The latest chapter in the Brandeis fiasco is that president Jehuda Reinharz is resigning, just one year after signing a new five-year employment contract. The official letters don’t once mention the name “Rose”, which is insane: how can Reinharz say with a straight face that he “will leave the University in good condition with a strong foundation on which to build in the future”, even as there’s still enormous uncertainty over the question of whether the university will have to sell millions of dollars from the Rose’s art museum just to make up its funding shortfall?

Reinharz explicitly denied, in an interview with the Brandeis Hoot, that his decision had anything to do with the Rose — while admitting that PR surrounding his resignation would be handled by the same crisis-management firm that was hired after the Rose news broke and the university’s own communications officers utterly botched the way they dealt with the announcement. There’s certainly nothing in Reinharz’s stated reasons for his resignation (”It is now time for me to enter the next chapter of my professional life”) which explains what has changed since a year ago, when Reinharz signed his five-year contract.

With any luck a new president will be found soon, who has no personal association with the decision to close the Rose — and who might be able to better cope with the attention now being paid to that beleaguered museum.

On Friday, I posted a chart which I thought showed donations to Harvard University rising substantially over the past couple of years, to over $1.6 billion a year. Boy was I wrong. As the Crimson reports, Harvard received $602 million in gifts this past fiscal year—an 8 percent year-on-year decline.

My commenters picked up on the mistake very quickly, but unfortunately I missed those comments: I rushed to meet Bob Millman for wine that afternoon, and then disappeared off to a wedding for most of the weekend, and by the time I got back the comments on the Harvard post were quite far down the list. Which is no excuse: I really should have been on top of this.

So many apologies for not updating the post in a timely manner, and for not paying enough attention to my astute and perspicacious commenters. You guys are the best, and I definitely screwed this one up.

If you want a defense of the endowment style of investing, Michael Hennessy provides a really good one. Even he, however, admits that many endowments went way too far during the boom years:

Some (not all) endowments were far too aggressive with their private assets programs, sometimes to the point of planning on incoming charitable contributions (and even seasonal tuition payments) to help fund private asset capital commitments and private capital calls in a “just-in-time” fashion.

Using tuition payments to make capital calls from private-equity funds? I know that people have described Harvard as a large hedge fund with a small educational institution attached, but this is just insane. As a public service, Hennessy should start naming names.

Well done to Jane Mendillo for increasing the transparency of the Harvard endowment, moving from a relatively terse “John Harvard letter” to a more discursive “Endowment Report”. Whence comes this chart:

At the height of the worst recession in living memory, it seems, donations to Harvard went up.

I actually called this, back in May, saying that Harvard’s alumni might be more likely to donate to a university when their donations weren’t dwarfed by endowment returns. But then the Times said that donations were correlated with endowment returns, and I thought that donations might fall. I guess there was nothing to worry about.

(Incidentally, the annual donations to Harvard, at over $1.6 billion, are now pretty much the same as the size of the entire endowment at Wellesley College, whence Mendillo came.)

Update: Wow, I really got this one wrong. As my commenters rightly point out, the chart shows donations from the endowment to the university, not donations to the university. Those did indeed fall.

This chart comes from John Caddell, and it shows the cost of attending Rensselaer Polytechnic Institute as a percentage of US median income. Scary stuff. But not as scary as David Leonhardt’s column today, which demonstrates a nasty ghettoization effect at state colleges, many of which are turning into failure factories:

Only 33 percent of the freshmen who enter the University of Massachusetts, Boston, graduate within six years. Less than 41 percent graduate from the University of Montana, and 44 percent from the University of New Mexico.

There are serious problems with incentives, here: colleges get paid according to their enrollment, not according to the number of students they graduate. And with freshmen cheaper to teach than seniors, it actually benefits a college to have more of the former than the latter.

The first order of business here is to level the playing field: at the moment, poor kids have an alarming tendency to attend colleges with low graduation rates, even when they’re more than capable of getting into colleges with higher graduation rates. They thereby essentially give their rightful place at the better schools to richer kids, who are much more likely to graduate in the first place. That’s why Joe Weisenthal is wrong here:

The authors cite students who go to Eastern Michigan University (39% graduation rate), but who could have gone to University of Michigan (88% graduation rate). But UMich is already at maximum capacity — as are other elite schools — so for one thing, an influx of new applicants, would just displace students, and we’d be back to ground zero. But beyond that, how do we know that the the UMich graduation rate would stay constant given an influx of students who used to go to Eastern Michigan? That’s a gigantic variable.

The point is that the displaced students would be richer students who would be much more likely to graduate in any case, even if they went to Eastern Michigan University. And even if the UMich graduation rate fell from 88%, it would still be much higher than 39%.

