continue to ignore costs completely.
You are doing it right now.
Re:Colleges are not for education (Score:5, Insightful)
You are doing it right now. You admit that the value of any education is not infinite, but thats so damaging to your method of argument that you accuse the other side that they believe the value of any education is zero as if your accusations are a logical argument, and yet you have continued to not actually discuss what the value of any specific education actually is. Society cannot feel its way to prosperity. If you have to generalize to make your argument because specifics always seem to hurt it, its because its full of feels rather than thinks.
Well you're not going to get a full position paper in a Slashdot posting, sorry to burst your bubble on that one.
Yes as conservatives say, degrees have a definable monetary value which can be calculated using the discounted cash flows of the individual's projected salary. No, I don't agree with liberals that education has unlimited value and is worth any cost. However, I do agree with them that the social value of an educated person is greater than the DCF of their salary improvement. How much greater? Well that's an interesting question and one worth debating.
My personal position is that having members of the populace who both desire a college education and are capable of handling the material but not educating them due to their personal life circumstances is a waste of potential human capital and that currently the break even point is likely the bachelor's degree or it's equivalent. As a society I think it would be in our best interest to ensure that everyone has the opportunity to achieve at least that level of education. During the Agricultural period grade school was sufficient, during the Industrial period high school was sufficient, during the Information Age we now need a post-high school educated populace. This doesn't have to mean college, but it should mean significant education past the 12th year.
The free market is great at optimizing resource allocation given the correct constraints but like any optimizer if the constraints aren't set properly you get strange answers. Our current funding model for post-secondary education creates significant labor market inefficiencies that won't self-correct.
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Re:Colleges are not for education (Score:5, Interesting)
What GP clearly means is that University education should be at no (or little) cost to the students. You're being willfully obtuse here.
It will be little or not cost for them to attend, but they will pay for it the rest of their lives in the form of taxes. So will those who *don't* go to college. Meanwhile, Biff and Skippy get a taxpayer-subsidized 4 year frat party. People tend to not value things that they don't think costs them anything. Free sounds like a nice idea, until you consider the consequences. And yeah, I'm still paying my student loans.
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i disagree with the statement "people tend to not value things that they don't think costs them anything".
i went to school basically free. i had to pay 10% of instate costs at a big 10 school.
we grew up poor and it was really the only way i was going without monster loans.
i can tell you i sure valued that education.
i consider the consequences, they are a nice life based on my degree and education.
Re:Colleges are not for education (Score:4, Insightful)
I think it would be completely fair to have reasonable minimum academic performance requirements. You have to have shown promise in high school and must continue to get good grades in college or university. That way Biff and Skippy likely get zero or only one year of that frat party. If they can fool around and still get good grades then maybe that's ok - they do seem to be learning.
To deal fairly with people who did not do well due to circumstances beyond their control (say a parent died the week before finals) there could be some sort of review process. There could also be some sort of probation system where people who were borderline would pay some cost to show that they were serious. Improving their grades would then remove that required payment.
I would make a slightly more nuanced statement. People may value less something which is given to them as compared to something they had to earn. Individual results will likely vary significantly as to how much less. Studying hard to get good enough grades is earning the reward of free tuition.
I would consider my own personal experience here. My family did not have a lot of money, so I earned my own money to pay my way through a four year B.Sc. While I had excellent grades in high school, I received only one scholarship that amounted to the cost of a couple of text books. I graduated with an A+ average and the government (Canadian) gave me a scholarship which paid my way through graduate school. They more than got their money back in taxes I've paid over the years.
At the same time, I knew people who's parents paid their tuition for them, and who failed out after one year of frat partying. I also knew people who's parents paid their tuition and who studied hard and did well.
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And yet there are all those countries that do have free (or close to it) tertiary education and somehow still value education and don't seem to have an abundance of "taxpayer-subsidized 4 year frat parties".
I take it you also think that elementary/middle/high schools should also not be little or no cost to attend to avoid those taxpayer-subsidized 12 year frat parties?
There's a large enough junk off people in society, not everyone by any stretch (you for example don't seem to be in this group), that think t
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Surely you would expect that?
The top 10% of income earners earn 45% of the income after all, but 68 > 45 I here?
1. The tax system is intentionally progressive, the top end is supposed to pay more as a percent of income by design. 68 > 45 is a feature not a defect.
2. The stats for income are based on AGI - those at the top end have greater access to methods of lowering their AGI through deductions and exemptions and accountants that aren't available to those at the bottom end. So while they earn 45% of
Yet in developed(?) countries... (Score:3, Informative)
In most Latin American countries, the best universities are fully or partly State-run. Tuition is often free or symbolic up to Bachelors, and for posgraduate studies it is still *really* cheap by US standards — i.e. I'm studying a Masters degree in the second most important university in Mexico, and pay less than US$100 per semester. Of course, that's because I chose not to be a full-time student; as I would automaticallyreceive a grant of ~US$600 per month.
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When I was in college, one class I had several foreign exchange students on one project:
A German who was studying to be a teacher.
A person from Chile who was studying to be an engineer.
A Chinese PLA member who was doing computer security.
A student from France studying nuclear engineering.
Of all five people on the project, I was the only one who had to get loans and grants for my education. Germany, Chile, China, and France all paid fully for each respective citizen's tuition, books, fees, even supplies.
TAN
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The vast majority of people aren't getting philosophy or art history degrees to benefit society with their insightful realizations of life or their knowledge of the past with respect to art. Most of them are doing these majors because they are easy and require little skills. Anyone who has gone to college knows the majors that other people switch to because they have easy schedules and allow them to party after they dropped their preferred major after they found out it required hard work. People aren't gett
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Good education is cheaper than free - in the long run it more than pays for itself.
This only applies when a sufficiently small proportion of the population have that education, so that it allows those who have it to differentiate themselves in the employment market.
If everyone was educated up to PhD level, it wouldn't magically mean that we all get massive salaries.
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If Congress wants to help pay for college, stop backing new student loans to any university whose tuition went up more than 2% last year
With non-teaching jobs well in excess of 50% of total employment at most universities, this is how you slam on the brakes.
It's easy to nickle dime 8% annual increases -- nobody wants to pay for a $2000 nav radio for their car, but an additional $35 a month, sign me up!
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If I'm speaking to a breatharian, I won't be doing so for long.
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Granted completely. First step to figuring out where the costs lie is to admit that there exist costs, that it can't be "100% free".
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I don't know about you, but I wouldn't care to pay for little Billy's $100,000 art history degree that is less than useless because they wasted perfectly good ink and perfectly good paper in giving out the degree and no work available for Billy.
Perhaps getting rid of the useless administrative cruft and burea
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Aw heck, why wait till they die? Tax the old, tax the rich. "Should five per cent appear too small / Be thankful I don't take it all"
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Colleges need to stop building new buildings. (Score:2)
Almost every college is crazed with the idea of building new buildings. Even if the average occupancy during peak times is about 20% for the buildings. If there needs to be new technology, then refurbish existing rooms for less, vs building a new building.
Alumni, do not donate when your school is trying to get funds to build a new building!
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General alumni donations do not go into capital projects, like new buildings. When your university is asking you, as a regular person, to donate it is to raise their alumni participation numbers. That affects their national ranking. It's a marker to show that you valued your time there. You do get to specify how you want the money spent.
Capital projects are funded by major gifts - the guys who get their names on the side of the building. This would not be you.
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University education should be free. And in some countries it is.
No such thing as a free education (Score:3)
University education should be free. And in some countries it is.
It is NEVER free. Someone somewhere is paying for it. There is no such thing as a free education. Furthermore people tend not to value things they don't have to pay anything for. I think students should have some financial skin in the game. I have no problem with the cost of an education being subsidized through taxes or donations or other funding but I don't think the cost to the student should be zero. Modest? Yes. Zero? No.
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You largely misinterpret my words and you know that. Of course schools cost money. And so do universities. However, you can either have a system where money dictates if you can go to school or where all can go to school and we all, in an attempt to be altruistic, pay for it. In the end, if the university education pays off, you will pay enough money so someone else can go to school and university. It is like many concepts in modern states. For example, retirement. Some pay and the elderly people get the mon
People don't value what they don't pay for (Score:2)
You largely misinterpret my words and you know that.
