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Education United States

'Princeton Isn't Free - But It Could Be' (axios.com) 73

Posted by msmash from the closer-look dept.
An anonymous reader shares a report: Princeton University is so rich it has become a perpetual motion machine -- an institution that can operate with no outside financial support whatsoever. That's the claim made by Malcolm Gladwell, in a recent newsletter, and opposed by Harvard economics professor John Campbell, in a letter to The Browser. Gladwell is broadly correct. Campbell's quibbles might change the exact numbers, but Princeton really does seem to have reached the point at which it's capable of funding itself in perpetuity, even without research grants or tuition income.

A handful of ultra-rich universities increasingly resemble hedge funds with a nonprofit educational arm attached. Critics like Gladwell say that endowments have become so huge that Princeton and its ilk no longer need to beg for money from alumni; that such donations would almost certainly be better spent at almost any other nonprofit; and that even charging tuition seems unnecessary at this point. Princeton's endowment hit $37.7 billion in 2021, or $4.5 million per student. The school's entire annual operating expense that year was $1.86 billion, which is less than 5% of the value of the endowment.

The endowment will probably decline in value in 2022; such are the markets. But over the long term, it's reasonable to expect the endowment to continue to grow more quickly than the university's expenses. Princeton's historical investment returns alone have been significantly higher than the rate of inflation in tuition and other education costs -- that explains why proceeds from the endowment account for an ever-greater share of spending every year. On top of that, Princeton continues to be very good at persuading its alumni to continue to donate generously to the fund.
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'Princeton Isn't Free - But It Could Be' More

'Princeton Isn't Free - But It Could Be'

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  • Princeton's financial aid is very generous (Score:4, Informative)

    by Anonymous Coward on Thursday October 06, 2022 @01:57PM (#62944369)
    I have only one data point, my own, so I'm posting at AC. My child was admitted for a fall 2021 start date. Family income for preceding year was $450K, liquid assets of $200K, home equity of ~ $1M. The family had 1 other student in college with a $40K yearly cost of attendance.

    Princeton offered $20K / year in need-based financial aid (original $75K yearly cost of attendance). My child got in to several other colleges and was offered nothing.

    Getting into Princeton is difficult. Paying for it is not. I understand Harvard and Yale are similarly generous, but my kid did not get into either of them.

    • Re:Princeton's financial aid is very generous (Score:5, Funny)

      by gosso920 ( 6330142 ) on Thursday October 06, 2022 @02:03PM (#62944379)
      Cool humblebrag, bro.

      • Re: (Score:1)

        by Anonymous Coward

        Cool humblebrag, bro.

        As an AC, is it really a humblebrag?

        • Re:Princeton's financial aid is very generous (Score:5, Insightful)

          by saloomy ( 2817221 ) on Thursday October 06, 2022 @03:13PM (#62944529)
          This is what happens (Universities being so well endowed) when you have financial institutions able to lend near-endless amounts in student loans with no risk because of government guarantees. Students cant even discharge the debt in bankruptcy if their $300k Gender Studies degree doesn't give them the income to pay off the cost of university and requisite partying and $200 text books that come with it.

          Really, the solution is simple. Student loans should be treated like all other loans. Dischargeable in bankruptcy, no guaranteed by the fed, and subject to typical repayment plans. The current situation is just untenable as the system allows universities to raise the costs to absurdly astronomical levels, gripping people with undischargable debt, which the banks will never disagree to as they have downside protection from losses by the federal government, and downside protection from losses due to bankruptcy. This seriously has to change, and the universities will have to compete and be reasonable with the costs. No more lazy rivers in the common areas either...

          • Re:Princeton's financial aid is very generous (Score:4, Interesting)

            by CWCheese ( 729272 ) on Thursday October 06, 2022 @03:57PM (#62944645)
            perhaps the student loans should be guaranteed by the endowments of institutions like Princeton and the other Ivys and have the endowment cover the loan defaults,

            or they could simply erase tuition and fees altogether since they generate more in interest on the $4.5M/student annually than the tuition/fees

          • It's a tradeoff. I wonder what percentage of people actually find themselves in a position where they would need to discharge their loan in bankruptcy. By having the loans federally insured, they generally carry a significantly lower interest rate than a non-asset-backed loan would normally carry. This makes loans more affordable for everyone. Your suggestion would make it more expensive for the majority, for the benefit of what I would assume is a very small minority.

            • By having the loans federally insured, they generally carry a significantly lower interest rate than a non-asset-backed loan would normally carry. This makes loans more affordable for everyone.

              The fuck they do. My nephew's student loan interest rate is 7.5% APR. At a time when mortgages were being issued for about 3% and car loans anywhere from 0-2%. Maybe 5-7% on the high-end for people with marginal credit. Student loans at 7-8% would have been a good rate in the 80s perhaps. But then those "subsidized" rates never adjusted with the broader market, so they instead became subsidies for the banks at the expense of students and their families.

