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Federal funding helps drive up the cost of higher education. A recent study helps to see where federal higher education dollars go, in order to inform how philanthropists might best support higher education.

If you wonder why college costs are so high, and why they keep rising, one answer would be the substantial amount of federal aid that goes to these schools, either in the form of grants to the schools or in loans to the students. If philanthropists interested in higher education are going to spend their grant money wisely, they ought to know how much federal aid their targeted schools are getting.

Open The Books has provided a valuable resource for donors with a report, written by Adam Andrzejewski and Thomas W. Smith, on how much money the Department of Education gives to higher education.

Overall, Open The Books found that the Department of Education ladled out around $18 billion in the 2017-18 fiscal year in grants, direct payments, and loans. Here are the ten universities receiving the most Department of Education money:

Note which schools aren’t on the list: the Ivy League schools famed for their massive endowments. Of the schools that are on the list, all are schools which have many campuses, including those such as Penn State and Texas A&M where the main campus is the largest slice of their university systems. The three largest university systems, the City University of New York, the State University of New York, and California State University,[1] are three of the four largest recipients of Department of Education aid. At least two of the schools on the list—New York University and Texas A&M—are large enough and wealthy enough that they have branch campuses in the Middle East.

Two of the top ten schools, Grand Canyon University and the University of Phoenix, are for-profit schools. They don’t get grants from the Department of Education, but do get direct payments to students and student loans.

Andrzejewski and Smith then have fun discussing schools you didn’t know existed but whose students get direct payments from the Department of Education and federal student loans, including schools devoted to building wooden boats, training people to repair refrigerators, and preparing people to run games at casinos.

The authors note that most seminaries have students who get federal student loans. They calculate that, between fiscal years 2015 and 2018, the three religious education schools that had the largest amount of federal student loans were Fuller Theological Seminary ($77.8 million), Asbury Theological Seminary ($32.9 million), and St. Vincent’s College ($30.1 million). Fuller and Asbury are nondenominational Protestant schools, and St. Vincent’s was the only Catholic school on the list.

Finally, the authors note the 50 best-paid Education Department employees. Secretary Betsy DeVos, who makes $199,400, is the best-paid employee, of course, but there are two other Education Department employees who make over $195,000 and the 50th best paid employee in the department makes over $180,000.

Given this information, what should program officers who fund higher education do with it?

First off, remember that nonprofits tend to give to universities rather than individuals. The recent grants of Robert F. Smith to Morehouse College [LINK] eliminating student loan debt for graduating seniors and Michael Bloomberg to Johns Hopkins ensuring that Hopkins students don’t have to take out loans are unusual because they’re meant to help students directly.

Open the Books might help you find schools with high tuition bills and low amounts of government aid. These schools would be better recipients of your aid than places where the government pays a larger portion of tuition.

However, as Jacqueline Pfeffer Merrill wrote last week, subsidizing tuition is not the best use of education grantmaking. As I wrote in my study Games Universities Play, there are much better ways for donors to use their grants:

  • Don’t give grants to endowments. Perhaps the worst gift you can make to a college is an unrestricted gift to an endowment, which ensures that a university can use your money to do what it wants,
  • Don’t endow chairs. It’s likely that your influence over a chair ends when you die. In addition, remember that money is fungible. If you pay for a professor’s salary with an endowed chair, which means the university can use the money to fund causes or professors that you don’t like.
  • Give to activities that add to rather than displace existing groups. For example, giving money to graduate students to help them complete their dissertations is a good use of money, as is helping assistant professors turn their dissertations into books. Giving money to conservative or libertarian centers is also a useful endeavor.
  • Give to organizations that support colleges. The donor has several to choose from. I like the Martin Center (who has published me) because they produce a steady stream of interesting articles about higher education. The Intercollegiate Studies Institute is the leading nonprofit supporting conservative students and professors. Libertarians can support the Institute for Humane Studies, which has recently reorganized to support higher education. Anyone interested in preserving the quality of colleges and universities can back the National Association of Scholars. The Foundation for Individual Rights in Education stands up for free speech at schools and on campuses. Finally, my colleague Jacqueline Pfeffer Merrill has set up a program at the Bipartisan Policy Center which also comes up with ways to enhance free speech on campus.

There are many useful ways donors can support colleges—as long as you don’t do anything to assist college endowments. For as Washington Post columnist Jay Mathews notes, a large endowment is no signal of educational quality.

“I see no sign that life-enhancing research correlates with endowment size,” Mathews writes. “Our universities are admired throughout the world, but I can think of better things to do with $36 billion than making Harvard look good.”

[1] Remember, the University of California is separate from the California State University system.

1 thought on “Higher education: government funding and philanthropic involvement”

  1. Mark says:

    I am reading Richard Vedder’s, “Restoring The Promise.” His chapter on endowments is breathtaking. To the first point above, he posits, “University donations are largely fungible.”

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