I didn't misinterpret them at all. I said exactly what I meant and I'm pretty sure you meant that everyone should be able to attend school without paying a cent directly. I disagree. Education is not free and I strongly think that people should have to contribute, particularly when they are adults. My tax dollars support the education of children in my community and state. That isn't free. I firmly believe that college students should incur some amount of direct liability for their education though I'
College level should be 100% free (Score:2, Interesting)
College level should be 100% free
WHY?!?!?!
So a college degree will become as worthless as a high school diploma?
What's the point? If you didn't bother to learn in high school, you ain't gonna learn in college.
Re:Colleges are not for education (Score:4, Funny)
College level should be 100% free to citizens in the USA, there is no reason at all to have to charge for classes up to associates, and it should be inexpensive to get to bachelors and beyond.
We can't have that, it'd be like Europe. I mean, that's practically Communism! What would be next, free healthcare?
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Why should anything be "free"? Acknowledging that the education industry in America is screwed up isn't the same as saying stuff should be "free". Someone has to provide the "free" services you want, "free' healthcare, "free" education, etc. By "free" you mean that YOU shouldn't have to pay for the stuff you want, someone else should be forced to.
Funding streams (Score:3, Insightful)
College level should be 100% free to citizens in the USA
It's not free. Someone has to pay for it and frankly the students should have some skin in the game. Students who don't have to pay for their tuition routinely put less effort into it. It's almost a cliche. I agree that college tuitions have gotten WAY out of hand but I don't think it should be free either. Providing a quality education does cost money and people don't tend to value things they don't have to pay for.
No the dean does not deserve $980,000 a year salary, he doesn't do shit. If you want to pay the coach well, base his salary on ticket sales for games.
I have no problem with colleges paying market rates for talent. If that is a big numbe
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I was about to call BS on you, but apparently you aren't that far off!
Harvard University Professor and Dean Salaries [glassdoor.com]
Harvard University Associate Dean Salaries [glassdoor.com]
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They are for empowering a small group of people.
College level should be 100% free to citizens in the USA, there is no reason at all to have to charge for classes up to associates, and it should be inexpensive to get to bachelors and beyond.
I 100% disagree with you. I have no problem with subsidizing the education of people who really want to be at school but there were plenty of jackasses that were there to party. They failed just as many classes as they passed and it took them 6+ years to finish, if they ever did. I have no interest in paying for these people to have a good time. Not to mention the fact that there is no reason that everyone should have to go to college. There are plenty of people that don't do well with academics. They
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Actually that's what K-12 education is for here. Anything else, you're on your own. So you should rather look to improve that system first if it is inadequate.
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You know what professors should be paid, and adjuncts.
Yup, about a tenth of what the football coach gets paid. Rising to an eighth for the dean.
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The price of college is based (loosely) on how much it costs to educate someone. As the costs of labor increase, wouldn't you expect that professors salaries would go up as well, or would you rather just lock them into a state mandated salary?
This is not to say though that college is way to expensive, I totally agree there. I have two kids that in a few years will be looking at college, and I will encourage both of them to go to Germany.
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and leave the more advanced degrees to the "real" collages.
I tried to leave the advanced degrees to collages, but they just sat there on the wall looking pretty.
https://en.wikipedia.org/wiki/... [wikipedia.org]
Wow! (Score:5, Informative)
Also 6% seems a very high price to manage money. Where they getting a return on investment of 12%?
Or is this the old boys club where they are shoving student's money around to justify higher wages for themselves?
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It does seem nuts. But when I went looking for information I was surprised to learn that in 2014 Yale's endowment fund had a RIO of 20.2% [yale.edu] (!).
While it is ridiculous that they end up spending more on management fees than they do on students from the endowment, it looks like the managers of the fund are doing pretty well.
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it looks like the managers of the fund are doing pretty well.
In a year when the S&P was up over 15% they did well but not exceptional. Yale would have gotten a better net return by just putting the cash in indexed mutual funds; in the long run, almost every investor does better that way instead of going with "actively managed" funds where the manager collects a huge salary in years when the market is up and doesn't say anything in years when the market is down.
