Duke Endowment

[cowetarock]

A story in the Times on Thursday concerning tax breaks and off-shore hedge funds (I told you I'll read anything.)stated the endowment now is in excess of 7 billion. Google did not provide another source. The most recent figure I saw two years ago approached 4 billion. I would like to know if these figures are accurate and ,if so,the reasons for such growth. Anyone?

[Indoor66]

Maybe because:

The market has done well and the Endowment is tax exempt. Accumulation - Einstein's 8th wonder - compound interest. Also, our fabulously generous alumni making donations to add to the fund.

[Jarhead]

To which endowment are you referring? The Duke Endowment is based in Charlotte, NC. The University is only one of many beneficiaries of that endowment. Duke University has very little control, if any, over the Duke Endowment. Endowment funds on the books of the University are another matter. They are restricted funds that are to be used for a specific purpose, such as an endowed chair in a specified discipline, or a scholarship paying tuition from fund earnings, or a construction fund for a specified building. They don't grow because they are tax free. They grow because they are well invested, and their use is restricted. On the other hand, the Duke Endowment is as well invested, but it functions to distribute its funds to others, Duke University, Davidson College, and many others. So, which one are you talking about?

[cowetarock]

To which endowment are you referring? The Duke Endowment is based in Charlotte, NC. The University is only one of many beneficiaries of that endowment. Duke University has very little control, if any, over the Duke Endowment. Endowment funds on the books of the University are another matter. They are restricted funds that are to be used for a specific purpose, such as an endowed chair in a specified discipline, or a scholarship paying tuition from fund earnings, or a construction fund for a specified building. They don't grow because they are tax free. They grow because they are well invested, and their use is restricted. On the other hand, the Duke Endowment is as well invested, but it functions to distribute its funds to others, Duke University, Davidson College, and many others. So, which one are you talking about?

As a lawyer and fund raiser for a non-profit I am well aware of the difference between the university endowment and the Duke Endowment.I am also familiar with the complex tax laws appling to non-profits as well as the means by which an endowment is grown. What I am looking for is verification of the figures cited and a breakdown of factors by percentages contributing to this remarkable growth.

[cowetarock]

The information I was looking for is in a Duke News and Communications release today. Total Duke investments are 7.5 bilion of which 4.5 is endowment.

[dukestheheat]

either way this discussion goes, all would agree that we are rather loaded.

dth.

[tecumseh]

If Duke's endowment is really 7 billion perhaps they should stop charging tuition. Think of it this would immediately vault Duke up to the top of the list of coveted admissions. The could do it financially only 25% of the operating revenue comes form tuition and this includes the grad schools, belt tightening and tapping the endowment to a larger extent could do it.

[Jarhead]

If Duke's endowment is really 7 billion perhaps they should stop charging tuition. Think of it this would immediately vault Duke up to the top of the list of coveted admissions. The could do it financially only 25% of the operating revenue comes form tuition and this includes the grad schools, belt tightening and tapping the endowment to a larger extent could do it.

As cowetarock states the endowment funds total 4.5 billion, not 7 billion. The endowment funds can only be used for the purposes for which the endowment funds were created. If they were used to cover tuition for all students, they would last just 11 years. The other 3 billion can be used for anything governance approves, but just like my investments which I consider rainy day funds they are not available for current expenses. I haven't seen Duke financial statements in years, but I would guess that 3 billion is exceeded by the total annual total operating expenses of the University. We don't need less investments. We need more, both unrestricted and restricted. So give more money, y'all.

[tecumseh]

I assumed the fund was 7 billion Wikipedia lists it at 4. 5 billion. Lets assume Duke can hit up Melinda for an extra half billion and Duke endowment is 5 billion. It should be able to go tuition free.

Tuition and fees only represents 25% of income to run the institution this includes graduate school tuition. So total undergrad tuition is under 20% of this fees and room and board would still be charged and then "voluntary tuition" tax deductable could be collected. On top of this aggressive campaigning should increase alumni giving. So I would guess you are left with about 10% or less uncovered which is 180 million or so. I think belt tightening could save 80 million and then an additional 2% from the endowment towards operating costs would cover the last $100,000,000.

This would propel Duke towards the very top of the academic heap.

[Jarhead]

This would propel Duke towards the very top of the academic heap.

You mean to the very top of the community college heap, don't you? Do you think we could charge the university payroll on it American Express card. The University would be bankrupt in 5 years.

Look, tecumseh, the endowment cannot be used for any expenditures except those specified when the endowment was created. For example, if Bill gates gave 1 billion to cover the tuition and fees of all undergraduates how long do you think that would last? Six years maybe? I don't have a calculator handy. Not very substantial if that were the purpose for which it was granted, and definitely not a permanent endowment. But what if he said that his gift could only be spent on Central Campus construction? It would still be part of the overall University endowments, but not a penny of it could then be used for tuition.

