Tuesday, January 8, 2008

A Tale of Two Endowments: Why I Make Smaller Donations To Grinnell College

This past weekend I had dinner and drinks with a couple of college buddies. The buddies are on my class reunion committee and as part of the organization of the reunion they are suppose to try to get their fellow classmate to donate to our school, but they had a hard time justifying why we should give money to our school. In part because as you may know Grinnell College our school has an endowment of around 1.67 BILLION DOLLARS*, while Beloit College, where I taught last year, has an endowment of about 100 million dollars. Another way to think about it is Grinnell could put its endowment entirely in bonds and have a return each year of Beloit’s endowment.

As an economist I want to know what is the additional impact of an extra dollar given to each of these school? I think at this point the marginal impact of the first $1 to Grinnell is that it helps our US News and World Report ranking as it counts % of alumni contributing. After the first $1 what is the marginal impact for a school like Grinnell with nearly 1 million dollars per student. My guess is a $1 given to Beloit will do more good.

Grinnell’s endowment per student is surpassed only by a few schools. Currently congressional pressure is coming on Yale and Harvard from Iowa’s Senator Grassley to spend that endowment or lose their tax exempt status (article). Alumni are doubtful as Yale may not Get Ben Stein's money. Grinnell has rebuilt or is going to rebuild about every building on campus. They could increase financial aid.

Later today I will send this entry to the alumni association of both Beloit and Grinnell , and ask what is the marginal benefit of my dollar? The best response gets a $200 contribution from me.

*** Update. My father asks if I can make the same offer to Ohio Wesleyan. Yes. Any small liberal arts college whose Alumni Relations staff makes an appeal to me is eligible. Grinnell and Beloit to have an advantage as I factor in my feeling for the University


rjgitter said...

Hey Seth,

Can Ohio Wesleyan enter the contest, too?


trillwing said...

As a Grinnell alum, I've had much the same question. I look forward to seeing what answers you get!

Tim said...

Hey Seth! As part of your requirements, can you ask that they explain their tuition increases over the last, say, 15 years (compared to inflation over that period)? It bothers me more and more to be asked to give money to a college (I graduated from Beloit) that appears to be pricing itself out of reach of the majority of families (and I'll assume Grinnell is doing the same).

Financial aid is great, and all, but its not something you have any control over... I'd prefer a realistic price tag to start with.


For me, the breaking point came with Beloit cheerfully pointing to a new "special interest" house they had built, for upwards of a quarter million dollars, that would house eight students. Let's just say it left me with the impression that "controlling costs" was not high on the College agenda - particularly as long as alumni checks were rolling in.