Marketwatch’s Chuck Jaffe wrote an interesting article last week about a financial planner who is urging her clients to think twice before leaving money to their college’s endowment. From the article:
Delessert’s [the financial planner] problem with Harvard is a simple one; the school has an endowment that has more than $35 billion in assets, brags about its great investment returns on that money, and pays no taxes.
And yet, at the same time, the school has raised tuition costs, citing rising expenses as the need to keep the fees on the upswing.
Statistics on college endowments showed that schools with large endowments (at least $500 million) reported spending an average of 4.4% of their stockpiles in 2007. Meanwhile, those same schools made an average of more than 19% on their money. It’s enough to make the average investor mighty jealous.
At Harvard — where being a student now costs more than $47,000 per year — the school could cover the cost of tuition, room and board for all of its students for less than 1% of the endowment’s value. Tuition costs themselves are so insignificant, they’d practically be a rounding error in the endowment’s checkbook.
She makes a good point. At $35 billion, does Harvard really need more gifts? Long time readers of this blog already know my thoughts on this topic so there’s no need to rehash an old post.
I’m not a charitable giving expert but I would think that, depending on how much you want to leave to your college, one thing you could do is establish your own endowment with the focus on tuition. Or, you could possibly leave it to a particular school within the college (like the business school or engineering school).
Personally, I don’t see me or my wife leaving anything to our college. Although we liked our college just fine, we can think of better places to leave our money.