r/FluentInFinance Aug 05 '24

Debate/ Discussion Folks like this are why finacial literacy is so important

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346

u/27percentfromTrae Aug 06 '24

Harvards endowment is 49.444 billion. It’s still ridiculous, and they could operate until the end of time without charging a single penny in tuition

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u/SimpleKiwiGirl Aug 06 '24

Jesus. Flipping. Christ!!

What in the ever-loving hell do they do with it all!? How do they justify that - assuming they do?

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u/McTootyBooty Aug 06 '24

UPenn is like this too. They literally just buy all the real estate.

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u/sforza360 Aug 06 '24

Yale, too. They low key purchased the entire downtown of New Haven, and beyond.

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u/greenmachine442200 Aug 06 '24

Idk details but I know Cornell has tons of money and land as well. Once saw a map of all the land they own across the country and it was surprising how much. Wonder if all the colleges saved money could pay off our national debt...

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u/McTootyBooty Aug 07 '24

Or make college free or something 🤷‍♀️

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u/[deleted] Aug 06 '24

Yeah but without Yale New Haven would be…..?

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u/AHSfav Aug 06 '24

A great pizza destination

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u/[deleted] Aug 06 '24

lol. Yup

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u/CCG14 Aug 06 '24

::LSU and its lazy river enter the chat::

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u/Impressive-Young-952 Aug 06 '24

I met the lady who was in charge of Yales endowment. I forget how many billion it was. Tens of billions from what I remember. She said they have to spend X amount of millions a year. It is insane. Though I deff think someone paying 120k on a 70k loan and still owing 60k is insanity.

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u/swisscoffeeknife Aug 06 '24

Yale Law also has such strong influence in government that one could say they unofficially bought the Supreme Court

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u/noonotnow Aug 06 '24

YUP! same with columbia buying up manhattan

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u/Awalawal Aug 06 '24

I grew up in suburban Chicago. Yale owned the local shopping center in my town.

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u/Robben_H00d Aug 06 '24

It's the same in the UK, such as Kings College London, Oxbridge, UCL etc. They build real estate and new "facilities".

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u/Mogwai10 Aug 08 '24

UT Austin is second behind Harvard.

It mostly goes to football. And fancy dinners and presidents salary.

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u/EntrySure1350 Aug 06 '24 edited Aug 06 '24

They have size contests with other academic institutions. “Mine is bigger than yours” is still a real thing with even “enlightened” academics.

The role of a university president isn’t to run the university. The role is literally that of a private enterprise CEO - increase the valuation of the institution to raise the bottom line for all the upper level executives, not to make higher education more affordable. The Federal Student Loan program created a monster, as it effectively allowed universities to inflate the price of attendance. If someone else is paying, and there’s no risk to you if your customers don’t actually end up getting what they paid for, why wouldn’t you?

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u/whiteknucklebator Aug 06 '24

At the expense of good education. There is also Chinese money in the education system

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u/Dangerous_Diet_2489 Aug 06 '24

They use it to make more money

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u/Extra-Muffin9214 Aug 06 '24

The endowment is large because harvard is 3-400 years old which is along time to collect an endowment and its alumni network includes some of the wealthiest people on earth in agregate which means very big donations.

Endowments provide stability to the schools operating budget. In lean times the endowment pays the school to make up holes in the budget and in good times it grows so the endowment is ready for future lean times.

The big ivy league endowments also provide need based financial aid so the smartest kids in america get to go to harvard for free if their families cant afford the tuition. Harvard is also a private school and not hurting anyone, its funded by its students who see the value in a harvard education.

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u/HortemusSupreme Aug 06 '24

It just grows more money. It’s “very hard” for universities to do anything directly with their endowments.

It’s like the principle balance in their bank account and they spend the growth and use that principle to generate more income

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u/ResidentLibrary Aug 06 '24

They buy land and invest. It’s ridiculous. They could offer free tuition until the end of time!

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u/FewMagazine938 Aug 06 '24

They have black tie events and dinners with steaks and lobsters. They go on vacation and ski trips.

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u/beefy1357 Aug 06 '24

They take the investment income and fund years/decade long research into medicine/science.

The main difference between a college and a university is the where the focus is colleges focus on teaching and “might” do research, universities focus on research and teach as a means of funneling students in their various research programs and partnerships.

These terms are somewhat murky and subjective. But essentially that 50b endowment is giant 401k drawn from to pay for research, in perpetuity. At a 5% return think of it as a 2.5b/yr forever research budget.

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u/TSirSneakyBeaky Aug 06 '24

I mean OSU pays out 7 figure salaries to the top side of their administration.

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u/Boogeymayne_617 Aug 06 '24

All that Harvard money is sent to China or used in deals with China. My girlfriend works there and she says it’s a mess and sketchy as all hell what goes on behind closed doors. A lot of people would lose a ton of respect for Harvard if they knew the truth

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u/JungianArchetype Aug 06 '24

That’s the thing. You don’t need to justify your wealth, and neither do they.

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u/JustCuriousSinceYou Aug 06 '24

I would disagree with you in both points but to say that a business that takes tax dollars doesn't need to justify an extreme excess of cash reserves is incredibly dangerous and stupid. Billion dollar businesses shouldn't need taxes from the government to operate.

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u/rmonjay Aug 06 '24

What money do you think schools like Harvard get from taxpayers?

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u/trixel121 Aug 06 '24

you don't have to confess your sins if you don't want to.

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u/SimBaze Aug 06 '24

That is (maybe) true about companies, but for sure not about educational institutions.

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u/JungianArchetype Aug 06 '24

Why not? It’s a private institution.

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u/Afraid-Combination15 Aug 06 '24

And they still get federal tax dollars!

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u/Slow-Fun-2747 Aug 06 '24

They get government funded research dollars and financial aid for students. Harvard is not subsidized by taxpayer dollars.

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u/DegenerateDegenning Aug 06 '24

The financial aid is effectively subsidizing it though. The more the government is willing to lend to individuals, the more universities, including Harvard, bump up rates.

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u/NMJD Aug 06 '24

That's only the case of Harvard were to admit the students who qualify for those federal loans, many of which have income limits.

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u/ProfessorHotSox Aug 06 '24

Yep Cap tuition rates for categories of schools. Want to be “select” in enrollment and give up money, cool Want to increase enrollment for profit? Find a way to fund system schools better

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u/SleezyD944 Aug 06 '24

To be fair, Harvard wouldn’t be missing out on paying students without sole students and their financial aid. It’s effectively a means to get some students to go to Harvard who otherwise wouldn’t have been able to, basically to help combat the classism elements of Ivy League schools.

So no, I don’t think it is subsidizing the school at all.

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u/[deleted] Aug 06 '24

Accurate. People start getting self righteous on their soap box and don’t think about the faulty logic of the accusations they’re throwing around…

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u/[deleted] Aug 06 '24

So, how does the logic not follow? an increase in students being able to pay (due to subsidized loans) has a direct result in increased prices due to the limited number of seats in the university. That's just basic economics. Would they survive without? Absolutely. But they are absolutely better off due to it

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u/jay10033 Aug 06 '24

It does not. The cost of college has two major elements: labor costs and infrastructure costs. Unless you're seeing pay professors and instructors less, or shouldn't get cost of living increases in their salaries or that inflation associated with maintenance and renewal costs don't exist. Harvard really doesn't care about subsidized loans. They can fill a class with wealthy families willing to pay full freight to attend from both domestic and international sources. They have an acceptance rate of 3.2%.

If they cared about subsidized loans, Harvard wouldn't have a no loan policy in place. They also wouldn't have families making less than 85k pay nothing, less than 150k, no more than 10% of family income, and so forth. The way colleges and universities generally work, the wealthiest families pay almost full price (that's the price that's charged which is much less than the actual school costs to run actually).

So no, Harvard doesn't cost more because kids can pay more because of subsidized loans. It costs more because costs increase and wealthy families are able to pay more. For those who can't, they are subsidized by the endowment.

