"A Moral Imperative." Exploring the Idea of Donor-Funded Free Tuition

 Photo: Leonard Zhukovsky/shutterstock

Photo: Leonard Zhukovsky/shutterstock

For donors concerned about the growing student debt crisis, the most obvious solution is simply to make college free. What's not to love? It frees students from decades of debt, while also bolstering a school's competitiveness and brand. 

Campus donors already have long track records of making higher education more accessible for some students by backing scholarships—a perennial favorite among alumni givers with deep pockets. But the idea of free tuition for broader segments of the student population has lately been gaining more traction in the donor community. A case in point: the New York University (NYU) School of Medicine, citing the crisis of "overwhelming financial debt," recently announced it would cover the tuition of all its students.

NYU has already raised more than $450 million of the $600 million that it anticipates will be necessary to finance the tuition plan. About $100 million of that has been contributed by Kenneth G. Langone, a co-founder of Home Depot, and his wife, Elaine, for whom the medical school is named. (The plan does not cover room and board or fees, which together are an additional $27,000, on average.)

"Thanks to the extraordinary generosity of our trustees, alumni and friends, our hope—and expectation—is that by making medical school accessible to a broader range of applicants, we will be a catalyst for transforming medical education nationwide," said Langone, chair of the NYU Langone Health board of trustees.

With a net worth of $3.4 billion, Langone's giving focuses on universities, medical research and training, and children’s causes.

Previous gifts include $11 million for Bucknell University’s athletics center, $6.5 million to NYU’s Stern School to endow the Kenneth G. Langone Part-Time Evening MBA Program, and, in 2008, $200 million to the NYU Medical Center, then the largest gift in the center’s history.

NYU's free tuition model is tantalizing because other schools can replicate it. Commenting on the plan, Robert I. Grossman, dean of the medical school and chief executive officer of NYU Langone Health, said, "We hope that many other academic medical centers will soon choose to join us on this path."

The school's bold move offers a good occasion to explore the financial and moral arguments for free tuition, and the extent to which donors are cautiously supporting such plans elsewhere.

The Moral Argument

"This decision recognizes a moral imperative that must be addressed, as institutions place an increasing debt burden on young people who aspire to become physicians," said NYU's Grossman upon announcing the free tuition plan.

And oh, what a debt burden it is.

About 62 percent of NYU School of Medicine graduates leave with some debt; the average debt incurred by members of the class of 2017 was $184,000.

These graduates actually have it pretty good. According to the Association of American Medical Colleges, the median current debt of graduating med students is $192,000. What’s more, 21 percent of doctors graduating from a private school do so with more than $300,000 of educational debt.

Given this massive debt load, many medical students, according to the New York Times, are increasingly pursuing top-paying specialties rather than careers in family medicine, pediatrics and research. 

Then again, not all students will be saddled with debt. In fact, many will pay off loans quickly and become quite wealthy. And, after all, students have a choice to go to medical school in the first place. Rather, the moral component, here, is the fact that escalating tuition diverts doctors away from critical and under-staffed fields. One could even argue it's a "life or death" issue.

Ken Langone isn't the only donor drawn to this line of thinking.

Last year, P. Roy Vagelos, the former chairman of Merck & Co., donated $250 million to the Columbia University College of Physicians and Surgeons, much of which funds an endowment that will ultimately allow the school to underwrite its student financial aid. He said he hoped the gift will free students to pursue careers in family medicine, pediatrics, research and other fields that are less lucrative than the top-paying specialties.

Meanwhile, UCLA’s David Geffen School of Medicine has a $100 million fund that pays for the entire cost of medical school for all four years, including tuition, fees, books and living expenses for roughly 20 percent of its students. The program is based on merit, not need.

Zooming out from the medical education field, donors are drawn to a similar moral imperative argument to liberate non-medical students from a lifetime of debt. After all, every scholarship gift is made with the underlying acknowledgment that it is, at least to some degree, immoral that students should face a lifetime of debt for simply going to college.

Ivy League schools have taken the lead in offering free tuition to segments of the population.

Stanford is free to all students from families that earn less than $125,000 a year. Princeton offers free tuition to parents who make less than $120,000 and free room and board to those who make under $60,000. Harvard and Yale make tuition free for families who make less than $65,000, while Harvard asks those who make between that level and $150,000 to contribute between 0 and 10 percent of their income.

Meanwhile, last year, Brown University launched a $120 million campaign, dubbed the Brown Promise, to drop all loans from financial aid packages awarded to their undergraduates. By doing so, Brown will become the 16th U.S. institution—and the sixth in the Ivy League (excluding Cornell and Dartmouth)—to offer all of its undergraduates a loan-free education.