And what about the rest, the other 3 billion? What do we think the annual expenses of the University are? I am guessing when I say about 3 Billion. Maybe I am way over the top, but if that is all the money we have in our rainy day fund, I'm worried. How in the dickens are we going to pay the 30 million for fda's cis replacement.

[tecumseh]

You are way over the top the budget is 1.8 billion but this includes a lot of research money for Duke Med and there is over 500 million in grants and research dollars coming in. The amount collected for tuition and fees is in the 400 million dollar range.

Most schools feel comfortable spending about 5% of their endowment a year if you assume a 10% annual return you are obviously still growing the endowment if you are spending 5% a year. For a 5 billion dollar endowment this is 250 million.

But the other fact is Duke is a very inefficient educational system. A friend of mine is the CFO (or similar title) of a small liberal arts school. He and his ilk laugh at the extravagance of the "haves" of the educational world. There is a lot of money that could be saved at Duke IMHO without effecting the educational product.

It could be done at Duke but it would take a whole different mindset and it would upset the "club" of higher educational elites. I mean certainly Harvard could do it without breaking a sweat.

[Jarhead]

Most schools feel comfortable spending about 5% of their endowment a year if you assume a 10% annual return you are obviously still growing the endowment if you are spending 5% a year. For a 5 billion dollar endowment this is 250 million.

Sorry that I missed the budgeted amount, but that is not really what I was talking about. Budgeted expenses are only one part of the total for the Greater University. I looked everywhere on the web for a copy of the Duke financials, but failed. Let's accept that lower amount though. That means only that my guess as to when we go to empty is out just a few more years. Also, I misstated a couple of definitions. See the reference linked below. Endowment funds are more restrictive than I thought.

(http://www.finsvc.duke.edu/acctops/acctgsys/introacctg/AcctgCodes.pdf)


Endowment funds are given to the University with the condition that they can not be spent – only the income generated from investing the money can be spent.


Current Restricted Funds: These funds are given or granted to Duke by outside sources to be used for a specific purpose. Examples: government grants, drug studies, gifts given for scholarships.

What this means is that there is no way for you to use the endowment funds to pay blanket tuition and fees for the total student body, or even for sub-sets of the student body. This started as a discussion of Duke investments. They were estimated to total 7.5 billion which included 4.5 billion in endowment funds. The endowment funds are moot, you cannot use them. Nor should you use the remaining 3 billion for reasons that I have already stated, rainy day funds, and all that.

So that leaves with:


But the other fact is Duke is a very inefficient educational system. A friend of mine is the CFO (or similar title) of a small liberal arts school. He and his ilk laugh at the extravagance of the "haves" of the educational world. There is a lot of money that could be saved at Duke IMHO without effecting the educational product.

You have brought up a new subject about an educational system. I don't know how to respond to that. Can you give me some specifics on the supposed inefficiencies? How would their elimination allow the implementation your plan given the realities of Duke's financial structure?

[DevilAlumna]

Lets assume Duke can hit up Melinda for an extra half billion

Not a safe assumption -- Bill & Melinda are still trying to funnel most of their money through their foundation (http://www.gatesfoundation.org/AboutUs/OurValues/GatesLetter/default.htm).

If you're curious, the Gates Foundation has an endowment of $33B, about $1.6B is from Mr. Buffett.

[unexpected]

Duke has 6,000 undergrads.

Let's assume all of these would get free tuition under the scheme you're talking about.

6,000 * 40,000 = 240 million.

If we need to get 240 million a year, what size does the endowment need to be?

If we assume the endowment earns interest at 5% a year (good years, bad years, etc), 6 billion dedicated solely towards this project will yield interest at 300 million a year. This figure will cover tuition + pump money back in the system to grow it as tuition rises.

We don't even have 6 billion. Harvard has 28 billion and doesn't even give free tuition. It's a lot harder than it looks. Besides, Duke meets 100% of demonstrated financial aid. Let the people who can pay, pay. It lets us build cool buildings like the French Center (why isn't it named the Gates center???)

[tecumseh]

You should be able to do MUCH better than a 5% annual return on endowment money. Again most institutions feel comfortable spending about 5% of the endowment a year fully expecting it will grow faster. With larger endowments non traditional investment strategies can be used and returns can be higher.

The second point I would take issue with is why multiply $40,000 by 6,000?Who says it takes 40,000 a year to provide quality undergraduate education? I certainly do not agree with this premise and feel the figure is much lower closer to $20,000 plus room and board.

What makes a great university the best minds or the best buildings?

[tecumseh]

Many colleges do an excellent job of educating students with limited resources especially endowments. http://www.teaglefoundation.org/liblog/entry.aspx?id=69
Most universities feel comfortable spending 5% of the endowment per year. At a school like Duke 5% of the endowment comes to $220,000,000 which even if we are counting graduate students comes out to about $22,000 a year of additional income. Yet Duke somehow charges more in tution often times significantly more, than many of these "poor" schools, limited resources schools that have no almost no endowments.!!!!!! This same could apply to Yale, Swarthmore, Grinell College, Stanford etc.