              Considering the bank takes on zero risk when issuing st

          • Re: (Score:2)

            by drhamad ( 868567 )
            If student loans should be treated like all other loans, most students would never get loans - they're not qualified for them.
          • Princeton eliminated student loans from financial aid awards 20 years ago.

      • Cool humblebrag, bro.

        It also violates the slashdot rules of a comment coming from a random ill-informed dude on internet, an informed first hand account is surely a terms of use violaiton.

    • You're one of those "poor" families they let in order to keep their non-profit/charitable status for tax purposes. Some riff-raff for the "real" students to rub shoulders with so they can tell their friends, "Oh yeah, I know some poor people."

    • Getting into Princeton is difficult. Paying for it is not.

      Not everyone can afford US$55k/year. Indeed, there are two UK universities that often beat Princeton depending on which random university ranking system you look at that used to offer free tuition and are still much, much cheaper....and with the way the pound has been going may soon be close to free again to those outside the UK! Getting into those is arguably harder since they don't apply a wealth filter of anything like the same magnitude.

      • Re: (Score:2)

        by pjt33 ( 739471 )

        You may not be taking into account that UK universities charge more to overseas students. E.g. to read computer science at Cambridge an overseas student pays 37300 GBP/annum to the university plus approximately 11000 GBP/annum to the college (varies by college) plus accommodation and other living expenses (source [cam.ac.uk]). 48k GBP is not "much, much cheaper" than 55k USD.

        Of course, there's still potentially a saving from the fact that you get a BA in only three years (and a status MA for free, which some overseas e

    • "Very generous." No it isn't. The whole point of this article is that it could easily operate in perpetuity for free. If that's the case, then the fact that it charges anything at all...especially that it wastes money evaluating which students to charge and how much...means it's not generous at all. It's doing the thing rich people generally do: Ungraciously demanding gratitude from the people they should just serve as a matter of civic duty.

  • Princeton is already free (Score:3)

    by dpille ( 547949 ) on Thursday October 06, 2022 @02:14PM (#62944409)
    If you have $300k, you leave it invested and borrow $300k that you pay off over 34 years. Viola: free education and some extra cash at the end for your trouble.

    • Re:Princeton is already free (Score:5, Insightful)

      by drnb ( 2434720 ) on Thursday October 06, 2022 @02:25PM (#62944439)

      If you have $300k, you leave it invested and borrow $300k that you pay off over 34 years. Viola: free education and some extra cash at the end for your trouble.

      Here is an even more enriching scenario. Invest $300K, get a $300K loan, then vote for politicians that will forgive the loan when they are down in the polls.

      • Here is an even more enriching scenario. Invest $300K, get a $300K loan, then vote for politicians that will forgive the loan when they are down in the polls.

        Biden is polling the same numbers as Reagan at this stage. https://www.newsweek.com/joe-b... [newsweek.com] I'm also happy that the $10k relief is letting everyone quit their jobs and retire. Are you also upset that people who avoided the hurricane aren't getting their relief checks?

        • Re: (Score:2)

          by drnb ( 2434720 )
          Reagan did not have a 50/50 senate. He knew he was only going to lose the House at most. Biden could easily lose both the House and Senate. A very different situation.

    • If you have $300k, you leave it invested and borrow $300k that you pay off over 34 years. Viola: free education and some extra cash at the end for your trouble.

      Et viola?

  • With such independence Princeton could be free from much interference coming from government, corporations and political evangelists. Stick to their mission and tell critics, evangelists and whiners to f' off. Their mission being a real education. I guess its all up to its administrators, are they educators themselves or political evangelists like many?

    • Re: (Score:1)

      by Anonymous Coward
      They're a major research university, meaning the economics of undergraduate education are a small portion of their overall income needs. I'm pretty sure people would jump off buildings if all of Princeton's federal research grants dried up overnight.

      • Re: (Score:3)

        by Tupper ( 1211 )

        As the fine article informs us, research grants are also unnecessary for Princeton's budget.

    • as I proposed in 2008: https://www.pdfernhout.net/pos... [pdfernhout.net]
      "Wikipedia. GNU/Linux. WordNet. Google. These things were not on the visible horizon to most of us even as little as twenty years ago. Now they have remade huge aspects of how we live. Are these free-to-the-user informational products and services all there is to be on the internet or are they the tip of a metaphorical iceberg of free stuff and free services that is heading our way? Or even, via projects like the RepRap 3D printer under development, ar

    • They canâ(TM)t really. The article is fluff. They have a 30B endowment but operating expenses alone (which do not account for grant expenses) are 5%. In order to Bidenflation, their ROI would have to be at least 25% this year to break even. There is probably another 5-10% in grant money that flows through.

