Endowment Yields 19.2%; Rises to $4.5B

Sep 17 2014

The endowment has risen from $3.73 billion to $4.50 billion as the College announced that its investments yielded a 19.2% return. That's the best performance since the blowout at the top of the dot.com bubble in 2000, when the endowment rose by a mind-numbing 46%. (As a cautionary tale, it fell by 3%, 6% and 3% over the next three years, and the administration was forced to make painful budget cuts). The College's calculation is as follows:

The increase reflected net investment gains of $778 million and new gifts and transfers of $146 million, offset by distributions of $189 million to support Dartmouth programs.

By way of background, the draw from the endowment to support the College's operations each year is about 5% of the total value of the endowment (based on a rolling three-year average).

The real question here is, "Hey Phil, what you gonna do about it?" A jump in the endowment of $735 million will allow the endowment to throw off an extra $36.8 million in a couple of years (recall the 5% draw figure mentioned above). Where will the money go? If past practice is followed, the ever-growing, overpaid staff will get most of it. One might expect that this is how things will go this time around, too -- after all, most faculty members received a raise of only 1.5% this summer, with some getting a meager performance raise on top of that figure.

I'd suggest that right now Phil announce that he is allocating a good chunk of this money to reducing tuition. The 2.9% increase for this year was twice the rate of increase in the Consumer Price Index, even though Phil had promised increases in line with inflation. He justified that commitment on the basis that investment returns would probably be moderate in the coming years. How happy he must be to have been wrong. In 2013, the College took in about $120 million in undergrad tuition (not including room/board and fees). Using part of the new $36.8 million could make a big dent in that figure.

If Phil is the bold President that I hope him to be, he could announce right now that next year we will match Princeton for the lowest cost of education in the Ivies: $55,440/year. Dropping from the current $61,947 to that level would cost us something in the range of $16-$18 million dollars, not even half of the new budget money made available by the endowment's wonderful return. And Phil could set a further goal of reducing that figure even more in the future, if endowment returns allow it. His three-year goal could be to make Dartmouth the most affordable school in the Ivies. Long live, Phil!

Addendum: Beyond the intrinsic nobility of such an ambition, a bold statement by Phil would get us on the front pages of national newspapers for something other than rape, binge drinking, hazing and racism. Wouldn't that be a nice change?

Addendum: While the College is thinking of how to spend this extra money, an allocation to revamping dorms would go a long way to improving residential life at the College, as Lorelei Yang wrote in The D today, and as this space has noted, too.

Addendum: None of the other Ivies have reported their results to date.


More Good Press

Sep 17 2014

Something in print that makes us look good. How unusual.

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Show Me the Financial Aid

Sep 16 2014

(For students returning to campus, we are re-printing a few highlights from last term.)

In perusing the College's financial aid figures, there is proof to be found for an assertion that we have repeatedly made:

...over the past three years the Admissions department has bent over backwards to protect the College's yield figures by admitting more students early decision, and also by accepting far more legacies. These two moves, beyond helping the yield, also have had a positive financial impact: students accepted early cannot play off one school against another in negotiating financial aid; for them it's take it or leave it. And legacies, by and large, have a far greater capacity to pay full freight.

The above table shows that the Trustees have made a similar financial calculation as regards our mix between public and private school admits; students from the latter group are self-evidently wealthier. For the classes between 2007 and 2013, admitted private school students ranged between 32-36% of the freshman class; the last three years have seen a jump to a rock-solid 40%. That consistency sure looks like a quota to me. Of course, you might believe that kids from private schools suddenly got a lot smarter starting in 2010. If so, may I interest you in a bridge?

Once again, the Kim administration chose to play fast and loose with the quality of the College's incoming students -- our lifeblood -- for financial gain, rather that dealing with the big bear in the room: our bloated, over-compensated staff.

The Dartmouth Factbook describes how the number of students receiving need-based financial aid has dropped since the Class of 2014, the class year in which the Kim administration made significant, financially motivated decisions regarding the College's admissions policies (here and here). From a high of 51% in the 2009-2010 academic year, the number of students receiving aid has consistently fallen:

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Dartmouth Now reported in March that "Forty-six percent [of accepted students in the Class of 2018] have qualified for need-based financial aid," and Dean of Admissions Maria Laskaris has informed me directly that it now appears only 45% of incoming students will receive aid.

The difference between 51% and 45% of students is significant: approximately 260 students over four classes. If this many students no longer receive financial aid -- of which the average award is now over $44,000 -- the College will take in an extra $11.4 million each year.

Soak the students to feed the staff.

Addendum: I don't share President Obama's worries about "the rich," but if 55% of the College's incoming students come from families that are able to drop more than a quarter of a million dollars on the education of each of their children, Dartmouth can't help but have a social atmosphere somewhat divorced from the real world.