A 1-percenter’s formula for free college
Democratic presidential candidate Bernie Sanders wants to make college free for all students at public universities—but it wouldn’t be free. It would cost around $70 billion per year, which Sanders wants to finance through a new tax on stock trading and other methods states would devise.
There may be another pathway toward free college—having universities themselves cover the cost, which Scott Minerd of Guggenheim Partners suggested at the recent Milken Institute Global Conference in Los Angeles.
“When you see the price of college tuition today, and you compare that to the wealth that's in the endowments of some of the finest schools in the United States, it seems to me that the investments that are going on in brick and mortar seem to be taking precedence over investing in the students,” Minerd, Guggenheim’s chief global investment officer, told Yahoo Finance. “When you come out of an Ivy League school carrying a huge load of debt, it would seem to me that the schools should be doing their part.”
Minerd is a professional investor, not an education policymaker, and he’s not making a formal legislative or regulatory proposal. But he does reflect the frustration many Americans feel over the crushing cost of college and the sometimes-dubious returns, especially among recent grads who are saddled with debt but can’t find decent-paying jobs. His idea wouldn’t put any additional burden on taxpayers.
Total student loan debt in the United States has soared to $1.6 trillion, with the average borrower owing about $33,000. The recent scandal involving rich parents paying for their kids to cheat their way into prestigious schools inflamed the middle-class suspicion that college admissions are rigged in favor of the wealthy. “It just proves to the average American that higher quality education is controlled by the wealthy,” Minerd says. “It should be an egalitarian system.”
Rich endowments
New York University’s Langone Medical School is a model for what Minerd has in mind. The school now offers free tuition for all its students, funded by a $650 million endowment. Many schools don’t have that kind of money to fund scholarships. But some do, including Harvard, with a $38 billion endowment, the University of Texas ($31 billion), the University of Michigan ($12 billion) and the University of Virginia ($7 billion).
Universities can’t spend down their endowments indefinitely, but they could, perhaps, spend more money on students and less on fancy dorms or gyms, which they often build to lure applicants these days. If they did spend more on students, they might get donations back from those students once they’re comfortably earning a living. They could even formalize a deal to get a portion of students’ earnings once they graduate, in exchange for free tuition.
Some states and cities are also making community colleges free to qualified students, including Los Angeles, New York state and Tennessee. So Sanders and other candidates pushing for free college are making some progress. Universities could deliver more.
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Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman