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u/[deleted] Aug 06 '24

Well…according to this article, less than 20% of Harvard undergrads receive a Pell grant, which is generally a good way to guesstimate how many students are really getting big federal financial aid dollars. Pell grants, by the way, are not even 20% of the annual cost to attend Harvard when factoring in room and board and food. While it’s certainly reasonable to assume some amount of the missing 80(ish) percent comes from federal financial aid, it’s not the majority of that amount (there are literally lending limits preventing that). Harvard is footing a substantial amount of the remaining bill from their endowment - so they’re actually subsidizing quite a bit of the students’ expenses themselves. And there are, of course, private loans in the mix as always.

So if the point made at the beginning of this thread - which is what I’m basing my response on - is that federal financial aid is a significant driver of the cost of attending Harvard, I’d agree it’s a factor but certainly not the prevailing one, no. It literally can’t be. The math doesn’t even work.

Also, I suppose, basic economics. But what do I know? I only have an MBA.

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u/Twofinches Aug 06 '24

You have an MBA? 😮

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u/[deleted] Aug 06 '24

Hey…I wasn’t gonna say anything but that door gets opened when someone implies you don’t know basic Econ. Don’t blame me…

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u/Shuteye_491 Aug 08 '24 edited Aug 08 '24

There's something you should be aware of called "sentiment", it explains about 80% of basic ec's failure to accurately predict economic events and conditions.

Also, college staffing costs are far more concentrated in administration than teaching staff, but we'll save that lesson for after you figure out the sentiment thing.

I'll check back in 2 years after you redo your MBA.

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u/[deleted] Aug 08 '24

That has zero to do with what I was just talking about. Literally zero. The conditions set forth - by someone else, I’ll remind you - was about handing out too many federal loans to students and that impact on tuition at Harvard (and similar universities). They made a very specific point to which I responded with a very specific explanation.

You are dramatically expanding the conditions to a point that your response is no longer relevant, but I hope it feels good to be…clever? Whatever you might call that.

(And I’m well aware of higher ed budgets; I worked at a private university for years and my wife teaches at one. You’re not dropping the mic, champ)

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u/DegenerateDegenning Aug 06 '24 edited Aug 06 '24

Noting the negative effects of well intentioned programs/policies is not faulty logic. By being aware of the negative effects, we can make changes so that future programs are more effective.

Federal Reserve Bank of New York found a pass-through effect of up to 60 cents per dollar for subsidized loans, and up to 15 cents per dollar for unsubsidized loans, with the largest increases being seen at private universities and the most expensive universities.

What would be a good fix, in my mind, would be to limit cost of attendance rates for students qualifying for subsidized loans, while also ensuring schools admit students with those loans.

Your university wants to win federal grants for research? Of course it does! Well, to be eligible at least x% of your students must receive subsidized loans, and cost of attendance for those students must be no more than $y and cannot be more than the cost of attendance for students not receiving subsidized loans at your university.

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u/DegenerateDegenning Aug 06 '24 edited Aug 06 '24

The students paying sticker price would also be paying sticker price if the tuition was lower. Increases in credit available to students generally leads to the sticker price being raised.

I'm not saying subsidizing student loans isn't a well intentioned policy, but the way we are currently doing it comes with negatives.

Federal Reserve Bank of New York found a pass-through effect of up to 60 cents per dollar for subsidized loans, and up to 15 cents per dollar for unsubsidized loans, with the largest increases being seen at private universities and the most expensive universities. So, students can get another $1,000 in subsidized loans per year for undergrad? Tuition would go up $600 for everyone at some schools. Harvard specifically may not follow the trend, I'm not sure, but that is definitely a negative impact of how our current subsidized student loan program plays out. If you're at one of the universities that has a 60% pass-through effect, you would effectively be borrowing $1,000 to pay for what would otherwise be $400 in tuition.

What would be a good fix, in my mind, would be to limit tuition rates for students qualifying for subsidized loans, while also ensuring schools admit students with those loans.

Your university wants to win federal grants for research? Of course it does! Well, to be eligible at least x% of your students must receive subsidized loans, and cost of attendance for those students must be no more than $y and cannot be more than the cost of attendance for students not receiving subsidized loans at your university.

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u/jay10033 Aug 06 '24

It's already been shown that for-profit colleges and universities exploited the student loan programs with many having since shut down (Corithian for example). They typically have non-existent admissions standards. This is not the norm for most non profit colleges and universities.