      Sign me up for a financial instrument with a guaranteed 35% ROI.

  • Wealthy alumni will continue to donate to get the tax deductions. It's also how we get these mega churches. Rich people see it as a way to reduce their tax burden by donating.

    • Re: (Score:2)

      by Strider- ( 39683 )

      You never get back more than you pay when it comes to donations. I'm fortunate enough to be able to make reasonably significant and frequent donations to several causes I care about. I get about 35% of that back at tax return time. Even for the wealthiest of the wealthy, they would still be better off if they paid taxes than gave the money away.

      • I'm not sure 100% correct. I am aware of several people who donated large pieces of property they inherited (stepped up basis so no tax was due on inheritance) and claimed the full amount when the property was donated. Such large amounts it took several years of max deductions in fact. I also thought but may not be correct here, but say you bought stock in 1990 for 10 dollars and now you donate said stock worth 1000. The deduction is 1000 even though you never paid tax on the 990 appreciation. You will ofte

        • Donating appreciated assets is a good way to avoid capital gains tax if you want to donate anyway, but the sum of the capital gains tax avoided and the tax deduction you get for the donation (which is based on the current value of the asset at time of donation) is still less than if you'd sold the asset for that value and kept what was left over after paying the taxes.

          To put it another way, it's not true that donating puts you in a better financial position than not donating. It is true that you can do a lo

          • Donations are not just about charity. Donating even just $5k gets you political influence in an educational institution which you can then leverage for additional gains. Give $1-10M/y and you get to sit on a board or committee to make decisions about what companies a school spends its money with.

  • In the future, companies with a trillion dollars in the bank and robotic workforces COULD give their products/services away for free.... BUT NO, that's now how it will work

  • Cooper Union used to be that way, all it took was one very stupid set of staff to ruin their financial foundation.

  • Does it scale? (Score:3)

    by awwshit ( 6214476 ) on Thursday October 06, 2022 @03:41PM (#62944593)

    How can we scale this up to the national level and actually give away education?

    • Re: (Score:2, Insightful)

      by VeryFluffyBunny ( 5037285 )
      'Murica could do it tomorrow. There are still a few countries where higher education is essentially free, mostly in northern Yurp. When I went to uni, my fees were paid & I received a maintenance grant for my living expenses. But now, all of a sudden we "can't afford" to educate the population on a meritocratic basis - you have to have come out of the "right vagina," i.e. someone who's rich.

  • He's said this before about Harvard (Score:3)

    by usedtobestine ( 7476084 ) on Thursday October 06, 2022 @03:47PM (#62944609)

    And he was correct, then, too.

    The link to the youtube video is:
    https://www.youtube.com/watch?... [youtube.com]

    and if you want to search for it, its on the Mercatus Center channel and is part of the Conversations with Tyler series titled "Malcolm Gladwell on Harvard Endowments, Satire, and more (full)."

    He says that the one thing that Harvard is exeptionally good at is fundraising, and that if they spent their entire endowment, they'd be able to fundraise it back to a high level. He also discussed endowments and how they only work if you spend them, not just allocate 5% per year, and used the Sears founder as an example.

  • Wait, does Princeton have operating costs of $222k per student per year? What the hell do they spend it on?

    ($37.7 billion endowment is $4.5 million per student, so $1.86 billion expenses must be $222k per student)

  • Where are the politicians calling for a windfall tax? Big Education gets a free pass?

  • OF COURSE NOT.

    The endowment will simply grow and grow and grow.

    C'mon! How gullible are you?

  • Princeton is a small college, and I believe is also the most selective in the ivy league. What Princeton can or can't do is a nice vignette about a quaint college, but irrelevant to the rest of the world.

  • The value of Ivy League schools is that they're unaffordable.

    First you take a few of kids from really rich folks, who can only get in because of their wealth and connections (Bush, Kushner). With that kind of background no matter what they do they're likely to end up in some position of power and influence.

    They you take a bunch of smart and wealthy kids, like the $450k family income AC above. Those kids aren't playing with a stacked deck like the first group, but they should have the smarts to make good on

  • This news is very interesting and I think that many universities should strive for such a result. The key to such an outcome is patience, which many lack, I once did an essay on this topic on examples from https://samplius.com/free-essay-examples/patience/ [samplius.com] with a breakdown of how such places grow and develop. And further only more and everything will come to the fact that universities will become private organizations, not dependent on external funding and will be ready to accept students by giving their ow
  • Besides just funding the school, tuition is also part of a mechanism that motivates students to study
    and get good grades. Specifically, you charge tuition, hand out renewable scholarships for academic
    excellence, and put GPA (and possibly other) requirements on the renewal. So if a student fails to do
    homework, they lose their scholarships the following year. You can assign different scholarships
    (with different GPA requirements) to different students based on ability, so you require students to
    maintain a 3

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