I normally come to MGoBlog to avoid “College Confidential” type discussions, but the thread the other day about Michigan versus Harvard got me thinking about a few topics that might be of interest to some people here, as Michigan alumni (and maybe some people as non-alumni). In a previous lifetime, I had serious interest in university development and fundraising, and so I actually know a decent amount about some Michigan-specific issues.
People don’t really think about this, but Michigan’s endowment is actually relatively small, despite being big in absolute terms. For example, people see we have an endowment of somewhere around $8 billion these days, which is certainly huge, and better than pretty much every public school in the country save UVA on a per student basis. However, consider that a fairly comparable institution such as Northwestern has an endowment of roughly $7 billion, and only half the total students as Michigan. So, the endowment per student is basically twice as much at a place like Northwestern. Endowment pays for all kinds of things, such as professors’ salaries and financial aid. However, the returns on this diminish at a certain point. For example, a place like Princeton has something like $10 million in endowment per student, but at a certain point there just isn’t anything new to spend that on that they don’t already have. There are only so many professors they will hire, so many buildings to build, etc. Also, endowment funds are earmarked for specific things generally, and it’s hard to reallocate them. This leads me to my second point.
Financial aid: A school like Stanford gets about 20% of their operating budget from tuition. Michigan gets roughly 70%. We all know that the state has been cutting back on their funding for the school, and as a result Michigan has been jacking up tuition for both in-state and OOS students, with OOS students paying roughly 150% of their educational costs (as an aside, from what I hear, OOS students are now pushing 45% of incoming classes, mostly for reasons of tuition). This isn’t a knock on either student group, but it also disincentivizes generous aid, as tuition is so crucial to our budget. However, this also brings me to my next point.
Yield - the number of admitted students who then choose to attend the school. In general, Michigan gets about 40%, which is similar to Chicago, for example. However, due to the fairly low financial aid offered, a student accepted to Michigan might be considering a couple of fairly similar schools (say NYU and USC) and then due to personal preference, pick one of the other schools as the prices are fairly comparable. Or, they might be accepted to Michigan and a slightly lower-rated school (say Pitt), and want to go to Michigan, but get merit aid from Pitt but not Michigan. Basically, less aid decreases yield, and in turn increases:
Acceptance rate - This year, Michigan accepted roughly 15,000 people out of an applicant pool of 47,000, for an acceptance rate of roughly 33%. This has gone down a ton in recent years, as when I applied it was 50%. The lower the rate gets, the more perceived prestige an acceptance has. However, due to fairly low yield, acceptance rates stay fairly high relative to peers to fill spots. If yield even bumped up to say 50% due to better aid, we’d only have to accept 12,000 students to fill a class of 6,000 (ideally class size would go down due to the financial model changing from filling spots to get money to having cost of attendance and tuition being more equal, and therefore less incentive to fill more spots as it’s a financial wash). Even so, if within the next couple years applications bump up to 60,000, which is not unreasonable given the rise in recent years, acceptance rates would go down to 20%, which is just slightly lower than Berkeley now, and pretty dang competitive. In theory, this could be another “momentum” situation where lower acceptance rates and higher yields begets even lower acceptance rates and higher yields.
- So, this is wonderful and shiny and nice in theory, but you are saying “Hey, maizonblueaction, how would be go about increasing available financial aid, as that seems to be the premise behind your entire argument?” I’m glad you asked. First, let me premise this by saying that I am really and truly not affiliated with Michigan in any other capacity than that of a concerned alumnus. In her last move as president, MSC and co. are actually starting a rumored $5 billion capital campaign that will probably go mostly towards endowed funds that will increase financial aid, especially for undergrads, and I would imagine the success or failure of that will largely determine the fate of both need-based, and merit-based (someone gets accepted to HYPSM) and is given money to come here instead, and to some extent, perceived Michigan prestige. There is a football analogy here, for anyone interested in finding it.