People hate change if Duke was committed, truly committed they could charge no tuition and IMHO still be on solid financial footing.

[Jarhead]

You should be able to do MUCH better than a 5% annual return on endowment money. Again most institutions feel comfortable spending about 5% of the endowment a year fully expecting it will grow faster. With larger endowments non traditional investment strategies can be used and returns can be higher.

The second point I would take issue with is why multiply $40,000 by 6,000?Who says it takes 40,000 a year to provide quality undergraduate education? I certainly do not agree with this premise and feel the figure is much lower closer to $20,000 plus room and board.

What makes a great university the best minds or the best buildings?

That's easy. The best minds go to the university with the best facilities and environment for the study of their disciplines.

A question -- where did you get the idea that "most institutions feel comfortable spending about 5% of the endowment a year fully expecting it will grow faster." You are missing the concepts of the accounting rules that apply here. Only the earnings of endowments are spendable.

Is there any institution with the stature of Duke University that costs less than $40,000 for tuition and fees? I believe that room and board are included. Some state operated schools may be lower, but they do get substantial tax money. The Duke tuition rate is pretty much in line with other quality institutions. Also, Duke has a very good record on financial aid which I think trumps your idea.

Let me tell you about my barber and his son. He's a barber ($13 for a haircut) with a small three chair barbershop on State Route 5 in Moore County, NC. About 8 years ago, his son enrolled at Duke University. He told me about the tuition invoice he got. It was for about $34,000, but it showed an adjustment bringing it down to around $3,400. Financial aid is what it was. He was worried that his son would have to work very hard, and his son did. Got his degree, early, and from his earnings while doing it, and other help, he was able to go to a state supported law school. Passed the bar in Mississippi, and is now practicing law in Mississippi. Financial aid is significant at Duke. One might refer to the $40,000 as the rack rate.

[kexman]

1) Financial Aid is a benefit at Duke, but it would be nice if loans were kept to reasonable amounts so students would not leave overly indebted...not sure the average at duke

2) At least at michigan the state kicked in less than 10% of the budget...I add this since I was shocked it was so low. It would be different at other state schools, but it was not as significant as I would have thought. At some point they should just drop the state:)

3) I think our endowment is lower than our perceived stature...
wiki has our endowment #16

1) harvard 28.9 billion
2) yale 18
3) stanford 14
4) Uof Texas 13.2
5)princeton 13
6) MIT 8.3
7)columbia 5.9
8)Uof Cal 5.7
9) U of M 5.6
10) Texas A and M 5.6
11) Penn 5.3
12) Northwestern 5.1
13) emory 4.8
14) U of chicago 4.867
15 Wash U 4.68
16 Duke 4.49 billion


I think we have some work to do to catch up with the big boys!!!

[tecumseh]

[QUOTE=Jarhead;21949]That's easy. The best minds go to the university with the best facilities and environment for the study of their disciplines.

A question -- where did you get the idea that "most institutions feel comfortable spending about 5% of the endowment a year fully expecting it will grow faster." You are missing the concepts of the accounting rules that apply here. Only the earnings of endowments are spendable.

This is just semantics here almost all endowments have been earning well over 5% nevertheless they do not like to spend over 4.5% or 5% or some similar figure. Most use a 12 quarter rolling average but even during periods of spectacular returns do not exceed 5%.

Work to "catch up". This misses the point, the point of the endowment is not to have the largest one. The endowment serves to promote the mission of the school. Duke will never "catch up" to HYP in academic reputation or the students it attracts without doing something dramatic...no tuition is dramatic.

"The best students" don't flatter yourself. A lot of the "best students" these days get great merit scholarships and go to small schools and state schools.

I see that no one addressed on why some schools with no endowments do a great job educating students and charge lower tuition?

[tecumseh]

Yale law professor Henry Hansmann, an expert on the law and economics of nonprofit institutions, was recently quotd deriding the argument that universities need to maintain their endowments against hard times rather than fritter it away on educating students now. His pointed comment: “A stranger from Mars who looks at private universities would probably say they are institutions whose business is to manage large pools of investment assets and that they run educational institutions on the side . . . to act as buffers for the investment pools.”
…
Helpfully, [former Columbia University trustee Edward N.] Costikyan has a suggestion for university administrators looking for ways to spend the money: Reduce tuition. He cites estimates that colleges like Harvard could conceivably abolish tuition altogether.

[unexpected]

Endowments spend approximately 5% of their earnings every year. Some years they may do better, some years they do worse. And yes, here's an academic paper that talks about this figure:

http://www.educause.edu/ir/library/pdf/ffp0413s.pdf

as for the 40k, I don't know if you went to Duke or not, but at Duke, they are included in the invoice. You will literally get a bill for about 21k every semester. Duke students are forced to live on campus for 3 years, and get dining plans for those years as well, so it's not easily broken up into "tuition" and "room and board."

As giving everyone scholarships, some schools do that already. Off of the top of my head, Cooper Union is free for everyone, and I think there was an engineering school in Boston that was recently started that also did that. Neither of this schools are really vanguards because of this.

