Some national lawmakers are concerned that as universities' endowments swell, their financial aid programs are not growing at an equal rate.
Tufts was one of 136 colleges that received a letter last month from the Senate Finance Committee seeking details on endowment growth and spending.
Congress sent out the letters on Jan. 24 in order to learn how schools with endowments of $500 million or more spend their money.
"This initiative will help us better understand how endowments work and the role they play in making college education more affordable for everyone," Sen. John Kerry (D-Mass.) said in a press release.
Tufts intends to cooperate with the Finance Committee's request for details of the endowment over the last 10 years, according to Tufts' Executive Vice President Patricia Campbell. The university's endowment is currently just under $1.5 billion.
"Tufts believes it is important for our elected officials and the public to understand the cost of and sources of funds that support higher education," Campbell said in an e-mail.
Congress may establish a payout requirement for financial aid, according to Sen. Chuck Grassley (R-Iowa), ranking member of the Finance Committee. Such a requirement would make colleges devote a particular amount of their budgets to financial aid.
While federal law requires most private foundations to put at least five percent of their funds each year toward charitable purposes, no such constraint is associated with university endowments, although endowments and donations to universities are tax-exempt.
"It's fair to ask whether a college kid should have to wash dishes in the dining hall to pay his tuition when his college has a billion dollars in the bank," Grassley said in a press release.
But some see the potential payout requirement as problematic, according to Steven Bloom, assistant director of federal relations at the American Council on Education (ACE), an organization that aims to provide unified leadership on key higher-education issues.
"If they passed this new mandatory payout requirement, it would really involve the federal government intruding in university budget decision-making in an unprecedented way," Bloom told the Daily.
Requiring a mandatory payout from wealthy universities' endowments may not be as simple as the federal government foresees, Bloom said. He explained that many see the management of endowments as something as easy as pulling money out of a checking account from an ATM.
"In fact, university endowments are more like mutual funds ... each of the accounts [is] set up for specified purposes," he said.
He said the ACE is trying to educate the Finance Committee on why a mandatory payout would not ultimately help attain the goal it is trying to achieve.
According to Campbell, Tufts already has a responsible spending policy.
The university allocated $42.6 million to undergraduate aid in the fiscal year of 2008.
"This amount has doubled in the last 10 years ... with an average annual growth rate of 7.6 [percent]," Campbell said.
While it zeroes in on financial aid policy and annual payout rates, the Senate's letter asks institutions a series of questions regarding other aspects of endowment management and how universities manage their business.
Congress is also concerned about families' knowledge of college costs and how financial aid policies work.
"Too often, colleges and universities do not provide enough information to students and families," Grassley and Sen. Max Baucus (D-Mont.), chairman of the Finance Committee, wrote in the letter to universities. "Families and students need to have greater certainty regarding the costs of education so they can better assess their education options."
For Tufts, financial aid is distributed on a need-based priority system. Tufts recently replaced all loans with grants for undergraduates whose household incomes are less than $40,000.
While financial aid comes from endowment resources, a portion of the operation budget also goes toward financial aid, according to Campbell.
"We can all be proud that Tufts has initiated several truly innovative aid programs," she said.
As the 136 colleges scramble to put together a thoughtful and detailed response to the letter within the 30 days requested, "no timetable has been set," in terms of further investigation on university endowments, Brigid O'Rourke, Kerry's Massachusetts press secretary, told the Daily.
"I think that the letter they sent out will give all of these schools an opportunity to tell the story about how endowments work," Bloom said. "I think these schools rightly believe they have a good story to tell."
