Touting its recent financial aid expansion, the University responded Monday to a letter from leaders of the Senate Finance Committee requesting detailed information on its financial aid policies and endowment.
In a letter accompanying the response to committee chairman Sen. Max Baucus, D-Mont., and ranking Republican Sen. Charles Grassley of Iowa, President Ruth Simmons emphasized the "extraordinary investments" in financial aid being made by Brown and other schools.
"Much of this progress would not be possible without income from our endowment," Simmons wrote to the senators.
The senators' Jan. 24 request to 136 of the nation's wealthiest colleges and universities came after Baucus and Grassley had expressed concern about the increasing cost of college in a period when universities with large endowments are seeing substantial returns on their investments.
Grassley has suggested that he would consider proposing legislation to require colleges and universities to spend a minimum proportion of their endowments every year, as charitable foundations must, in order to help drive down the cost of higher education for low- and middle-income families.
Brown, like many of its peer universities, opposes that idea. Simmons did not directly acknowledge or argue against it in her letter, but she implied that current efforts were sufficient.
"I respectfully suggest that, as you review the issues surrounding university endowments, you and your fellow members of Congress consider the great strength of our system of higher education," she wrote. "We must maintain the partnership between the federal government and our institutions to ensure affordable high quality education for as many students as want to go to college. For our part, we will work to contain costs and manage our endowment in the most effective way possible."
Simmons also noted that Brown is limited in how it can use its endowment, telling the senators that the University is "legally and ethically prohibited" from spending too much from endowment funds and contravening donors' intentions for the money's use.
"Currently, three-quarters of Brown's $2.6 billion endowment is restricted to purposes other than undergraduate financial aid," she added.
The University announced its recent aid expansion - which eliminates contributions from most families earning under $60,000, abolishes loans for families earning less than $100,000 and reduces debt for all students receiving aid - on Feb. 23, after it had received the senators' request but before it responded. The move came on the heels of similar announcements from many of Brown's peers.
The University Resources Committee, which proposed the increased aid budget, cited both competitive and political forces as motivations for the move in a report to Simmons. The University also announced in February that it would pay out 5.89 percent of the endowment's total value next year, exceeding for the first time a decades-old guideline that dictated endowment draw be set between 4.5 and 5.5 percent. Brown calculates endowment payout on a three-year average value rather than the endowment's current value to compensate for year-to-year fluctuations in growth.
The policy Grassley said he might propose requires that colleges and universities draw at least five percent of their endowments every year.
The responses of colleges and universities that received the letter "will help inform" Grassley's decisions about whether to pursue such a requirement in the Finance Committee, said Jill Gerber, Grassley's Finance Committee spokeswoman.
Of the recent announcements by Brown and other institutions, Gerber said Grassley "thinks the voluntary action is great, and he'd like to see more of it." But, she added, "The schools that have taken that action are still just a fraction of the schools with sizeable endowments."
Proposing the endowment draw requirement, she said, remains on the table. Gerber could not say what action the Finance Committee might take next, or when. Replies to the Jan. 24 request, which asked institutions to reply within 30 days, have been "coming in very steadily," she said. But, she added, "It will take a while for staff to analyze the responses and draw conclusions about what universities are reporting."
Brown's response included the letter from Simmons and 14 pages of extensive statistics describing the inner workings of Brown's endowment, how it compensates and evaluates its investment managers and how it calculates financial aid.
As leaders of the Finance Committee, Baucus and Grassley have long been focused on the charitable sector and other tax-exempt organizations, according to Brian Flahaven, director of government relations at the Council for Advancement and Support of Education. Their recent focus on colleges is an extension of that interest, he said.
His organization believes that payout decisions "ought to be left in the hands of college and university endowment managers" to enable schools to balance growth with current needs, he said.
Flahaven said he believes colleges and universities will use the committee's request to explain the importance of flexibility in endowment management and how universities with endowments differ from charitable foundations.
Recent signs of an economic downturn may depress the high endowment returns of recent years that caught the attention of the Finance Committee, he said, underscoring the need for colleges and universities to be able to restrict endowment draw when long-term growth is threatened.
