Harvard University, a four-year college located in Cambridge, Mass., which has produced many famous alumni, announced this week its largest single donation in history. It was $150 million, and it was from Kenneth Griffin, a stock trader based in Chicago.
The gift would provide financial aid to as many as 800 students every year in varying amounts, the university said, from 200 full rides to partial support. “Ken Griffin’s extraordinary philanthropy is opening Harvard’s gates wider to the most talented students in the world, no matter their economic circumstances,” said Harvard President Drew Gilpin Faust in a press release.
But can this truly be so? Could the gates to a Harvard education be any wider? And if they could be wider, what is going on with the university’s finances?
Working roughly: Harvard currently maintains an endowment of some $30 billion, by far the largest in the country, if not the world. At a tuition of around $60,000 a year, the endowment equals about 500,000 years of paid tuitions. Harvard has about 6,700 undergraduate students. This suggests that there should currently be no financial barrier of any kind to a student applying to Harvard, unless something dastardly is going on.
More likely the financial gates are already as wide as they can be. The university rightly boasts about its terrific “need blind” admissions program, but it seems not strictly honest for Faust to talk about wide open gates—which are as wide as they could possibly be—opening even wider.
This thumbnail math means that Griffin’s donation makes no real difference to Harvard. The university is probably set for buildings and professors, too, and of course many students are completely able to pay. That would make the donation a wash, morally, except for one thing: Donations to nonprofits are not taxed. That means the U.S. government, which is nominally set up to provide social goods to its citizens, is out somewhere between $15 million and $70 million, depending on how aggressive Griffin’s accountants are. (Many financial engineers claim their income as carried interest, which is taxed at a lower capital gains rate.) Avoiding taxes may make a donation to Harvard a moral negative, in terms of social good.
So what, besides giving the donor’s children a leg up in the admission process, is a big donation to Harvard really about? Has Griffin done something wrong? Does this calculation miss something?