Mega-Donors to the Rescue: What to Make of Another Huge Scholarship Gift

  ShutterstockProfessional/Shutterstock

 ShutterstockProfessional/Shutterstock

A recent New York Times piece looking at the exorbitant price tag for an education at the University of Notre Dame asked, "Does God Want You to Spend $300,000 for College?"

God couldn't be reached for comment, but then again, God needn't worry about worldly matters like prioritizing college savings over retirement accounts.

Father Jenkins, the Notre Dame president, said it was "humbling" for him to see the financial sacrifices people make to afford an education at the school. Aware of the optics at play, the school informs parents that tuition generates only 41 percent of the revenues toward its annual budget. Similarly, Mary Nucciarone, an assistant director of financial aid, reminds parents that shelling out over a quarter-million dollars for their child's education is a "choice." 

Missing in this PR offensive is any mention of planned "financial sacrifices" by faculty, leadership or administrators to freeze or reduce tuition. But that's the nature of the narrative, isn't it? Perpetually escalating tuition is accepted as a given. As long as the student loan industry covers tuition and donors continue to write big checks, universities have minimal financial incentive to spare many graduates a lifetime of indentured servitude.

Donors' inability or unwillingness to push schools on this front has been a recurring theme in Inside Philanthropy's higher ed coverage. Billionaire donors want to "prevent and manage all disease" and slow climate change, among other grand ambitions. Given that wealthy donors have more leverage here than in many other areas, at least in theory, is making college more affordable too big an ask?

This brings us to news out of Massachusetts, which found Brandeis University on the receiving end of $50 million from the estate of Chicago philanthropists Rosaline and Marcia Cohn. The Cohn's gift, the largest in Brandeis’ 69-year history, will be earmarked for student financial aid.

The school's undergraduates are going to need it.

Full-time undergraduate students at Brandeis University paid $49,298 in tuition and fees for the 2015-2016 school year, prior to adjustments for financial need. According to Brandeis, tuition is increasing at a rate of 4.0 percent and fees are increasing by 3.9 percent. (According to the Times piece, Notre Dame anticipates costs to rise at 3 percent.)

The current inflation rate for the United States is 1.9% for the 12 months ended May 2017. 

Now, don't get me wrong. The gift to Brandeis is good news in the short term. Students who would otherwise fail to receive financial support for attending the school will now get it. And $50 million is a significant chunk of change.

As with most gifts of this nature, it was decades in the making.

In the mid-1970s, Mrs. Cohn established the Cohn Fund as a memorial to her husband, who died in 1968. When Mrs. Cohn died in 2010 at age 97, she left her daughter her estate. The estate of Marcia Cohn, who died in 2015, maintained the same beneficiaries as her mother’s.

In accordance with the Cohns’ wishes, the Jacob and Rosaline Cohn Endowed Scholarship and Fellowship Fund will provide financial aid each year for hundreds of undergraduate and graduate students who, in the words of Mrs. Cohn, will help solve the "problems and conditions of today and tomorrow."

There's also an interesting twist to this gift. Unlike most big donors in the higher ed space, no one in the Cohn family was a Brandeis alumnus or faculty member, or had any "formal connection" to the university.

Again, Brandeis students have cause to celebrate, and I admit it's unfair to ask donors to be all things to all people all the time. Would it be nice if donors held universities' feet to the fire and demanded lower tuition rates? Of course. But they rarely do. Why not?

For starters, donors want to make an immediate impact. Funding scholarships is an obvious choice, here. Second, could donors really move the needle in a significant way? Consider the forces they'd be up against. There are 44 million borrowers with $1.3 trillion in student loan debt in the U.S. alone. The student loan industry isn't clamoring for lower tuition rates. 

And so donors keep giving. Well, let me modify that statement. Affluent "top of the pyramid" donors keep giving. Those in the middle? Not so much.

A report by the Council for Aid to Education found that gifts from alumni declined 8.5 percent, and gifts from non-alumnus individuals declined 6 percent. These declines come on the heels of strong growth (10.2 percent and 23.1 percent, respectively) in 2015.

Are less wealthy alumni donors holding back because they're turned off by ever-escalating costs? According to the American Council of Trustees and Alumni, the answer might be "yes," at least in part. After giving billions in donations over the past 25 years, alumni have watched as universities cataloged "cost increases far exceeding the rate of inflation," as well as "lowered academic standards, and attacks on campus free speech."

The slip in giving by ordinary alums, if it's ongoing, promises to magnify the already expansive influence of "top of the pyramid" donors.

According to Brandeis, by 2019-2020, tuition and fees will rise to $57,624. If disenchanted "middle of the pyramid" alumni dial back their giving and tuition costs continue to outpace inflation, what's a mega-donor to do? Sit idle and let the problem worsen? 

Also consider the fact that during President Obama’s eight years in office, some 8.7 million Americans defaulted on their student loans, for a rate of one default roughly every 29 seconds. If borrowers restrict students' access to loans while tuition skyrockets, who will step in to fill the gap?

The answer is obvious. But I'd argue that donor generosity has its limits as well. Will mega-donors be as benevolent in 10 years when tuition rises to, say, $75,000 a year? What about $100,000? At what point will they say "enough?"

And so the $50 million Cohn gift to Brandeis University neatly fits into the emerging higher ed funding paradigm. Costs escalate and "middle of the pyramid" alumni giving drops off, leaving mega-donors to make up the difference. Universities may breathe a sigh of relief in the short term, but the long-term prognosis points to a "hollowed out" effect, financially and psychologically.