The Dangerous Wealth of the Ivy League

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Even as Ivy Plus budgets have spiraled upward, the schools' enrollments have barely budged. From the 1997-98 academic year through 2006-07, graduate enrollment at the 10 institutions inched up by 10%, to 55,708, while the number of undergraduates actually fell by 1.4%, to 68,492.

Meanwhile, the wealth gap between the Ivies and everyone else has never been wider. The $5.7 billion in investment gains generated by Harvard's endowment for the year that ended June 30 exceeded the total endowment assets of all but six U.S. universities, five of which were Ivy Plus: Yale, Stanford, Princeton, MIT, and Columbia. Ivy dominance extends to fund-raising. A mere 10 schools accounted for half the growth in donations to all U.S. colleges and universities last year. All of the top five on the list were Ivies, led by Stanford, which set a record for higher education in 2006, collecting $911 million in gifts.

During 2006-07, the Ivy "Big Three"—Harvard, Yale, and Princeton—collectively spent $6.5 billion on operations, up over 100% from a decade ago. This was more than double the 41% average budget increase for all U.S. colleges and universities over this period and quadruple the 26% rise in the consumer price index. The Big Three sank a further $1.2 billion into new construction and other capital spending last year. "Yale is wealthier now, so we can add resources in almost every dimension," says its president, Richard C. Levin.

The benefits of the Ivies' surge in prosperity range all across campus, and in some cases seem less than central to a liberal arts education. Stanford spent $4 million to restore the Red Barn, a Victorian-era structure that's part of the university's equestrian center and now provides a place for undergraduates to house their own horses at a cost of $500 a month. Seven employees groom and feed the steeds and clean their stalls.

It's hard to imagine now, but for most of the Ivy League's long history many students lived austerely, as befitted schools with roots sunk deep in New England Puritanism. This began to change noticeably in the 1990s as schools used growing endowment incomes to modernize classrooms and dorms and to build lavish new student quarters. One of the last remnants of Ivy asceticism vanished last year when Yale gave in to student demands and began supplying dormitory bathrooms with hand soap, at a cost of $100,000 a year. "People used to look at every penny," says John Meeske, Yale's longtime dean of administrative affairs. "The mind-set is different now."

Beyond the over-the-top comforts of Whitman College, Princeton bestows ever more comprehensive counseling, health care, and other services on its students. Starting this year, all PhD students who give birth will receive their full stipend during a three-month suspension of academic work. Princeton also has begun covering the living expenses of foreign undergraduates who remain on campus during breaks.

The Ivies have steadily raised the list price they charge their traditional clientele: the wealthy and the well-born. Tuition, room and board, and fees now run an average of $45,000 a year, which, the schools are quick to point out, covers only one-half to two-thirds of operating costs. But even at those prices, demand, in the form of undergraduate applications, continues to soar. On average, the Ivies rejected about 90% of applicants for the Class of 2011.

Extraordinary wealth has allowed the Ivy Plus schools to mitigate their extreme exclusivity by offering bigger discounts to more students of modest means—a move that few would object to. Princeton has doubled its budget for grants, loans, and other aid since 2001-02, to $82 million, as the percentage of undergrads receiving financial support has jumped from 44% to 53%. The average award is $32,200, against total charges of $44,950.

SALARY GAP

The Ivies' biggest expense category by far is labor. At Harvard, compensation and benefits accounted for 49% of its $3.2 billion in operating expenses in 2006-07.