According to Grassley’s press secretary, Jill Gerber, the Senate Finance Committee aims to increase discussion in Congress and among colleges about how to make higher education more affordable and whether colleges are doing enough to control rising tuition costs. The College’s report underscored its leadership in reaching out to low-income students.
The College’s response opened with a letter from President Tony Marx asserting Amherst’s long-time commitment to making education affordable to all undergraduates, citing, in particular, its no-loan financial aid policy for low-income families and the increasing number of students qualifying for Pell grants this year.
“Amherst is as or more active in reaching out to low-income students as any college or university of which we are aware,” the report states.
The report identifies several specific outreach policies including the Jack Kent Cooke initiative for community college transfers, which pays for a full-time staff member to recruit community college students. Other initiatives include the Telementoring program that facilitates the payment of low-income Amherst College students to mentor low-income prospective college students during the admissions process, and the partnership with QuestBridge, an organization that matches low-income students to participating colleges. The report also points out the easy accessibility of information about the College’s financial aid through the Web site and print publications.
Treasurer Peter Shea and Associate Treasurer Shannon Gurek drafted the initial report with input from Dean of Admissions and Financial Aid Tom Parker. Marx and other members of the administration edited and reviewed the report before it was released. Shea said that drafting the report raised no concerns about the Colleges’s current financial aid or endowment policy.
“The College is proud of its record of providing significant financial aid to a large and growing segment of the Amherst student body,” said Shea. “The College has been a leader in making enhancements to its financial aid program over the years.”
According to Shea, the greatest concern in writing the response was articulating the importance of maintaining Amherst’s current endowment policy. However, Gerber indicated that the Senate Finance Committee is currently considering proposing legislation aiming to require colleges to spend at least five percent of their endowments each year. Shea contends that such a policy would not allow the College to respond to yearly financial fluctuations and operate in a smooth and sustainable fashion.
According to the College’s report, each year’s spending rate is calculated as a percentage of the “average market value of the endowment value for the three previous years.” The rate should float between three and a half and five percent of the average market value depending on the rate of overall market growth or decline. Last year’s pay-out rate was about four percent of the total endowment growth over a year and four and a half percent of the total growth over a three year span.
“This allows for the smooth growth and decline in endowment market values,” the report says. Until the 1997-98 fiscal year, the endowment remained over five percent. The report rationalizes the subsequent reduction in endowment pay-out by arguing that it helped the endowment reach its highest value since the mid-1960s, after adjusting for inflation.
“The successful campaign, cost controls and superior investment returns have put the College in the strong financial position it is in today,” the report stated.
In a January New York Times article, other college presidents similarly expressed doubt about the effectiveness of the proposed pay-out policy.
In contrast with Amherst’s policy, in the Williams College response, President Morton Owen Schapiro promotes the concept of a five-percent pay-out as a means of protecting future endowment while “providing substantial subsidies to current students.”
At both Williams and Amherst, the Board of Trustees’ Investment Board oversees policy for endowment growth and spending. At the College, the Investment Board reviews the policy every two years.
According to the report, Amherst College’s endowment is over $1.66 billion, similar to other leading small liberal arts colleges. Harvard and Yale Universities, with endowments of over $20 billion each, have the largest endowments of any U.S. institutions.
In the same New York Times article, Grassley expressed concern that a record number of 76 colleges that currently possess over $1 billion endowments.
“Tuition has gone up, college presidents’ salaries have gone up and endowments continue to go up and up,” noted Grassley in the article.
According to Gerber, over 100 of the 135 schools contacted in January have already responded to the Committee’s request. The responses will be evaluated and considered for possible legislation changes, most notably mandating a five percent pay-out policy, although it is unclear when such changes will be implemented.