Honestly, I again make my point that there's no point giving scholarships to those that don't need it. I would estimate that 20-30% of Duke students don't even qualify for financial aid. Why give them scholarships if they don't need it?

The things I would like to see with financial aid: Keep the same system, but make it more grants, and not loans. Loans suck. We're headed in the right direction, with the $400 million financial aid initiative, but we can always try to do better.

In any case, I think it'll be a while before we see significant change. I think Duke's big donors are a little "Duked Out." We've just recently built the LSRC, the Fitzpatrick Center, the French Science Building, Keohane Quad, the BellTower, the BC Plaza, and now we're starting on Central. We also recently (2002, i think) finished the $2 billion endowment initiative.

It just goes to show that you can never have too much money.

[gus]

He cites estimates that colleges like Harvard could conceivably abolish tuition altogether.

I wonder what kind of impact that would have on alumni donations.

How angry would you be if, after spending 6 figures, and likely having debt close to that as well, you found out students coming in after you would not have to pay tuition at all.

Would you be more or less likely to donate?

[tecumseh]

What I would propose is a 5 year plan for Duke. You pay no tution but you pay room and board (and we inflate that a little) for four years. During your stay at Duke you are required to give one year of community service to Durham, the US or the world.

What would happen?
1) The student pool would grow and Duke would move to the top of US News and World Report. Duke would attract the cream of the crop.
2) The campus would be a little older a lot mature and a little more multicultural
3) Alumni giving would go up
4) There would be a greater sense of community at Duke, more pride in being a Duke grad and Duke grads would go out into the world with a greater sense of purpose

Dream on
1) There would be many people who would tutor in the Durham School District and relations between town and gown would improve.
2) I picture a Jewish American Princess shoveling night soil in SE Asia and learning to like it.
3) I picture member of the lacrosse team tutoring and coaching on an Indian Reservation and leading them to the state title and loving it.

[unexpected]

Your dream is more akin to a real liberal arts school. I could see what you propose taking place at a Middlebury or a Swarthmore, but Duke is trying to be a cutting-edge research institution.

This would also be a cutting departure from the current make up of the student body. When I graduated, over 50% of my class (2006) went to work in NYC or DC. Another 25% went to med school or law school, and I think 15% was "other."

The last number 10%, was the percentage that went to grad school. It seems that Duke has very few students that study a field for the love of it. It just seemed that Duke was one giant pre-professional school.

In any case, this relates to your post because I honestly think that if we were required to give a year of service, 50% of the students would bail.

I know it's fun to think of that one student that's really smart, and gets accepted, but can't afford it, so he has to go to State U, and now, suddenly, with this plan, these problems are avoided, but I think this idea doesn't exist in reality.

There are already mechanisms in place to help those who can't afford Duke.

[tecumseh]

Actually the subject came up when I was talking to someone who was the CFO of a small liberal arts college and we were talking about Grinnell College.
You make a legitimate point of Duke being a research institute and this is what is happening money is shifted from teaching undergrads to research and graduate studies. But is this what the founders wanted? Harvard in particular is reexaming its approach to undergraduate studies but perhaps Duke should also.

Students "bailing" .....Great I will help them pack their Lexus...we want a different student body one perhaps that is not entirely self centered that is the point. If you look at the competiveness at Cooper Union, Olin College, Mayo Clinic Medical School, I think it is safe to say that competitiveness to get in would go way up as would the matriculation rate. Plus it has an awful lot to do with how much hardship the extra year is perceived to have, if you learn Mandarin while working in China it may have real benefit.

Mechanisms for those who can't afford Duke. Not really for high middle plus income class people with several kids. This is the group that produces many of the top students. These students would flock to a "tuition optional" top twenty university.

[unexpected]

Mechanisms for those who can't afford Duke. Not really for high middle plus income class people with several kids. This is the group that produces many of the top students. These students would flock to a "tuition optional" top twenty university.

Do you have any data to support this, specifically to Duke? Or is it just anecdotal conjecture?

[tecumseh]

I was having a discussion recently with an admissions officer. I was bemoaning the fact that Duke does not give merit scholarships (there is the Angie Duke and Reggie Howard but these are pretty limited) and how the students who I try to recruit from this area to go to Duke end up with generous merit packages and thus cross Duke off the list. She says yeah it happens often and frankly it does not make sense for some families to pay for a Duke education when others can be gotten for much less.

[hurleyfor3]

Duke used to have quite a few merit scholarships. Then they gave one to me.

[unexpected]

As a sort of halfway point, look at Rice University. While they're not tuition free, their tuition is much cheaper than other universities of it's comparable class (about 20k a year).

Yet, even though its 20k a year cheaper, you don't see people choosing Rice over Duke and Harvard, and its academic ranking hasn't vaulted up.

[hurleyfor3]

Yet, even though its 20k a year cheaper, you don't see people choosing Rice over Duke and Harvard

Actually, I know a few.

