Forcing schools to spend more of their endowments on easing tuition burdens would put nonprofits on a slippery slope.

In a Los Angeles Times Op-Ed, Cambridge authors Burton A.Weisbrod, Jeffrey P. Ballou and Evelyn D. Asch explain why bigger spending doesn’t always translate to lower tuitions.

In their Oct. 12 Op-Ed articles, Sen. Charles E. Grassley (”Using college endowments“) and Amherst College President Anthony W. Marx (”Defending college endowments“) share genuine concern about the affordability of higher education. They disagree about the role college and university endowments should play in lowering tuition costs for students. From our point of view as researchers of the higher education industry, neither makes a good case for or against using money in college endowments to ease students’ tuition burden.

Grassley is correct that Congress has the right — and responsibility — to examine whether nonprofit schools are providing socially valuable benefits that justify their favorable tax treatment. But if, as Grassley proposes, legislation mandating larger payouts from college and university endowments becomes law, Congress would be heading down a dangerous path that could very well lead to more harm than good.

While it would be easy to mandate minimum payouts from endowments, it would be exceedingly difficult to ensure that such a mandate translates into a more affordable undergraduate degree. Why?

Mandated payouts might flow to wealthier students as “merit” aid. Indeed, the extra payout might not fund financial aid at all but rather administrators’ salaries or a new swimming pool. Preventing this would require even more federal oversight and regulation, with government stipulating how a school can spend not only its endowment payout but other revenue sources as well.

Endowment payouts are only one source of financing for universities. If schools are compelled to spend money that they prefer to save, they might seek to bolster those savings through other channels — and spend more on fundraising or even reduce financial aid.

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