Cost, Value, and Accessibility of a Notre Dame Education
While we should be confident about the value of our work at Notre Dame, we must acknowledge the negative public perceptions about higher education. Its reputation—deserved or not—for elitism, political bias, expense, and even irrelevance did real damage to Notre Dame and a select group of other universities last year as tax reform legislation unfolded. For the first time ever, Congress decided to tax the endowments of certain private universities, including Notre Dame. It was a 1.4% excise tax on endowment earnings at universities with $500,000 of endowment per student. That formula captured only 30 universities, among the most distinguished in the United States, but exempted all public universities, including ones like the University of Texas with an endowment of more than twice that of Notre Dame. On the other hand, other well-endowed private universities, like Columbia, were also exempted due to the vagaries of the formula. When Congress first set its sights on private university endowments, it identified 160 universities to tax. By the time the bill passed and various interests had prevailed, Congress had manipulated the formula to bring the number down to 30.
When Congress imposes excise taxes, it generally does so to raise significant revenue, often for specific purposes. The federal gasoline tax, for example, produces about $30 billion annually for highway construction. The endowment tax is expected to generate only $200 million in the first year for no particular purpose, certainly not to address the $1.4 trillion cost of the accompanying reduction in the corporate income tax over the next decade. Proponents of the tax said they wanted universities to spend more endowment dollars on financial aid, but there was no such requirement in the bill. Indeed, it succeeded only in diverting to the federal government money that would have otherwise been available for financial aid. The endowment excise tax is estimated to cost Notre Dame $8 million to $10 million annually.
"We must make it a priority to make attendance affordable for qualified students and relieve the burdens on students and families who are making such great sacrifices to receive a Notre Dame education."
Why was the tax imposed? I agree with those who suggest the tax was politically motivated, as the Republican majority targeted a relatively small group of private institutions, mainly in Democratic states. These institutions were viewed by some as liberal strongholds routinely critical of Republican administrations, and left-leaning on social values.
This move was made politically palatable, I suspect, because of the negative public perceptions about higher education. These concerns were reflected in a series of surveys conducted by Pew Research Center. In July of this year Pew reported the results of a survey that showed 61% of Americans think higher education is moving in the wrong direction. There are, however, interesting differences between those who are or lean Republican and those who are or lean Democrat. Among Republicans, 75% say higher education is heading in the wrong direction, while 52% of Democrats say so. For Republicans, 79% are concerned that liberal political and social views are favored in the classroom, and 73% believe that universities have gone overboard in protecting students from potentially offensive viewpoints. For Democrats, 92% say the cost of education is the biggest problem, and 56% say that students are not acquiring skills needed for the workplace. These are concerns for Republicans as well, with 77% of them saying that cost if a problem and 73% saying acquisition of workplace skills is a problem.
Whatever the actual motivation for the endowment tax, such negative public perceptions about universities made its enactment politically possible. Though we may strongly disagree with the accuracy of these perceptions, we dismiss them at our peril.
We must counter such perceptions both by what we do and by what we say.
We must continue to ensure that a broad range of views are represented on campus. I am proud of the fact that Notre Dame has hosted controversial speakers, left and right. I know of no case where someone has been prevented from speaking at the University, nor of any invitation to speak that has been withdrawn. I hear regularly from some that Notre Dame is too liberal, and from others that it is too conservative. These are indications, I believe, that we maintain a healthy openness in the marketplace of ideas. I hope we can continue to foster this environment at Notre Dame.
Secondly, we must, institutionally and individually, be prepared to make the case for the value of a Notre Dame education. I have spoken before about the dangers of justifying the value of an education solely in terms of the financial return on a financial investment. Such a justification, I believe, encourages us to view the value of education as the financial rewards, separate from the intellectual, moral, and spiritual enrichment that are the central objectives of a Notre Dame education. Nevertheless, for families considering such a steep financial commitment, we must be prepared to explain why such an investment makes sense.
Nearly half of all Notre Dame students receive some financial aid, and so most do not pay the $71,801 that is the full cost of attendance—which is the average cost that includes tuition, room and board, books, travel, and personal expenses. Even for those who do, the investment makes sense.
Graduation rate is relevant here, for it is a particularly bad investment to spend time and money to attend years of college and fail to earn a degree. Notre Dame can boast one of the best graduation rates in the nation, with just under 96% of students receiving their degree in six years. Numerous studies have shown that the enhanced earning power of someone with a college degree far exceeds the costs of that degree. Bachelor’s degree holders are half as likely to be unemployed as peers who only have a high school degree, and they earn over 60% more. Such earning power translates to roughly over a million dollars in increased revenue over the course of one’s career—multiples of even the full cost of attending Notre Dame. A study by the Federal Reserve Bank of New York, in 2014, showed that, over the course of a person’s career, the annual return on a college education was about 15% compared to a 7% historical average for stocks. There were other demonstrable benefits, of course. College graduates tend to be healthier, have greater job satisfaction, and report higher levels of happiness. They also have higher levels of voting and civic engagement.
The returns on the financial investment are clear, and we must be prepared to make this case to families. But that is not enough. We must do all we can to keep the costs for our students and their families down, while maintaining a commitment to excellence in the central work of education and inquiry at the University. We must make it a priority to make attendance affordable for qualified students and relieve the burdens on students and families who are making such great sacrifices to receive a Notre Dame education.