Opinion: A New Way for Wealthy Colleges to Use Their Endowments

With endowments of wealthy universities achieving unprecedented growth, lawmakers such as Sen. Charles Grassley, Republican of Iowa, are suggesting that these institutions be forced to spend more of their assets each year, notes an opinion article in The Wall Street Journal.

Todd. G. Buchholz, a former White House director of economic policy, says Congress should not take any action to regulate endowments. But, he says, wealthy colleges should look for new ways to help students and parents. In particular, he says, they should turn loans for college tuition into grants.

In addition, he suggests that universities allocate a portion of the tuition students pay into a savings account. The university would reinvest the savings in its endowment for 25 years. At that time, the student or parents who paid the tuition could take back the principal and a portion of the return.

Mr. Buchholz predicts such an approach would solidify the emotional and financial relationships of families and alumni to institutions over their lifetimes, and as a result, the colleges would fare better in fund raising.