Robbing the Poor To Subsidize the Rich

The last year has been rough for Harvard. First there was that incident in Mass. Hall, then Brother Cornel got all red in the face, and now the endowment has shrunk to a paltry $18.3 billion, approximately $7.8 billion of which belongs to the Faculty of Arts and Science (FAS). With only 5.5 times the GDP of Haiti in the bank the prudent penny-counters at the Harvard Corporation have decided to play it safe and tighten the purse strings. In dollars the amount of money paid out of the endowment will be only 2 percent larger than the amount paid last year, the lowest percentage increase in a decade.

But over at FAS the budget isn’t shrinking. Shamed by the fact that even Brown’s financial aid packages are starting to look better than ours, there are plans to substantially increase funds devoted to the College’s scholarship program. Enlightened by the news that first-years don’t consider Expos a meaningful forum for student-faculty interaction, there are blueprints to increase the much better received freshman seminar program. And then there’s the oft-annunciated intention to increase the number of tenured FAS professors (although, of course, not from among the ranks of our own junior faculty).

So, with the higher-ups safely hoarding our gold bullion, where’s FAS going to get the booty?

Regretfully, from us.

To make up the difference between what the Corporation’s willing to pay out and what FAS wants to spend, administrators have decided to increase college tuition by $1,681 for the 2002-2003 school year—$1,042.81 more than if tuition were adjusted for inflation alone. At 4.9 percent this is the largest percentage increase in tuition in seven years. In dollar terms it is the largest increase in at least 25 years.

For the wealthiest Harvard students, whose parents make substantial incomes, the tuition increase will pose no problems. Likewise, for the least wealthy Harvard students, increased financial aid will absorb the costs of the hike (even if it may leave them with a larger work-study requirement or greater post-college debt). But for the rest of Harvard’s students, whose parents make too much to see the costs absorbed by aid and too little for the costs to be an inconsequential expenditure, the tuition hike will be a real burden. Feeling the pinch of the recession, members of the middle class will be strained to come across an extra $1,681 to slide into Harvard’s already bulging wallet.

This, of course, raises the question of why Harvard is playing the anti-Robin Hood and robbing the poor to subsidize the rich. With $18.3 billion comfortably in the bank, shouldn’t Harvard be the party forced to dig a little deeper into its pockets?

According to Andy Tiedemann at the University Development Office, the University’s conservative financial policies stem from a desire not to “erode the value of the endowment.” But when compared to extensive beachfront that is Harvard’s financial holdings, the amount of money that it would take to avoid raising tuition equals but a few grains of sand. If every student paid the additional $1,681, it would bring an extra $10.7 million to FAS next year. But, given that some students on financial aid will not have to pay these costs, the real value of the tuition hike will be somewhat less. Still, even the over-estimated $10.7 million figure amounts to only .13 percent of FAS’s portion of the endowment; the waterline would barely budge if the Corporation paid out this money to FAS.

Yet, some argue against any voluntary depletion of the endowment, even one that is statistically insignificant. These misers fall into two camps. The prestige fanatics worry about marring Harvard’s image as the nation’s wealthiest University. But with Harvard’s endowment safely billions of dollars larger than its nearest competitor spending a few extra dollars isn’t likely to threaten its position at the top. The doomsayers, on the other hand, worry about saving Harvard’s endowment for the proverbial rainy day when a cloudy economic climate will demand that Harvard dip into its stash. But, if Harvard doesn’t think that it’s raining now, as the nation feels the strain of the first recession in a decade, then it is doubtful that Harvard ever will. Today, when middle class families could use a break, why is Harvard continuing to hoard its cash?

Moreover, the argument for Harvard to increase payout from the endowment is even greater in light of the University’s history of rarely meeting its payout goals. Every year the Harvard Corporation sets a goal for payout that falls between 4.5 and 5 percent of the endowment. However, because this number is set in November—10 months before the start of the fiscal year—and then not readjusted for economic growth in the succeeding months, Harvard rarely pays out at its target rate. In 2001, for example, Harvard paid out only 3.3 percent of its endowment, and over the past five years average payout has been only 3.7 percent. When compared to the 341 wealthiest Universities in the nation, Harvard paid out a smaller percentage of its endowment than at least 156 other schools in 2001.

Admittedly, the size of Harvard’s endowment makes the real value of the payout larger than the real amount paid out by many other universities.

But, as a matter of integrity, Harvard should at least try to meet the goals it sets for itself. Moreover, as the wealthiest and most respected academic institution in the nation, Harvard should be a leader in subsidizing the costs of undergraduate education-especially when such costs are related to such essential academic functions as faculty hires, improved course offerings, and increased financial aid. To make students bear these costs isn’t prudent, it’s greedy.

Lauren E. Baer ’02 is a social studies concentrator in Dunster House. Her column appears on alternate Mondays.