President Elizabeth Garrett called a bill proposed in Congress in September that would require schools to use a part of their endowments for financial aid “misconceived,” Bloomberg Businessweek reported.
The bill, which is set to be filed this month, would require institutions of higher education with endowments larger than $1 billion to distribute some of that money in the form of need-based scholarships in order to maintain their tax-free status, according to the Bloomberg article.
Representative Tom Reed (R-N.Y.), who serves the 23rd district — which includes Ithaca — drafted the bill in order to “make college education more affordable for middle class families,” according to an article in The Lansing Star, written by the congressman’s office.
“I care about ensuring [that] anyone with the desire to educate themselves can receive a fair chance at making that happen without being prevented because of the cost,” Reed said in the article.
Although those who support the legislation have “their hearts in the right place … their methods won’t succeed for the goals they have in mind,” Garrett said during her interview with Bloomberg.
Joel Malina, vice president for university relations, said that a university’s endowment is “not an unrestricted resource to tap for current-day needs, but instead is a binding commitment that extends in two very important directions.”
“Taxing or otherwise tapping into an endowment’s principal investments might satisfy short-term demands — but would also cheat future generations of the educational programs and financial aid that today’s endowments support, and violate state laws that require prudent and careful management of endowment funds,” Malina said.
In a statement responding to Garrett’s critique, Reed asserted that “we understand exactly how endowments work.”
Noting in his statement that university endowments generate billions of dollars in tax-free income, Reed maintained that “it’s only fair that they put some of that profit into lowering, and in many cases removing, all tuition costs of going to college.”
Although Cornell reported a disappointing investment return of 3.4 percent for the year ended June 30, the lowest of the Ivy League schools that have reported their results, its endowment value has reached $6.3 billion, marking a 1.6 percent increase from last year and a record high.
Citing an increase of about $160 million in endowment-supported financial aid between 2009 and 2014, Malina maintains that Cornell is already reducing the economic burden of tuition.
“If you can earn admission to this institution, whatever your economic situation, Cornell is committed to making sure you can take full advantage of an educational experience that will transform your life,” he said.