Re:Wow! (Score:5, Informative)
Also 6% seems a very high price to manage money. Where they getting a return on investment of 12%?
They didn't get 12% ROI, they got more than 20%. And it was that success that got them their big payday.
According to the article, the fee for the investment managers is 2% plus 20% of the growth. The 2% amounted to $137M and 20% of the growth was $343M, which means that the managers' efforts increased the size of the endowment by $1.7B. That's phenomenal. The bankers made a lot of money, yes. Too much? I don't know; I'd be happy to let them manage my investments under those terms with those sorts of returns. As for the university, they were able to spend $1B of their endowment while increasing its size by over $200M, net.
That's exactly what an endowment should be doing: Generating a health return and spending most of it, but retaining a modest increase to keep up with inflation.
I really don't see the problem here.
Re:Wow! (Score:5, Interesting)
which means that the managers' efforts increased the size of the endowment by $1.7B.
No one is disputing that the size of the endowment increased by $1.7B. Was it really due to the managers' efforts, or could the fund have increased by $1.7B if invested in a lower cost investment portfolio that *doesn't* take 20% of that growth? Over the last couple years, the market has been strong, and many investments have done well. I could support paying the managers 20% of whatever growth they generate above and beyond some normative benchmark, like the S&P 500. That would be a measure of the managers true effect. Oh, and while we're at it, why don't we say that if the fund ends up doing worse than the S&P 500 due to the managers efforts, claw back some of that 2% fee too.
Not phenomenal: Index Better! (Score:5, Insightful)
The 2% amounted to $137M and 20% of the growth was $343M, which means that the managers' efforts increased the size of the endowment by $1.7B.
No that is not at all phenomenal and in fact is probably worse than simple index investing and almost certainly has little to do with their efforts. Using your numbers the fund grew by [(1.7-0.343)/(8-1.7)-1]=21.5%. Depending on the exact year in question putting the money in a simple broad US stock market ETF such as one offered by Vanguard [vanguard.com] would have generated a 33.51% increase in 2013 and 12.58% in 2014 and if this is the amount paid in 2014 it will likely include some or all of the 2013 gains because you cannot pay before you know what the gain is.
Doing this would have cost them a 0.05% expense. It's really easy to make "phenomenal" returns when the stock market is rising as much as it has in the past few years. What I do not understand is why they are paying such exorbitant expenses and, if they want to offer a bonus it should be based on performance above the market not just the total increase which has little to do with a manager's performance.
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But which ETF do you choose? It's easy for you in hindsight, but the great fund managers do a great job choosing where the money goes, and when to move it.
A typical investment would net around 5% to 10% over time, making the manager 1 to 2%. That's not exorbitant. As you said, in a good year the .numbers get bigger.
And the article was rubbish, cherry picking data to serve an agenda.
This is really the same old story about how fund managers take every advantage they can, to mutual benefit, but don't suffer in
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while they produced a half billion dollars more net of their fees
They rode the rising tide of the market. Their fees ate up any extra gain that came from their management.
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The catch is it should be 20% of the growth above a market index or zero, which ever is greater. The S&P was up 16-17%, so their bonus really should have only been $50MM, or a total compensation of $187MM. Some contracts are even done with the base fees taken out of the bonus fees, but I think the bonus rate is higher.
Good Luck With That (Score:5, Interesting)
It isn't just education. It's everywhere.
In the past couple of decades, we've seen a rise in need for "administration" in the engineering field.
I've been to plenty of meetings where there have been more PMPs (or prior to the last five years, proto-PMP administrative types) than there have been engineers. I've been to technical interchanges that could have been cut down in attendance by half to two-thirds if the engineers in attendance could have been bothered to do their own damn reporting. I see that "meeting minutes" is a deliverable on any contract I'm working on.
I can't say that I get where this is coming from, whether it is because engineers don't want to be managers, or because the "everybody gets a trophy" generation required employers to start giving aspirational administrators more power for less qualification, or because contractors needed to pad out how many employees they needed on any given contract to establish perceived value, or maybe any combination of these.
