Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached • Hacker News Board

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#221

Post by jldugger » Tue, Mar 22, 2016, 3:51 PM UTC

77pt77 wrote: post #182

jldugger wrote: post #113

Earlier quoted context omitted.

Broad market indicies like S&P500 are regarded as having a 7 percent return after adjusting for inflation.

According to http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/... from 2006-2015 the SP500 had a geometric yearly mean return of 7.25%. according to http://www.usinflationcalculator.com/inflation/current-infla... The average inflation for that period is 1.9% so you get roughly 5%. Still pretty decent.

We're talking longer than 10 years here. A better estimate might calculate the average 10 year return for every 10 year return period, and the standard deviation of that same data set. And then do that calculation for 30 years. I believe you end up with a higher average and smaller deviation at 30 than 10.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#222

Post by alistairSH » Tue, Mar 22, 2016, 3:52 PM UTC

1stop wrote: post #190

jqgatsby wrote: post #82

Earlier quoted context omitted.

I walked out of MIT with $100K in student loans, because I had the combination of 'parents who make too much money' and 'parents who had five kids and did not adequately save for their children's education'. I'm all for soaking the rich, but how is that fair? I was apparently rich by association, and it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life.

You know if you didn't want the 100k loan, you could have gone to another university...? You make being a privileged middle class kid seem like such a chore. There is always someone better then you, and there id always someone who got what you did for less. But on the flip side, you are also the someone to someone else.

FWIW, the total in-state cost for students at UVA is approaching $28,000/year[1]. U. of Michigan and Georgia Tech are similar.

Take out the room/board fees, and you're still looking at $14,000/year just for tuition.

So, even going to a top state university isn't going to keep you debt-free. Maybe not $100,000 in debt, but still a significant sum.

There is definitely a "donut hole" in terms of aid available to middle-class undergraduates[2]. If you're poor, chances are you can obtain grants or other aid. If you're rich, you can pay cash and not sweat it. If you're somewhere in the middle, that aid dries up fast, but you can't write a check.

[1] https://news.virginia.edu/content/board-visitors-sets-2015-1... [2]https://www.washingtonpost.com/news/get-there/wp/2015/01/29/...

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#223

Post by jldugger » Tue, Mar 22, 2016, 3:59 PM UTC

ww520 wrote: post #163

jldugger wrote: post #104

Earlier quoted context omitted.

> They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? The safe withdrawal rate is set at 4 percent. Earmarking half of that 4 percent for student aid is pretty severe on the budget.

Just to clarify so that people won't plan their retirement wrong, the 4% safe withdrawal rate from the Trinity study is for having at least $0 of a fund at the end of 30 years. The withdrawal rate for an indefinite fund like Yale's is much lower.

You say that, but Wikipedia states that 4-6 percent are spent annually on operations and capital. It offers no citations, but I can produce some:

Princeton (https://finance.princeton.edu/policy-library/endowment/endow...):

> The Trustees have endorsed a spending rate range of 4%-5.75% to achieve this balance. In order to enhance predictability and stability in endowment payout, the Trustees have established a standard spending rule that increases the spending distribution per unit by 5 percent per year, although the standard spending rule increase may change if necessary to maintain the spending rate within the prescribed policy band.

Yale (http://giving.yale.edu/ways-to-give/endowment-fund):

> Yale combines a long-term spending rate of 5.25 percent of the total endowment value with a smoothing rule that adjusts spending gradually in accordance with changes in the endowment market value. ... In January 2008, Yale announced that in the future, its endowment formula will be modified to place a floor of 4.5 percent on the expected payout rate and a ceiling of 6 percent.

I might not have called it 'safe withdrawal' rate, as it conflates the two spend rates. But it's in the same ballpark. 2 percent of the endowment would be 1/3 to 1/2 the annual spend.

And this all sets aside the concept of earmarks; money donated with an earmark cannot be used to offset the loss of income to the general fund.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#224

Post by lintiness » Tue, Mar 22, 2016, 4:07 PM UTC

jimbokun wrote: post #116

noonespecial wrote: post #108

Earlier quoted context omitted.

The price of Serious Education, like that of Serious Illness is now quoted at $ImpossibleSum and then generously negotiated down to ($EverythingYouveGot + $EverythingYouCanBorrow).

This is the economic issue in the U.S. right now, and the only candidate who seems to even acknowledge it is Bernie. It's a difficult issue for Hillary, whose husband oversaw implementation of some of the policies that created this environment. And all of the Republican voters seem to be more afraid of brown people possibly getting money from the government, than about whether or not they can get sick or go to school…

let's for a moment consider the economic issue OF THE FUTURE. we're spending our grandkids earnings on shit today with a promise to pay with interest sometime forward. anybody know a guy who was in congress while all this was happening? stop with the magical bernie economic mathematician nonsense.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#225

Post by bwilliams18 » Tue, Mar 22, 2016, 4:10 PM UTC

rottyguy wrote: post #194

inthewoods wrote: post #126

Earlier quoted context omitted.

Even worse, in my opinion, is that these institutions can continue to be considered Not for Profit organizations. Harvard is very interesting in this way - they have so much money in their endowment that they seek all kinds of investment. Real estate is one of their favorites. When they buy property, it can no longer be taxed. This is why the towns surround Cambridge hate when Harvard buys up property. Watertown, in…

I believe Columbia is the 2nd largest land owner in NYC. The first is the Catholic Church. http://nymag.com/listings/attraction/columbia-university/

NYU must be third.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#226

Post by Grishnakh » Tue, Mar 22, 2016, 4:10 PM UTC

ameen wrote: post #217

Grishnakh wrote: post #139

Earlier quoted context omitted.