The Brown Promise is part of the $500 million goal for undergraduate financial aid set in 2015 as part of the $3 billion BrownTogether campaign, and it's interesting for two reasons.

First, when announcing the plan, Dean of Admission Logan Powell wholeheartedly embraced the moral imperative argument, saying, “No student or family should be forced into the heartbreaking decision of whether to turn down admission because of the burden of loan debt."

Second, from a financial perspective, the plan seems imminently practical. According to President Christina Paxson, Brown had to raise a mere $30 million to eliminate loans in financial aid awards for all current and incoming students starting with the 2018-19 academic year. 

As for the practicality of NYU's plan, tuition at the school is roughly $55,000, and the plan covers all current and future students. There are 93 first-year students, and another 350 students who have up to three years left before obtaining their degrees. 

A New Financial Model

The idea that universities could raise a ton of money to offer free tuition seems feasible because, well, universities all over the county are raising tons of money.

Examples of recent blockbuster campaigns include Vanderbilt University ($600 million) Amherst College ($625 million), Wellesley College ($500 million) and Duke University ($3.85 billion). More recently, Tulane University exceeded last year’s previous all-time fundraising total by almost $25 million. 

Fair enough, you may say, but these are private and Ivy League schools sitting on multi-billion-dollar endowments and a deep donor pool. They can afford to offer free tuition or eliminate loans entirely. What about public universities?

Let's consider some circumstantial factors.

Upon netting a $219 million gift to expand scholarships, endow new faculty positions, and fund investments in buildings, University of Maryland President Wallace D. Loh said public university leaders must emulate their private counterparts and cultivate philanthropic support. 

Public schools soliciting private dollars is “the overall pattern,” according to Loh. “It’s a pretty accurate description of what’s happening nationwide."

Loh's sentiments echoed those of University of Illinois Urbana-Champaign Chancellor Robert J. Jones after the school received a $150 million gift from alumnus Larry Gies. "More and more, you're going to see philanthropy as a greater part of the financial model for public universities, as it's always been a part of the financial model for private universities," Jones said.

The point, here, is that public universities are already raising mountains of cash.

The University of Maryland had raised $902 million a few weeks into the official launch of its $1.5 billion campaign. The University of Arizona reached its $1.5 billion fundraising goal two years early. The University of Florida raised more than $400 million for the third year in a row.  UCLA's fundraising goal is $4.2 billion. UC San Diego's is $2 billion. And so on.

And as the cash rolls in, we're seeing more examples of donors who want to liberate students from tuition. Last year, for example, Jay H. Shidler, the managing partner of the Shidler Group, a national real-estate investment organization, made a $117 million donation to the University of Hawaii to provide "a level of steady funding that could be used to make the college tuition-free within 40 years, if there is a need or desire to do so at some future time."

Sympathetic Donors

The only problem here? Free tuition doesn't address the root causes of the student loan crisis or the financial inefficiencies that contribute to escalating tuition.

Indeed, in announcing the Langone gift, NYU's Grossman noted that "institutions" like his own employer continue to "place an increasing debt burden on young people," as if administrators are completely powerless to reign in expenses. Will donors keep the spigot flowing if tuition continues to escalate indefinitely? 

It's a salient question, which brings me back to the utility of the NYU program.

At the end of the day, donors examining the plan need to decide if free tuition, or at least free tuition to a segment of the student population, is an effective and impactful use of their money.

NYU students are clearly ecstatic. Even the Wall Street Journal, that persistent critic of market inefficiencies, applauded the plan on macroeconomic grounds, reminding students that Langone's money didn't "flow from the good intentions of Alexandria Ocasio-Cortez, and it isn’t a product of the Cuban healthcare system."

Other people weren't as enthusiastic.

Elisabeth Rosenthal, writing in the New York Times, called the plan a handout for the soon-to-be-1-percent. While the plan aims to direct students to the less lucrative fields of family medicine, pediatrics, research and other fields, there's no mechanism compelling them to do so.

As the plan currently stands, according to Rosenthal, a student can enjoy free tuition and become a "private cardiologist in Miami" or a "throat surgeon in suburban New York." These doctors can easily pay back what would have been borrowed. Not so much for the doctor delivering babies in rural Oklahoma or practicing pediatrics in the South Side of Chicago.

Aaron Carroll, a pediatrician and researcher at Indiana University was equally dubious. "If you had to find some cause to put tons of money behind, this strikes me as an odd one," he said.