But there's a perfect storm of "my small function, no matter how small, is worth an extra man-year and I will make a meal out of a nibble to justify it" going on here.
$480 million to fund managers (Score:4, Insightful)
That is just crazy. These are not high-risk/return investments funds. Just load up on a diversified bluechip portfolio, and make sure you follow all the other sheep so that you can't be singled out for getting something wrong.
The annual fund manager convention must just be putting up pictures of regular people and laughing profusely.
Re:$480 million to fund managers (Score:4, Informative)
That is just crazy. These are not high-risk/return investments funds. Just load up on a diversified bluechip portfolio, and make sure you follow all the other sheep so that you can't be singled out for getting something wrong.
Will that strategy net you a 20% return on your investment? Because that's what Yale's fund managers achieved.
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Fair point, but the problem is their fees negate most of any benefit they bring, and we don't know what risks they took to get that 21%. An S&P 500 index fund would have returned around 12% last year. The management fee came to 6% so they are only 2% up on index tracking. Sure 2% is a lot on that amount of money, but any sensible investor can do better than an S&P 500 index fund if they are prepared to take more risk. Putting a portion of the funds into tech stocks on the assumption that the tech bu
Re: $480 million to fund managers (Score:3)
20% is random fluctuation. Statistically, over two to three decades, NO ONE beats the market average.
So this payment structure is guaranteed to do worse in the long run, by paying out large bonuses in the "fluke" years.
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That is just crazy. These are not high-risk/return investments funds. Just load up on a diversified bluechip portfolio, and make sure you follow all the other sheep so that you can't be singled out for getting something wrong.
Will that strategy net you a 20% return on your investment? Because that's what Yale's fund managers achieved.
The bigger the fund the higher the percent returns, but that's not because they are better at "investing" (i.e. moving capital from losing companies in a competitive market to winning companies), it is because there are successively more exclusive financial instruments whose benefit to the market is successively more dubious but return higher and higher margins. In other words the system is gamed at multiple levels and the more money you have, the more exclusive gamed systems you get to play, and you pay t
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The annual fund manager convention must just be putting up pictures of regular people and laughing profusely.
No, actually they discuss safe-house locations for when they finally cause the shit to hit the fan. [theguardian.com]
Tax it (Score:2)
Make all management distributions a taxable. Or better ... make all management distributions above a % of education payouts at a taxed penalty. Then the donors will want more accountability since some money is going to the government instead of fund managers.
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That's probably the only way to ensure that money isn't horded, no matter who is doing the hording. Possibly they will just try to horde it out of the country.
I don't think there's a good solution to "how do you stop X from hording money". Money by it's very nature has a habit of growing when well managed. This is probably why you can never get rid of the 1% problem. Once you have a considerable more amount of money than the average Joe, even like $5 million, as long as you manage it well, that money will
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Why should there be an incentive for people to grow their $5 million to $25 million? It no longer makes any difference to them. The only difference is in the ability to direct and control large numbers of other people towards some worthy task.
Money is a stupid mechanism for doing that. Try 'having a good idea that other people want to support'.
Yes, people will want to grow their money to $25 million just so they can say they did, but why should there be an INCENTIVE to do that? What's accomplished in any se
6% operating costs? (Score:2)
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Pensions are low risk, low return. One third of Yale's money was in a high risk, high return fund. Don't know about the other two thirds, they may have been in something like your link. The author didn't seem to care to find out.
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False comparison (Score:2)
It would be interesting to know the spread. (Score:2)
Re:It would be interesting to know the spread. (Score:5, Informative)
I expect that the "hoarding money" is confined to the Ivy League Universities, and by the time you get to Texas A&M and the like they are desperately trying to get funds and have no spare money to hoard. It would be interesting to know the spread in funding.
It would be interesting to know the spread. Per U.S. News, here it is (2013 figures):
http://www.usnews.com/educatio... [usnews.com]
Harvard is #1 at $32B
Texas A&M is #8 at $8B
Re:It would be interesting to know the spread. (Score:4, Informative)
Bigger list:
https://en.wikipedia.org/wiki/List_of_colleges_and_universities_in_the_United_States_by_endowment
This just underscores the fallacy of demand side.. (Score:3, Interesting)
.. economics... aka "throw money at stuff to make the problem go away"...