This, from Weisenthal, is also silly:

While the educators complain that high schools aren’t doing enough to prepare students for college, the goal of “improved matriculation” sounds just as silly. Just as graduating from high school doesn’t automatically make you prepared for college, graduating from college doesn’t automatically make you ready for the real world.

No, but it makes you much more employable, and it does wonders for your lifetime earnings. Lots of companies simply won’t employ a college drop-out, no matter how qualified they are, and will employ a less-able college graduate instead. It’s often the first filter applied: companies won’t even look at people without a degree.

Improving the matriculation rate therefore improves the range of choice presented to employers, and improves the overall quality of the white-collar workforce. It benefits everyone, except for maybe dubiously-competent graduates who right now don’t really need to compete, in the job market, against smarter applicants who unfortunately dropped out of college. If those smarter applicants get themselves degrees, the less-competent will find it harder to get jobs.

Update: Ryan Avent seems to think that dropouts are dropouts, wherever they attend university. I don’t think that’s true. For one thing, the presence or absence of a campus makes a big difference: students are much more likely to drop out if there isn’t one. And for another thing, there are all manner of peer effects: if most of your peers are dropping out, you’re more likely to follow suit than if nearly all of them are graduating.

Update 2: Oops, Charles Kenny just pointed out that Caddell was using the wrong numerators in his chart, he was using the top line when he should have been using the second line. So I’ve deleted the chart, as it stood it was very misleading.

Update 3: Caddell has fixed the chart, so it’s back.

For all that Harvard president Drew Gilpin Faust likes to talk about the “worrisome impact” of “America’s deep-seated notion that a college degree serves largely instrumental purposes”, she’s still happy coming out with stuff like this:

A widespread perception of the value of universities derives in no small part from very pragmatic realities: a college education yields significant rewards. The median earnings for individuals with a B.A. are 74 percent higher than for workers who possess only a high school diploma.

This is the kind of lying-with-statistics which academics should be debunking, not propagating. If you want to know what the rewards are of going to college, you need to compare the lifetime earnings of people who went to college with those who could have gone to college but didn’t. It’s trivially true that the kind of people who go to college will earn more than the kind of people who don’t. What’s interesting is whether the kind of people who can go to college benefit financially from doing so.

Here’s Rolfe Winkler:

How much more will you make if you go to college than if you don’t? Are those extra earnings enough to pay back your loans with interest, along with the opportunity cost of forgoing full-time wages while you’re a student?

A common misconception is that a college degree is worth a million dollars over the average working lifetime. But a paper published late last year by the National Association of State Universities and Land Grant Colleges pegs the value at close to a tenth of that, $121,539.

The study I’d love to see is the one looking at the lifetime earnings of Harvard dropouts, and comparing them to the lifetime earnings of people who graduated from Harvard. If you include Bill Gates, it’ll seem as though dropping out of Harvard makes you more money than completing your studies there. Even if you don’t, it’s far from obvious what the results of such a survey would be.

There are good non-financial reasons to go to college, as Faust says. But as the cost of going to college increases, the purely financial cost-benefit analysis is becoming non-trivial, especially if you end up having to take out enormous student loans.

Anne Marie Chaker’s story is a little bit too alarmist, I think, but there’s still a serious problem here:

Students are borrowing dramatically more to pay for college, accelerating a trend that has wide-ranging implications for a generation of young people.

New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion.

What Chaker never even hints at until much further down in the piece is that a lot of this is good news: students are moving from expensive private loans to cheaper federal loans. But the fact is that young students are not very good at judging what’s a reasonable amount of debt for them to carry. The dean of Hofstra University has it right:

“I don’t know if we can take it for granted that a 22-year-old knows what it means to borrow $100,000,” said Nora V. Demleitner, the dean of Hofstra Law School, where enrollment is up a relatively modest 5 percent. “They look at the $100,000 in loans, and then they look at the $160,000 salary. And they think, ‘Well, that’s not so bad.’”

At least with mortgages, people have a reasonably good idea of how much they can afford to pay back. With student loans they don’t — especially not with something like a law degree, where either you get that coveted $160,000 job as a first-year associate, or you don’t. And if you don’t, you’re very unlikely to make anything like that kind of money, and your student loans are likely to dangle over your head for decades hence.

There’s a strong case to be made that the government should not be in the business of making it easy for students to go massively into debt even when their chances of repaying that debt are slim. It’s not hard to come up with anecdotes such as this:

Lillian Russell graduated from law school at the University of Pittsburgh last year with $181,000 in debt from her seven years in school. She has spent much of the past year looking for work. In recent weeks, she found a job clerking at a small law office. While she settles into her job, she has deferred payments on most of her federal loans, though interest continues to accrue.