[unexpected]

Yes, there will always be a few. I guess my point could be restated as:

"Even though Rice costs 1/2 as much, you don't see the groundswelling of support for people to go to Rice. You don't see students desperately wanting to get into Rice as opposed to Princeton or Harvard, and you haven't seen Rice rise in the rankings."

It seems perenially stuck in the 8-13 bracket.

[tecumseh]

Rice is relatively inexpensive but if you live in Texas UT in Austin is still much cheaper and is a world class university. In marketing and sales that middle ground is often a hard place to be. What I was proposing is tution free so Duke would be less expensive than state schools would in fact be the least expensive option. If you notice the rankings of schools don't change much no matter what in order for Duke to move amongst the HYP they would need to do something really radical this would fit the bill.

[Jarhead]

I think I have gotten into a debate with FDA's twin.
Actually the subject came up when I was talking to someone who was the CFO of a small liberal arts college and we were talking about Grinnell College.

What is it about Grinnell College that makes you think we should be modeling Duke after Grinnell. I don't see any validity in that comparison. The roles of the two institutions are very different.


You make a legitimate point of Duke being a research institute and this is what is happening money is shifted from teaching undergrads to research and graduate studies. But is this what the founders wanted?

Please give me an example of money being shifted from teaching to research. Isn't it true that most of Duke's research is funded through government and corporate grants and contracts, and through designated gifts? There is also likely to be endowment earnings designated for research. Other than research done by degree candidates and the research expected to be done by faculty, what other research is going on, and how is it funded? Can any of this be shifted to cover the teaching of undergrads? What departments are in dire need of additional funds for teaching of undergrads? I would expect that these needs are covered by unrestricted donations and earnings including tuition, university enterprises, state funds, investments, and whatever endowments may be unrestricted. Contributions from the Duke Endowment are substantial, and I believe they go into both restricted and unrestricted funds. I think the Duke Endowment funds tuition for children of Methodists Ministers, for example.


Mechanisms for those who can't afford Duke. Not really for high middle plus income class people with several kids. This is the group that produces many of the top students. These students would flock to a "tuition optional" top twenty university.

Is that who you want your free tuition to cover? That is laughable. Those people can cover Duke's tuition, and stll pay their country club dues. They may find themselves in a bind if they had several children, but is that Duke's concern? That is for Duke to determine, and if help is needed, they will give it. That you are proposing your free tuition for high middle plus income class people with several kids seem elitist in the extreme to me.

I mentioned my barber earlier. He is not upper middle class by any stretch, and he has three children. He had to pay only 10% of his son's tuition, but his son also worked pretty hard. His son also did a year, or maybe a semester, at Cambridge, as I recall, as part of his undergrad curriculum. He was admitted to Duke before they even asked for family financial info. That is the best kind of program, not your ill advised free tuition scheme.

You seem to think that Duke's endowment funds can be used to cover tuition for everybody. If Duke were to unilaterally do that it is likely that the donors of those endowment funds would ask for their money back. The only way your idea could happen would be to find somebody, or several somebodies, to fund an endowment just for that purpose. Actually, Duke already has a number of endowed scholarships. Now, if you could do that, mine would be the loudest applause. The University could then afford a new dormitory, and I would recommend that they call it Tecumseh Hall.

[Jarhead]

Isn't Rice mostly an engineering school?

[tecumseh]

Other than arrogance not sure what your posts convey. You make all sorts of assumptions on the part of the poster to prop up your arrogance. It took help from "unexpected" and quite a few posts before you understood the 5% rule instead you just assumed I did not understand how investment income worked when it was you who lacked understanding.

Perhaps I am an intelligent person and talking to someone who is the CFO of a liberal arts college perhaps he knows a lot on this subject did that ever occur to you? Did I say or that Duke should model itself after Grinnell? Did I say I have children looking for a free ride?

Your arrogance knows no boundry perhaps you should read the post about civility.

[The Gordog]

Actually, I know a few.

Actually he went to UVA (in state), but Duke was the third choice of those that accepted him (UVA, Rice and Duke) based entirely on the money aspect.

[Jarhead]

Perhaps I am an intelligent person and talking to someone who is the CFO of a liberal arts college perhaps he knows a lot on this subject did that ever occur to you? Did I say or that Duke should model itself after Grinnell? Did I say I have children looking for a free ride?

Your arrogance knows no boundry perhaps you should read the post about civility.

To quote a New York idiom, "you tawkin ta me?"

[tecumseh]

http://www.educause.edu/ir/library/pdf/ffp0612.pdf

[unexpected]

Rice is mainly a science school. Academically it's similar to Hopkins (if you're an East Coaster).

I'm all for Duke becoming #1, but I think all that money could be better spent.

Honestly, sometimes I feel that the Duke ranking is way overrated. If you go to a place like Stanford, for instance, there seems to be just a ton more buildings, professors, and research going on there.

We still don't have a Noble Laureate on our faculty, while even State Schools have at least one okay, I think we finally bought one to become Dean of Something Important).