Look, you want education to be cheaper? You need to increase the competition for education. Yale and Harvard are always going to be expensive because they're Yale and Harvard and they can get away with that. Forget them.
Focus on the schools that educate the majority of college graduates. And if you look at them you'll see they basically increase their tuition whenever you increase the subsidies. government ear marks more money for education... and tuitions go up. why wouldn't they?
The same thing happened with housing. Government ear marked a lot of money to under right loans for poor people that otherwise couldn't afford homes because they're terrible credit risks... because they're poor. Well, what happened? Housing prices went up. Because people selling homes could charge more because people were showing up with these government loans. And beyond that, supply went down which also drove prices up.
now if you kept this going long enough... eventually... you get more housing. But you've got some time to wait for that AND in teh mean time prices are going up and they're going to stay up... they'll never go down... they just go up and up and up and up.
Now if you want prices to go down... you increase supply. Which means building more universities, expanding universities... what you want is EMPTY seats. A glut of supply. And that will drive prices DOWN. Making things MORE affordable instead of less affordable.
I know I know... I said "supply side" and I've made some idiots unhappy for reasons they don't even understand. But this is basic economics, kids.
You want the universities to charge less? Increase competition so they know that if they don't lower costs they lose your butt in their seats.
And while you're at it, consider making it harder for them to give subsidized educations to people that aren't even citizens. I know I know... I'm a bad guy. But consider that if they can't put those butts in their seats it also opens room up in the university for you and your kids etc.
What you want to do is get the university talking about "how are we going to get more people in our university"... and one of the things they're going to do right off the bat is NOT raise tuition costs if they're worried about attendance. With inflation alone that will cause tuition to fall back into equilibrium in about 20 years.
But don't stop there... we have the whole online education thing which some people think is shit because there are a lot of diploma mills that like to do it that way. But these education systems are entirely viable if taken seriously.
Especially for undergraduate classes that are mostly about people sitting in a lecture, writing down notes, and turning in some stuff that is graded by a teacher's aid. All of that stuff you can encourage into online classes. Possibly do it through the community college programs but push it really hard. Make federal funding for public universities/colleges contingent on their participation. Don't specify which software they have to use. By all means give them something they can use for free provided by the feds if you want. But whatever the feds come up with is going to be inferior to what some university either independently develops or contracts. Its theoretically possible that it won't work out that way but its historically unlikely.
The point here is drop costs. Just jack the supply up to hard that the universities have to cut fees to keep the crickets from taking over.
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You're on the right track with the economic analysis. But...
"Just jack the supply up to hard that the universities have to cut fees "
Who can afford to "jack the supply up" enough to deliberately to lower prices? Governments? If it's profitable, why aren't they doing it already?
We probably also need to consider the up-shift of the demand curve due to the high subsidies that many students receive in the form of grants and low-interest loans.
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The government already throws massive sums at the education system. I am suggesting shifting the subsidies... not totally... that would be disruptive... but gradually and incrementally to subsidize construction and expansion of universities to increase supply.
So I would slowly be scaling back demand while scaling up supply.
As to why they aren't expanding already, they are... sorta.
As to the upshift in demand from government loans, that's actually mostly what I'm talking about. Those loans are probably a bad
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Threshold and institution size ... (Score:2)
Shouldn't the threshold be based upon the size of the institution? Two reasons:
Larger institutions have much more infrastructure to maintain if there is a decline.
A common threshold would benefit small, well endowed, and arguably elitist institutions.
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A common threshold would benefit small, well endowed, and arguably elitist institutions.
