During his presidential campaign, Donald Trump argued that requiring wealthy universities to spend more of their endowment funds on tuition aid would reduce students’ financial burdens.
Whether implementing that idea—which has floated around Congress since 2008—would lower college costs on the whole is doubtful. And, in my view, the federal government is already meddling too much in university policies.
Nevertheless, Trump raised an important issue when he discussed endowment spending at a campaign stop in September. Universities, by hoarding their donations, may not be serving the best interests of students and benefactors.
To unpack this issue, I would like to ask a fundamental question: why do universities have endowments, anyway?