A loss for educational equity

The next several years might see a decline in the availability of financial aid due to the hit many university endowments took last fall.

An endowment is money or property donated to a university. When in the form of money, most endowments are invested.

The principal, or the money given to the university by a donor, usually goes untouched. Instead, it’s invested, and those investment revenues go to pay for the endowment’s stipulated purpose (financial aid, an endowed professorship, etc.).

IU endowments are no exception. IU’s endowment portfolio declined by 26.7 percent during the last six months of 2008, said Gary A. Stratten, vice president and chief investment officer of the IU Foundation, in an e-mail. The Foundation manages University endowments.

The decline in the value of the endowment assets will have some impact on the financial support for IU students, and colleges across the country are facing a similar problem.

However, whereas IU is optimistically facing a situation where distributions drop 6 to 7 percent throughout 2009, some colleges and universities are facing much worse.

According to The New York Times, because these schools expect to have much less financial aid available, some have begun considering an applicant’s ability to pay – along with high school grades and SAT scores – when making admission decisions.

Luckily, “IU does not consider financial need when determining who to admit,” Jim Kennedy, IU director of financial aid, said.

The colleges that do decide to become need-aware risk producing an effect that Morton Owen Schapiro, the president of Williams College, said could “be a cascading of talented lower-income kids down the social hierarchy of American higher education, and some cascading up of affluent kids.”

It’s unlikely that poorer students will be excluded from anything other than private, highly selective schools. Community colleges and state universities, which also provide “American higher education,” will still be available and affordable. Keep in mind you don’t need to go to Harvard to become middle class.

Although Schapiro’s “cascading” theory doesn’t seem to be ubiquitous to all of “American higher education,” even a small cascading effect would be an unfortunate loss in educational equity.

Children from poorer school districts already receive less money to fund K-12 education, and yet its members give up more for it.

According to the book “Equity and Adequacy in Education Finance,” poorer school districts have less property tax to support their local schools.

Although state aid is given to them, it’s usually not enough to make up the difference.
So, to compensate, residents of poorer school districts usually face higher tax rates per dollar of assessed value of property.

This entire mess just goes to show the lose-lose situation that the financial crisis has created for universities and aspiring students.  

There’s the practical concern universities must take into account – most are realizing the economic reality they must face and need-awareness is, if nothing else, financially prudent. And there’s the more idealistic concern of maintaining a respectable degree of fairness in higher education.