As far as our programs go, While BME and Public Policy are ranked really high, some of the other major programs aren't even in the top 10 (Computer Science, for instance is #19). Electrical Engineering is in the top 25, and ME and Civil aren't even on the map.

Graduate School wise, we're even worse. Though we have well respect programs in humanities and BME, we're not a destination school like Stanford or Harvard on the graduate level for fields like chemistry, physics, biology, computer science, or the other engineerings.

As far as expanding our undergrad offerings, our art, music, and dance departments are terrible.

These are just a few ideas off the top of my head - some directions I would like to see the school go before we make it some tuition-free Utopia

and about UT vs. Rice -- UT and Rice aren't even on the same level. UT is #50, and Rice is #10. As a Texan, I would say the gap is bigger than the Duke-UNC gap. Rice is damn competitive (I didn't even get into Rice, but I got into Duke and Yale), and to me serves as the best data point.

You're conjecturing that if Duke went one step further, we'd do it better than Rice, Cooper Union, or Olin have, but there just doesn't seem to be any data to support that. It's a nice idea in theory, but it just seems to be wishful thinking :-(.

[hurleyfor3]

Actually he went to UVA (in state), but Duke was the third choice of those that accepted him (UVA, Rice and Duke) based entirely on the money aspect.

I'm sort of like that: I got into programs that by any measure were better fits for me than Duke was, but Duke was free.

I know at least one person, and perhaps two, who got scholarships to both Duke and Rice and applied from NC... and still went to Rice. I'm hardly the first person to say this, but it's all about what the best fit is FOR YOU. And money.

[tecumseh]

"Unexpected" nice post. Hey I like utopia. Part of my idea for discussion is that the current system is somewhat corrupt. If you can produce widgets or in this case educate undergraduates for $25,000 a year not including room and board why does Duke charge $10,000 a year more plus there is all this endowment money which is supposed to help run the university.

The endowment income is HUGE in Duke's case in a good year it may be $75,000 a year per undergraduate and yet this bonanza seems to have no effect on cost except perhaps an inverse relationship...the larger endowed schools charge more. Now how does this make economic sense except despite protestations it is clear they charge what the market will bear. I think that the Ivy League schools (and Duke) have a luxury brand name and part of the cachet mandates it being expensive.

I seriously question this is what the founders of many of these institutions had in mind when they originally endowed the schools.

[Indoor66]

The following is from my memory and is subject to others making additions and corrections:

I would point out that there is often confusion about the "Duke Endowment" and Duke's Endowment.

The "Duke Endowment" ("the Endowment) is a foundation created by James B. Duke. It consisted of ±$24,000,000 - primarily in Duke Power Company stock. The Endowment gives a percentage (I don't remember the proportions) of it's annual income to Duke University, Emory University, Johnson C. Smith University, Davidson College, a number of other colleges, retired Methodist Ministers and those other designated charities. The Endowment income to Duke has become less and less significant, Again, I don't remember the amounts though research may reveal those amounts.

Duke's endowment - raised through fund raising efforts - is primarily managed, IIRC, by Duke Management Company. That entity was created in the 70's during the tenure of Terry Sanford. Duke Management was tremendously successful under the direction of Gene McDonald (who moved to Duke Management from his position as University Counsel.) IIRC their returns were above 20%/annum for some periods. How they are doing now I do not know. Also keep in mind that the income earned by Duke Management is not subject to State or Federal income taxes - thus being part of the reason for the growth of the endowment from the $100 million range in the late 60's to it's present totals.

The University makes annual applications to the Endowment for grants for special needs, i.e. capital improvements, program expansion, etc. These applications are evaluated by the Directors of The Duke Endowment and accepted and funded or rejected, just as any other grant application is handled.

The endowment managed by Duke Management was generated by gifts and grants from individual and corporate donors. Some of this money is restricted and some is not. The University is obligated to comply with any restriction attached to gifts or donations. Such restrictions would also flow through to income generated from those gifts or donations.

To simply say Duke has a $4.1b endowment and can generate $X income per year, so let's pay everybody's tuition, room and board, is very simplistic. The process is far more complex.

[tecumseh]

Duke 66 I realize the process is far more complex BUT schools such as Knox College in Illinois or Westminster College in Missouri (site of Churchill's famous Iron Curtain speech) do a good job educating students for far less per student. These colleges also have needs like books for the library or a new science center or sabbatical pay for faculty positions since some of these schools are poorly endowed these needs must be covered in large part by tution.

My point is no matter how "complex" the relationship is you would not expect to find an inverse relationship between endowment and tution, yet this seems to be the case.

[throatybeard]

There's absolutely no point in comparing Duke to Knox College. None. These institutions are entirely different species within higher education.

[darthur]

I was having a discussion recently with an admissions officer. I was bemoaning the fact that Duke does not give merit scholarships (there is the Angie Duke and Reggie Howard but these are pretty limited) and how the students who I try to recruit from this area to go to Duke end up with generous merit packages and thus cross Duke off the list. She says yeah it happens often and frankly it does not make sense for some families to pay for a Duke education when others can be gotten for much less.