“I wish I had considered the long-term impacts of what I was getting into,” Ms. Russell says. When she entered school, “the idea was I’d take out the loans, get a job, and pay it back,” she says.

Realistically, most graduates from the University of Pittsburgh law school are not going to waltz into $160,000-a-year jobs: Russell’s experience, where she’s clerking for something close to a normal living wage, is surely quite normal. It’s ridiculous that colleges can charge pretty much whatever they want, and the federal government will always be there to provide loans. One good way of decelerating the inflation in tuition fees — and the concomitant rise in student debt — will be for the federal government to start getting much stricter about the kinds of sums it’s willing to countenance.

I never understood, when the Harvard and Yale endowments were making gazillions of dollars a year in profit, why anybody would donate any money to them: any growth in the endowment due to donations would be dwarfed by investment gains. But it turns out that alumni don’t think that way, either at Harvard and Yale or at Cooper Union:

One additional benefit of Cooper Union’s returns has been that donations to the college have increased as its endowment has grown, a phenomenon that Yale and Harvard experienced in the boom years.

I’m happy this is happening at Cooper Union, whose endowment is less than $1 billion and has been invested very well. But I don’t really understand why this correlation should hold even unto endowments with more than $30 billion under management.

Pockets has a spectacularly good comment on my blog entry about the charitable status of private schools which would more than deserve elevation as an entry of its own were it not for the fact that (s)he has gone into even more detail here and here. The main insight is that the “top” schools tend to advertise themselves and compete on the basis of how well their pupils do in exams, what universities they get into, that kind of thing. And that they can boost those numbers substantially by giving scholarships and bursaries to super-smart poorer kids:

UK private schools are among the best schools on the planet, and I was lucky enough to attend one. Saying that they maximise profits isn’t saying that they’re manipulative or evil or bad (I wonder if this is what’s annoying people?). They’re staffed with many lovely, caring individuals (like lots of other profit-maximising companies!), and through scholarships/bursaries they offer a great trade to smart poor kids - we’ll give you an amazing education, if you allow us to charge other kids to sit next to you.

Given that the schools would do this even if they didn’t have charitable status, it’s not clear why we’re giving it to them. As Pockets writes:

If you wanted to convince me of a private school which is acting charitably, not profit-maximising, then you’d have to describe a system where pupils take the entrance exam - and then the low-scoring poor children are offered bursaries. That’s a school which is gambling on its ability to raise standards among disadvantaged kids. But no private school does that, and with excellent reason: the cost could be lower league table results for the school.

Matt Yglesias also makes a point about private schools which I should have made initially:

They’re certainly not charities. And as best one can tell, their main impact on the common weal is negative, drawing parents with resources and social capital out of the public school system and contributing to its neglect.

You’d have to believe that New York City’s public schools would be both better funded and free of this kind of nonsense if a larger portion of the city’s elite were sending their kids to them.

There’s an analogy here to the studies showing the beneficial effects of homeownership. The problem is that two effects get mixed up: on the one hand, people who own their own homes do tend to live better lives. But on the other hand, those are the kind of people who would probably live better lives anyway, and by moving away from rental neighborhoods they effectively ghettoize those left behind. Similarly with private schools, especially in areas where a high percentage of local kids gets educated privately (like where I grew up, in Dulwich): the local public schools can be very bad indeed, despite the huge number of rich and highly-educated parents in their catchment area. To put it in economist-speak, private schools inflict a negative externality on the quality of education in the neighboring state-run schools.

Incidentally, pace another comment in the original thread, Greenpeace is not a registered charity in the UK — at least the headline organization which most people think of when they think of Greenpeace, Greenpeace Ltd, is not a charity. Not everybody in the non-profit space is a charity, and there’s no particularly good reason why all private schools should be charities, either.

In the US, I’m still holding out hope that university endowments will be taxed unless they can demonstrate that they’re actually spending their money on the public good. Thanks to the philanthrocapitalism blog, I now discover that a similar move is now afoot in England, which has told two independent schools that they will lose their charitable status unless they start educating poorer kids as well as those of the rich. The whines from the head of the Independent Schools Council are not very moving:

Private schools were already providing a public benefit by educating children who would otherwise be in state schools paid for by taxpayers, he said…

Without private schools “the public would have to pay between £3bn and £4bn a year in extra taxes,” Lyscom said.

No one’s asking to abolish private schools, or even proposing that most of them lose their charitable status. They’re just asking that they do a bit more to earn it, which seems right to me. But as ever, there’s an endowment effect: it’s orders of magnitude harder to strip charitable status from an institution than it is to confer that status in the first place. So this is going to be a long, tough fight. But it’s one worth having.