Johns Hopkins University

Spring 2008
Vol. 5, No.2


Dean Adam Falk
Adam Falk


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Frank Talk About Financial Aid

Recent months have seen an intense national discourse surrounding college endowments, tuition, and financial aid policies. With the Higher Education Reauthorization Act before it, Congress has taken a keen interest in many aspects of university operations, just as we have seen remarkable moves by a number of our peers to reduce debt burdens for low- and middle-income families. Financial aid is a complex issue for all colleges and universities, and I would like to take this opportunity to share my view of the relationship of Johns Hopkins and, in particular, the Zanvyl Krieger School of Arts and Sciences, to this national conversation.

Let me begin with an unequivocal statement of our values: It is critical to every purpose of Arts and Sciences that Hopkins be accessible to, and competitive for, the best students from across the socioeconomic spectrum. Toward this goal, we must use all of the school's resources efficiently and strategically, while continually striving to increase student support. Indeed, the single highest priority in the school's current Knowledge for the World campaign is to raise endowment for financial aid: Our joint campaign goal for this priority with the School of Engineering is $100 million.

And frankly, while I marvel at the announcements our peers have made and applaud their efforts to make higher education more accessible, my own aim is not to announce some new program, but to work with my colleagues to make the programs we have even more effective, so that Hopkins can be affordable to all students with the talent to attend.

How do we pay for financial aid at Hopkins? Like all universities, we use a combination of operating funds from tuition revenue and income from endowments. In our case, endowments for financial aid are quite modest, so the burden falls inordinately on our operating budgets. The vast majority of our endowment is restricted to specific purposes by the expressed intent of its donors, with only about 10 percent designated for undergraduate scholarships. Therefore, we rely much less on our endowment for financial aid than do many of our peers, whose endowments may be substantially larger, more discretionary, or both.

Congress has taken an interest recently in endowment growth and payout rates among universities. The question, essentially, is this: If endowments are growing at double-digit rates, shouldn't that new wealth reduce families' tuition burden? It's a fair question, but--even beyond the fact that recent economic performance should remind us that the stock market can have down years--it is based on premises that obscure some deeper subtleties in the management of university endowments. Simply put, endowment must be managed to provide a permanent source of income to support our teaching, research, and public service missions. This is the legal commitment we make when we accept an endowment gift. Thus an endowment's growth over time must account for both its payout and the effects of inflation. At Hopkins, the annual endowment payout is based on a three-year trailing average and is historically about 5 percent of its value. With overall net endowment returns over the past decade of approximately 8 percent, our payout is roughly constant in inflation-adjusted terms.

We must also recognize that Arts and Sciences' total endowment, about $165,000 per student, is modest by national standards--not, for example, high enough to rank in the top 15 among major research universities. Even doubling the payout rate on those endowments--were that possible--would not make a meaningful difference to our financial aid program. Our core strategy, then, cannot be simply to wring more dollars from our existing endowment, but rather to seek philanthropy--energetically and creatively--to establish new funds to support our terrifically talented students.

In the meantime, we are making steady progress toward a more affordable Hopkins education. The Baltimore Scholars Program has provided full-tuition scholarships to 59 students from Baltimore City public schools. The Hodson Trust Scholarship supports up to 80 students a year who have demonstrated academic excellence and leadership. But we must do more.

We at Hopkins, and all of us in higher education, welcome the opportunity to discuss these issues with our students, parents, and alumni--and with Congress and the American people. We share in common the ideal of an affordable world-class education for all students, and we at Johns Hopkins, and in the School of Arts and Sciences, will strive daily toward this vision.


Adam F. Falk
James B. Knapp Dean