The Republicans aren't as bad as you think. Trump has said (vague) things about providing health care for everyone. He's said a lot of things that are a big departure from standard Republican ideology, which is why a bunch of Republicans are calling him "not a real Republican" and the party as a whole is having a major shit-fit about him possibly getting the nomination. The guy isn't really a right-winger, he's a cen…

Bernie seems like the only sane person on there. Hillary is the worst of them, and I say this as a Muslim. Trump might hate me, but at least it's irrational unlike Hillary who is a first-class warmonger and only exists to sell multi-billion dollar weapons. The world could do a lot more with lesser wars, no unwanted migration, and no terrorism. The vicious cycle of violence killing innocents and following hate attacks…

From what I've read, Trump's anti-Muslim comments seem to basically be along the lines of stopping any of them from entering the country until some better screening measures are instituted, and worst-case, not letting any more in. However, he's been pretty clear about being interested in a more non-interventionist foreign policy, and our military involvement in the middle east is exactly what's created this monster. The establishment politicians, on both sides, by contrast, are warmongers like you say. I think they'll just make things even worse.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#227

Post by Domenic_S » Tue, Mar 22, 2016, 4:12 PM UTC

_delirium wrote: post #115

amluto wrote: post #103

Earlier quoted context omitted.

I tend to dislike systems of the form "if you make/own less than $X, you get $Y benefit". It often leads to nasty non-monotonic outcomes and like this. For actual public benefits, I'd much prefer to give all the benefits to all the people and raise taxes accordingly. This means that, as a CA resident, I think I should be permitted to deduct rent even if my AGI is $38,259, and I think I should get the full Affordable…

The universities I know of that have free-tuition programs do phase them out gradually, to try to avoid too much weirdness that would come from a hard threshold. For example, Harvard charges no tuition to students from households making under $65,000, but above $65,000 tuition phases in slowly, reaching full tuition only at $150,000+. However I do agree your proposed solution is better. Have universalist public progr…

> above $65,000 tuition phases in slowly, reaching full tuition only at $150,000+

Which is still silly. Who has more to spend/better opportunity to save? Two parents that make $75k each in Mountain View or 1 parent who makes $64,500 in Nowhere, Indiana?

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#228

Post by noonespecial » Tue, Mar 22, 2016, 4:19 PM UTC

lintiness wrote: post #224

jimbokun wrote: post #116

Earlier quoted context omitted.

This is the economic issue in the U.S. right now, and the only candidate who seems to even acknowledge it is Bernie. It's a difficult issue for Hillary, whose husband oversaw implementation of some of the policies that created this environment. And all of the Republican voters seem to be more afraid of brown people possibly getting money from the government, than about whether or not they can get sick or go to school…

let's for a moment consider the economic issue OF THE FUTURE. we're spending our grandkids earnings on shit today with a promise to pay with interest sometime forward. anybody know a guy who was in congress while all this was happening? stop with the magical bernie economic mathematician nonsense.

>spending our grandkids earnings on shit today.

I'm not sure that's true. College kids aren't producing anything today. What we're trying to do is to force them to fund our long (and I do mean long) cushy retirements with what they will produce later.

The whole system seems to be set up right now to extract a great deal of what they will produce in the future and pull it back to the older generations. It's a promise to make them pay in the future. Well, promises can be broken, and in this case I'm almost certain will. They can say no.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#229

Post by tmptmp » Tue, Mar 22, 2016, 4:25 PM UTC

rdancer wrote: post #176

kough wrote: post #125

Earlier quoted context omitted.

I'm in a similar situation right now: on paper my father's business owes him a lot of money that he "loaned" it from his salary, but in reality that money does not exist and it's not going into his pocket any time soon. Mix in two brothers with their own college costs, stir to taste. I took two gap years to work and save money; it's absurd to me that I'm paying full tuition price in this situation, but the financial…

Your family is too proud for the business to declare bankruptcy and go through Chapter 11 debt restructuring? When you're looking to pay tens of thousands in tuition, it helps to have a smart accountant, and plan a few years ahead. Is it a little unfair that people enter adulthood without a spec of financial literacy, and are immediately taken advantage of? Yes, but if a fool and his money are easily parted, the only…

great advice. I could never have thought of this. Me, a silly and complete financially illiterate fool, must work hard now to become financially literate. Thank you again. Can't upvote enough :(

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#230

Post by Domenic_S » Tue, Mar 22, 2016, 4:26 PM UTC

lmm wrote: post #187

shkkmo wrote: post #109

Earlier quoted context omitted.

> The vast majority of the time, kids with rich parents have a substantially blessed childhood & family-support, which justifies them having to pay substantially more in tuition fees. How does it justify that? We want to punish them with debt because their parents might have provided them with some opportunities? The current system of funding higher education penalizes children of parents who don't prioritize college…

We have a limited amount of subsidy to allocate where it will do the most good. Most of the time the children of rich parents - even those who had little interest in college - have more advantages overall than even a fully subsidized poor student would have. So it makes sense to focus our subsidy on those poor students.

Rich parents? Hilarious. You way overestimate where the line is drawn. When I went to UCD, my parents' income was ~$70k (in California) and I got some subsidized loans, then mostly unsubsidized loans, then they made my parents take out PLUS loans in their own names (more accurately, they capped the amount of loans I could take personally and the only way to make up the delta is either family cash contribution, or parent PLUS loans). Except for a small amount of interest subsidy, I got $0 financial assistance.

Now, my own personal situation is a deal of my own making -- I decided to sign on the dotted line. But in the aggregate, considering all the other students like me --- I'm actually shocked at the push back in this thread. The same group of people that bemoans the death of the middle class can't see how this is a part of the problem?

I feel lucky. I was in one of the last generations to get halfway-decent interest rates. My younger brother is paying through the nose (what is it now, 6-7%?).