Are elite universities "hoarding" endowment funds rather than using them to aid student education? This is a discussion currently before Congress. The concern is that the universities with the largest endowments (Harvard has an endowment of nearly $35 billion; Yale has an endowment of approximately $2.8 million per undergraduate student enrolled) are spending them at relatively low rates. Here is part of the argument:

The total worth of the top 25 college and university endowments is $11 billion greater than the combined assets of the 25 largest private foundations — including the Gates Foundation, Ford, and Rockefeller.

Private foundations have fewer assets and, in part because they give away more of their money, are growing far less. Yet they are spending more—their payout averaged 7% in 2005 even though they are legally required to spend just 5%.

Yale law professor Henry Hansmann has said that “A stranger from Mars who looks at private universities would probably say they are institutions whose business is to manage large pools of investment assets and that they run educational institutions on the side…to act as buffers for the investment pools.”

Non-university foundations are required to spend at least 5% of their total value each year to retain their tax-exempt status. At issue is whether there should be a 'required payout' for university endowments, as well. These can be sizable amounts -- for Harvard, that would mean an annual payout approaching $2 billion. The universities with the largest endowments are spending less than the 5% per year required of non-university foundations. Some parents of students at some of these schools have asked why tuition remains so high if the endowments have, over the past decade of investment, created such wealth for the universities.

Daniel Brooks is a professor of supply chain management at the W. P. Carey School of Business at Arizona State University.