Duke gives 70 non-athletic merit scholarships a year (http://www.aas.duke.edu/ousf/programs/), which I think is about 1 in 20 incoming students. To the best of my knowledge, almost all other elite undergraduate schools give 0.

[Jarhead]

Thanks for the show of support, Indoor66. What you say is exactly what I have been trying to convey to Tecumseh, but I gave up when he labeled me as arrogant. I'll own up to being frustrated, condescending, or just plain annoyed. Often that is how I get when faced with intransigence. Now, though, I understand what the problem is. Tecumseh is using the word endowment in a totally different way than we are. It would seem that he understands it as anything that is given to the university. Endowment = gift, and gift = endowment. Actually, that may be common usage to some.

If I gave Duke a huge gift, huge, I would most likely require that they spend it the way I want. I would get legal advice to make sure they use it my way. I can't imagine any other way to to do it. If my intention was to build a building, I would probably be happy if it went into a restricted fund. The University may figure that the building is nice, but they can't afford to operate and maintain it. We agree that part of my donation goes into an endowment fund from which the earnings are used to operate and maintain the building. I would tell the university that they cannot use those earnings any other way, and and that the principle would remain intact. Is that a fair assumption?

If I wanted the University to have flexibility I would just give the money, and not worry about its use. That's not an endowment in my usage of the word. To Tecumseh, it may be an endowment, and that is what he is talking about when he asserts that we should be diverting endowment funds to cover such things as tuition. That now becomes a different debate. Just mark me as against it.

[tecumseh]

Throaty beard....yes that is what they would want you to believe. When you apply to law school they say "Oh you went to Knox College that is not really a college, they do not really educate people there". You have been successfully indoctrinated, I am not saying the schools are exactly alike I am saying what about the inverse endowment rule, and they SHOULD be more alike than different.



Darthur.... I love the term "elite", that is the whole point it often does not make sense for a student's family to part with a quarter of a million dollars so their child can attend an "elite" college where as they can get a good undergraduate education for much less. This is especially true if the student is heading to graduate school. Merit scholarships have exploded in the last 10 years and the kids they are targeting are the same kids that the admissions office would like to have come to Duke.

[darthur]

Darthur.... I love the term "elite", that is the whole point it often does not make sense for a student's family to part with a quarter of a million dollars so their child can attend an "elite" college where as they can get a good undergraduate education for much less. This is especially true if the student is heading to graduate school. Merit scholarships have exploded in the last 10 years and the kids they are targeting are the same kids that the admissions office would like to have come to Duke.

Really. It seems to me that Duke is having no problem at all finding people interested in spending that money to get an elite education, even if it involves heavy loans. Look, I am all in favor of lowering tuition and adding scholarships where possible, but Duke is not and has shown no desire to be a small liberal arts school. Yes, you like liberal arts schools. I get it. Duke isn't one of them, and among schools it *does* compare with, it is very generous with academic scholarships.

[unexpected]

I don't think the semantics of the endowment conflict with tecumseh's idea. I think his position could better be restated as this.

Duke has shown that it has significant financial resources. Given this, why not start an endowment initiative to make it possible for all Duke students to attend Duke tuition free?

Also, Ivy league schools don't give merit/academic scholarships. I think that's one of the conditions of being "Ivy League."

Also, tecumseh, it's not a "indoctrination" thing. Academics is a full-contact sport. You learn best when you're pushed and challenged by your peers, and Duke's admitted class has a much higher set of credentials than a college like Grinnell or Knox. You can think that you're getting the same education, reading the same books, but you're not. Learning is not rote memorization - it's analyzing facts, challenging ideas, and being pushed so that you grow faster.

To make a basketball analogy, it's like saying the basketball player from Knox has just a good a chance of making it to the NBA as a player from Duke was. I mean, they're both playing basketball, they could be learning the same strategies, and they're both playing the same games- but that's not the case. Even if the identical player went to play basketball at Duke vs. Knox, the player at Duke would still have a better opportunity. Everyday he's playing against players of his caliber, he's playing real games against stiffer competition, and he plays in front of a national TV audience.

Occasionally they'll be a player from a small school that makes it, but the odds are better of making it are better if you're from a better school. Statistics bear this out- UConn and Duke, the two most prominent programs of the past decade, have 14 and 13 players in the NBA, respectively.

[tecumseh]

There could be another whole thread on large school vs small school. On being taught just by profs or frequently by grad students. On being in a place that students never get lost in the cracks etc. etc.
http://www.usatoday.com/money/companies/management/2005-04-06-cover-ceos_x.htm

But on some level a widget is a widget despite all the protestations of people in the academic field. On some level if kids in the inner city go to a local Catholic school and receive twice the education at less than half the price you have to ask why? On some level if certain schools can provide a great education at 25K w/o endowment funds you have to ask what is the endowment going to if high endowment schools need to charge even higher tuition? Something is rotten in Denmark or Durham.