My Word! This university is a tripod! [youtube.com]
Colleges are being run like businesses (Score:5, Interesting)
For Pete's sake, even the "non profit" "Catholic" college I went to, established in 1870, originally run by humble Jesuits, no longer has any Jesuits running the place. In fact 3-4 years after I graduated the replaced the damn Jesuit president with guess who? Mr. MBA man who has a background of being CEO of profitable businesses, a proven track record of raising tons of money, and making sound financial decisions and investments. I gave them a piece of my mind next time they called me and asked for donations, which I halted immediately. Their tuition has more more than doubled in a span of 10 years. When I went it was a tall $17K/yr... it's now a ludicrous $35K/yr. From what I've read, all of that money is not being spent on students nor faculty. No it's going to their precious endowment fund.
I know the government has done minor things like require colleges to post Net Price Calculators but that's almost pointless. You could have researched that information prior to that law being passed if you were determined enough to do it. IMHO, what they should really do is require them to create a ranking and scoring system they all have to abide by. Post entry-graduation rates, by year, by field/career, indicating how many attained jobs in each respective field or whether they had to leave their field, and how long it took. I'm sure prospective students would love that, especially if they could also see what graduates are getting paid as their salaries though that's a slightly too invasive. At least with this they could compare colleges apples to apples, on equal footing. Students could truly shop around and see what their dollar could get them.
I wouldn't call it hoarding (Score:2)
Poor Analysis misidentifies problem (Score:3, Insightful)
The analysis misses the real issue. Endowments are indeed spent and support perpetual operations. This has been attacked on several grounds and for various reasons, but in essence, if we accept that subjects like physics will always require future generations of teachers and researchers, there is no reason to inherently object to stable funding sources for this purpose.
However, since the 1970's (and periodically earlier), there has been a serious, problematic, society-wide trend: an increasing and now dominant fraction of the 'economy' is 'finance.' In theory, connecting every part of the economy with finance increases efficiency as money flows more freely. In practice, it all flows through certain hubs where frictions profit the finance professionals; their share of the pie has increased greatly. Is it disproportionate to the benefit of finance? That can be debated; but not up for debate is that yields and inflation will eat away at endowments if they don't get on that treadmill. You can't keep money in a savings account anymore; interest rates are too low to account for inflation. Only markets will do. With lots of money, the difference between a good return and a great return turns out to be game-changing compared to other factors like new donations. The only question left is whether 'good' investment professionals do a better job than 'mediocre' ones. If the good ones do a better job, then hiring them makes necessary sense - it would be incompetence to not - and their salaries are simply a tax taken by the finance sector, shared by people across the economy. You either pay at the bridge, or you pay by not being able to use the bridge.
The hoary trope about hoarding is usually a good indicator of someone trying to get hands on the money; as an aside.
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The financier share is disproportionate to the social benefit of finance to the extent that the value of financial instruments is disproportionate to the value of everything and everybody in the world all put together.
We discovered that the relationship between the financial economy and the underlying real economy has reached a decisive turning point. The rate of growth of world output of goods and services has seen an extended slowdown over recent decades, while the volume of global financial assets has expanded at a rapid pace. By 2010, global capital had swollen to some $600 trillion, tripling over the past two decades. Today, total financial assets are nearly 10 times the value of the global output of all goods and services.
That is not a band of angry hippies saying that. It is Bain Capital, who are financiers and like how things stand, seek to make it more so.
To anybody else, this is ridiculous and overleveraged. We cannot go on serving the whims of capital alone, because not only will it lead to ridiculous situ
Smart people using money intelligently (Score:4, Informative)
Google: "What is a university endowment"
A: Endowments represent money or other financial assets that are donated to universities or colleges. The sole intention of the endowment is to invest it, so that the total asset value will yield an inflation-adjusted principal amount, along with additional income for further investments and supplementary expenditures.
It is a donation that is invested. It is a donation that you cannot guarantee will be given every year. You grow this money so you will have a stable amount of income into the future.
A university is an institution. It is in the business of educating intelligent people, by retaining intelligent people. If you have a large endowment why should a congress that cannot balance a budget tell you how to spend your money?
Please remember not all universities have huge endowments. Many prestigious universities have large endowments ( snark ), from wealthy alumni, or wealthy people in the state that just like that university and left them money. These often one time investments are MEANT TO LAST. so you invest them. You do the smart thing and use 1% and try to gain 8% every year. A university can survive 100's of years so it can apply good financial practices. This is why endowments have boards that review how the money is used and invested and those boards do it for free or a small nominal amount.
