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‘The Best Education Money Can’t Buy’ Sets an Example

July 22, 2008

By Tamar Lewin

Berea College, founded 150 years ago to educate freed slaves and “poor white mountaineers,” accepts only applicants from low-income families, and it charges no tuition.

“You can literally come to Berea with nothing but what you can carry, and graduate debt-free,” said Joseph Bagnoli Jr., the associate provost for enrollment management. “We call it the best education money can’t buy.”

Actually, what buys that education is Berea’s $1.1 billion endowment, which puts the college among the nation’s wealthiest. But unlike most well-endowed colleges, Berea has no football team, mixed-gender dormitories, hot tubs or indoor mountain-climbing walls. Instead, it has a no-frills budget, with food from the college farm, handmade furniture from the college crafts workshops, and 10-hour-a-week campus jobs for every student.

Berea’s approach provides an unusual perspective on the growing debate over whether the wealthiest universities are doing enough for the public good to warrant their tax exemption, or simply hoarding money to serve an elite few. As many elite universities scramble to recruit more low-income students, Berea’s no-tuition model has attracted increasing attention.

“Asking whether that’s where our values lead us is a powerful way to consider what our values are,” said Anthony Marx, the president of Amherst College in Massachusetts, who considered the possibility of using Amherst’s $1 million-per-student endowment to offer free tuition but concluded that it would make no sense, given Amherst’s more affluent student body and that the college already subsidizes about half the cost of each student’s education.

“We’re not Berea, much as we respect them,” Marx said, adding there would be no social justification for giving free tuition to students from wealthy families.

Although the market drop this year is taking its toll, the growth in university endowments in recent years has been spectacular. Harvard’s $35 billion endowment, Yale’s $23 billion, Stanford’s $17 billion and Princeton’s $16 billion put them among the world’s richest institutions.

Such endowments have helped make higher education one of the nation’s crown jewels. As the president of Harvard, Drew Gilpin Faust, said in her spring commencement speech this year, endowments at Harvard and other research universities help fuel scientific advances as government support is eroding and help drive economic growth and expansion in a difficult economy.

Although most universities have only modest endowments, the wealth of the richest has made them increasingly vulnerable to criticism from parents upset about rising tuition costs, lawmakers pushing them to spend more of their money and policy experts arguing that they should be helping more needy students.

“How much do you need to save for future generations, and at what point are you gouging today’s generation?” said Lynne Munson, of the Center for College Affordability and Productivity in Washington.

In January, the Senate Finance Committee requested detailed endowment and spending data from 136 colleges and universities with endowments of at least $500 million, with a possible eye to forcing them to spend at least 5 percent of their assets each year, as foundations are required to do. Large, tax-free endowments “should mean affordable education for more students, not just a security blanket for colleges,” said Senator Charles Grassley, an Iowa Republican who is reviewing the data.

Officials in Massachusetts are studying a proposal for a 2.5 percent tax on the part of university endowments greater than $1 billion – a threshold exceeded by nine of the state’s universities.

“The endowments have grown to such an astonishing extent that people are asking, if the wealth and the value of the tax exemption are increasing, is the public benefit increasing, as well?” said Evelyn Brody, a tax professor at Chicago-Kent College of Law.

This year, Brody said, the debate has entered new territory.

Traditionally, discussion about endowments has focused on the balance between using the money for the current generation versus saving it for the benefit of future generations.

“Endowment spending has usually been a ‘when’ question, about when the money would be used for a charitable purpose,” she said. “But now, it’s also being viewed as a ‘what’ question. What is the money for? And I think that’s new.”

The mounting scrutiny by lawmakers has already prompted some action. Dozens of wealthy colleges have increased their aid to low- and middle-income students, many substituting grants for loans. Many have announced plans to expand their student bodies, and some are doing broader outreach and working with nearby primary and secondary schools to improve academic preparation.

Nonetheless, according to 2002 data, only 1 in 10 of the students at the nation’s most selective institutions come from the bottom 40 percent of the income scale. And the proportion of low-income undergraduates at the nation’s wealthiest colleges has been declining, as measured by the percentage receiving U.S. government Pell Grants, for families with income under about $40,000. At most top colleges, only 8 to 15 percent of students receive Pell grants.

At Berea, more than three-quarters of the students receive Pell grants.

Over all, Berea’s statistics speak worlds about the demand for affordable higher education; this year, the college accepted only 22 percent of its applicants. Among those accepted, 85 percent attended Berea, a yield higher than Harvard’s.

Berea can be a haven for the lower-income students at high schools where expensive clothes and fancy homes demarcate the social territory.

“When I first heard about Berea, I didn’t think I wanted to come here,” said Candice Roots, who will be a junior in the autumn. “But I visited in my senior year, and as soon as I got here, I knew this was what I wanted. Everybody was like me. You don’t have to have all this money to fit in.”

With its hilly campus, Georgian president’s mansion and old brick buildings, Berea looks much like any elite New England college. But its operating budget is less than half that of Amherst, which has a $1.7 billion endowment and about 100 more students. Faculty pay is much lower, and the student-faculty ratio higher. With no rich parents and no legacy admission slots, fund-raising is far more difficult at Berea.

Lacking tuition, Berea receives 80 percent of its $43 million education and general budget, and about two-thirds of its $55 million operating budget, from the endowment income.

Originally published by The New York Times Media Group.

(c) 2008 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.




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