Colleges charge a high tution because they can and certain schools like Duke are trying to project a luxury brand image, that price has very little to do with what is the expense of a quality widget
http://www.newyorker.com/archive/2005/10/10/051010crat_atlarge

[darthur]

1. tecumseh - you sound like a message-board troll. People who do not like your suggestions can "pack their lexus" and go? A "Jewish American Princess shoveling night soil in SE Asia and learning to like it"? Jarhead's response says nothing except how arrogant he is? Come on.

2. For reasons that entirely escape me, you continue to compare Duke to liberal arts colleges. Why? What about high-schools, or community colleges, or professional schools? Those all offer better bang for the buck too. Repeat after me: Duke is NOT a liberal arts college. Examples of things it supports that liberal arts colleges cannot support: Strong division 1 athletics program, strong graduate school, strong research faculty, strong engineering program, many more students, and more research/diverse/advanced classes available even for undergrads.

3. You keep saying there is an inverse correlation between endowment size and tuition, but this is just silly. You are considering only 2 data points: liberal arts schools and private universities. How about comparing different schools within the same category? And remember correlation does not imply causation. Even if I believed the correlation in a general sense (I don't), I can just respond: higher tuition => better education => happier graduates => higher donations => higher endowment. Nothing interesting or surprising there. And that's not even touching the point that if Duke is ten times bigger than a liberal arts college, it sure as heck BETTER have a much bigger endowment.

4. You still have given no evidence whatsoever that Duke actually *controls* enough money to substantially lower tuition / increase scholarships.

5. I am not even sure what you are trying to prove any more. Your points now just seem to revolve around a general trashing of a couple top universities. It feels more like a rant than an argument.

[tecumseh]

1) personal insult so I will skip it better for all involved...by the way I think I saw your mother the other day and she really looked....

2) Not sure what you mean and I think we may actually agree some, much of the endowment money goes to support graduate programs and research. It does not go towards funding undergraduate education. What makes the Duke college experience so fundamentally different than liberal arts colleges they use lasers or mind melds. It is harder to compare to state universities due to state support and there are not too many mid sized colleges like Duke if you exclude the elite schools.

3) Again the mid sized problem. There are not too many midsized universities and you cannot compare tuition to state supported schools. BUT since you are so insistent look at tuition at LaSalle, Iona, Creighton, Xavier, Drake, Bradley, Elon....these are midsized universities without endowments whose tuitions are all much lower.

4) So it comes to priorities and the cost of a widget IF all these midsized universities can make due on lower tuition and Duke has a HUGE endowment where does the money go????? Research, grad schools, and new dorms, tennis courts, athletic buildings, better food etc to keep up with the Joneses ...the other elite schools.

5) There is building war in who can have the best suites for the students to live in, the best athletic facilities for the students to sweat in. etc. etc.

[DevilAlumna]

Tecumseh,

You and I have been in agreement on a lot of pubpol threads, so I'm really surprised by your hard line here (or perhaps rather, how much I disagree with your position.)

In the interests of trying to understand -- can you answer a few more questions?

1) Did you attend Duke as an undergrad?

2a) Do you really feel that an undergraduate education from one of the midsize schools you listed is the equivalent of an undergraduate education from Duke?

2b) What do you use as your definition of 'education' (your 'widget,' if I read your posts correctly)? Is it more strictly on the book-learning side of things?

2c) How do you take into account the "rubbing elbows" effect/opportunity offered by a top-tier school like Duke, in your definition of 'education'?

3) Could you offer more detail on what programs that are currently supported by the endowment, you feel are less necessary/worthy of support than free tuition for undergrads? Nothing specific -- I don't expect you to know the line-item budget, just a generic term would be helpful.

I think I get what you're trying to say, just wondering if there's a better/clearer way to say it.

[tecumseh]

Yes I attended Duke and I was brought to this "realization" kicking and screaming by a friend of mine. He is a successful retired businessman who was bored and "unretired" to help a struggling 4 year liberal arts school and has done a brilliant job with them. We were talking about Grinnell College and he explained to me that despite their protestations they really don't need to charge tuition. Grinnell is 4 year liberal arts college with a $1.5 billion dollar endowment that recently significantly raised their tuition.

My father was full time academic physician and like I said I went to Duke (also had stints at Washington University in St. Louis, Emory University and University of Pittsburgh), so I was skeptical and I have not done his argument justice but he knows the business of running a college cold and he convinced me and the more I read the more I realized he was right.

Who is to say it takes less money to educate an unprepared student than a smart one? Why should costs be that much different at say Xavier than Duke? When California outlawed affirmative action significant cost were incurred at U of Cal Berkeley for these unprepared students.

I think the New Yorker article is right on about Harvard and it applies to Duke. Duke is selling a brand and discounting that brand hurts its image.
People expect to pay at the high end for a high end education. This is generally true in professional services and this waste of my time has in fact been very useful. I am starting a new company on the side and realize to price it at the high end makes it seem better to many people. No one brags about how much money they saved on LASIK or a tax attorney.