A little maths:
( if you cannot grow your money )
1 billion fund spent over 100 years: 1% is only 10 million a year
10 million fund spent over 100 years : 1% is 100k a year
The hope is to grow your money on average by 7% a year. And thats a big HOPE nowadays. Leave them alone, because otherwise those same universities will be broke in 30 years cause they spent the money now for a short term drop in tuition and facilities with no way to replace that money.
Endowments (Score:2)
You do know how endowments typically work, right? Some rich alumni gives the school $1,000,000 for a scholarship. If they just gave out the million to students they might help 50 students for 1 year, but that's not what they do. They invest the million and use the interest to fund the scholarship and can then help a few students per year - basically forever.
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The reply that you replied to was trying to point out that the article doesn't even understand how endowments work.
Yes, they go towards salaries. The person who donated $10M said they were donating specifically for that purpose. The university cannot touch that money for any other reason. They money does not, usually, go towards new buildings. There is a specific division tasked with raising funds for capital projects. They also go towards scholarships - which does go directly towards tuition. The un
Somewhat misleading (Score:3)
When money is donated to the university, it is categorized into buckets like facilities, capital projects, scholarships, salaries, etc. Some of these things get spent right away or put into a fund that is spent over a short period of time. But certain categories, like scholarships, faculty positions, and some staff positions, can be endowed so that they live on in perpetuity. These endowments need to be large because they fund these based on the capital gains of the investment. The university I work at has almost 200 endowed faculty positions and a TON of endowed scholarships. You need a large investment to have enough returns for to function given market fluctuations. Our board of directors is tight with the endowment because it is a well oiled machine does directly impact the students - and yes it does affect tuition in the form of financial aid grants. It's long term investment and anybody who invests knows that you don't fiddle with your investments for short term gains.
The main cost of tuition is keeping the university running. Most faculty and staff positions are not covered by endowments. Our endowed faculty is under 10% of our total faculty and staff count. Students want less students per class. They want better access to professors and not to be taught by assistants. They want every electronic service imaginable. Both students and parents want electronic front ends to everything. The IT staff to support all of these is not cheap. Universities are not the universities from 50 years ago.
Those edge case high salaries are a pain, yes. It irks me when I see our president's salary publicised. But, it irks me from more of an honor sake. When our university says it is trying to adjust our operating expenses to give the lowest tuition possible and those insane salaries remain untouched, it is somewhat hypocritical in my eyes. In reality though, I don't see it making much change in tuition for the students. Say there are 10 employees making $1M a year. If we cut that in half, that is $5M a year that can go towards a tuition cut. That's huge if you have a school of 500 but nothing if you have a school of 20k. But, from a PR point of view, it affects perception. Coaches have a different job and can get whatever salary they earn because they are a money generating entity all in themselves.
5% instead of 8% (Score:2)
College in 1960s (Score:2)
"Back then you didn't have to get an A+ high school grade average and perfect SAT scores to be admitted to a top notch public university. Even luckier, tuition was dirt cheap. I got a world class engineering education nearly free. I remember that good fortune, am eternally grateful and contribute regularly as an alumni. "
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When (if) you retire, at some point the IRS will require you to start withdrawing money from your various retirement savings accounts regardless of the need.
These university funds should retain their tax exempt status for a limited time, after which some percentage is required to be spent on out right grants or taxed and the proceeds going to the state university system.
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The main point of high school in many places nowadays isn't to teach: it's too keep teenagers off the streets. If you try to make high school degrees "worth something" by kicking misbehaving students out of school, you are putting precisely those who are most likely to commit crimes back onto the streets. Expect a nationwide uptick in crime to follow.
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I might take that a step further: Lets separate education [1] from our education -system- which is broken and a money sink.
First, we need more trades. IT is a mature type of trade now, so it should have a governing body similar to electrical, plumbing, and HVAC. Not certs (as who cares if a plumber is certified to install HepVo waterless traps, but people do care if a plumber knows the proper angle of tilt for drainpipes so poop doesn't wind up building up.)
IT should be a trade, just like plumbing. Too