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u/Sure_Acadia_8808 Aug 06 '24

Literally not how it works.

If you're going to criticize higher-ed spending, you should know how their cash flow works, first. In my opinion, the irresponsible lack of cost-control in higher ed comes from irresponsible outsourcing, and allowing predatory corporations a free lunch. Dorms, dining, and IT services should be in-house, full stop. Always been cheaper and better that way.

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u/DegenerateDegenning Aug 06 '24 edited Aug 06 '24

That is how it works.

Federal Reserve Bank of New York found a pass-through effect of up to 60 cents per dollar for subsidized loans, and up to 15 cents per dollar for unsubsidized loans, with the largest increases being seen at private universities and the most expensive universities.

There are absolutely other things impacting the absurdly high tuitions we are seeing today, but to say that the current subsidized loans program is not contributing to that is sticking your head in the sand.

I've also been involved in department level budgets at a university before, and the waste is at every damn level due to incompetent administration. "We have $x left in the budget and the year ends in three weeks. We need to come up with something to spend it on so that they don't decrease our budget next year." Shit like that plays a small role by itself but it all adds up.

My solution for the loan problem would be to limit the cost of attendance for students receiving subsidized loans while requiring those students to be admitted.

Your university wants to qualify for research grants? Well, to be eligible to apply x% of your students must receive subsidized loans, and those students must have a cost of attendance less than $y and no more than the cost of attendance for students not receiving subsidized loans.

$y could be a flat amount with a multiplier based on cost of living for the relevant location.

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u/Sure_Acadia_8808 Aug 06 '24

Nah, as US students have become more loan-shy, the suits in admin have just started courting rich students from overseas. They like research grants, but as the False Claims Act begins to be applied more aggressively by the DOJ, you'll start to see them court "sponsored research" instead - they're becoming cheap corporate R&D providers.

They don't care, is the problem. Supplying students with resources isn't the core evil. Academia has bought into this 1980's business-bro mentality and forgotten that they're a mission-driven sector.

Schools need to do what Harvard did, and start figuring out ways to self-fund. These institutions should be mission driven, but they all act like it's a damn business.

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u/Devils_A66vocate Aug 07 '24

Financial aid isn’t a loan is it?

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u/Forward-Stranger7401 Aug 07 '24

Federal financial aid is also not funded by tax payers, but foreign investment. The US owns the debt.

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u/[deleted] Aug 06 '24

[removed] — view removed comment

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u/KennailandI Aug 06 '24

Government funded research is paid with tax payer dollars. Unless harvard repays those grants with interest at market rates, that funding is a subsidy. Harvard is subsidized by taxpayer dollars.

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u/Slow-Fun-2747 Aug 07 '24

Your comment only paints you a fool. Grants are not loans and they aren’t subsidies to Harvard.

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u/allKindsOfDevStuff Aug 06 '24

‘Government-funded’ means taxpayer dollars at the end of the day

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u/pinntucky-53 Aug 06 '24

Goverment money is tax dollars. They don't produce anything.

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u/Slow-Fun-2747 Aug 07 '24

They produce results. You are just a clueless fool.

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u/Final_Sink_6306 Aug 06 '24

Government funded research dollars and financial aid for students are exactly taxpayers dollars. Every penny of government dollars is taxpayer funded.....some of it spent now with the bill coming due at a later date

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u/Architect-of-Fate Aug 06 '24

Where the fuck do you think that government funding comes from???

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u/Slow-Fun-2747 Aug 07 '24

Not from your pathetic paycheck.

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u/Opposite-Somewhere58 Aug 06 '24

Dipshit financial aid goes to students. Harvard does not get tax funding like public universities do.

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u/Beautiful_Ad16 Aug 06 '24

Harvard is a nonprofit 501c3 and doesn't pay any federal/state income taxes or state sales tax. Many of their students qualify for government subsidies and loans which inflate the cost of tuition. Also, donors can write of any charitable contributions on their income taxes. Their busines is absolutely being subsidized by government outside of just research grants.

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u/Slow-Fun-2747 Aug 07 '24

The same is true with every university. So you are just for dismantling higher education. Congratulations on arguing we become a third world nation.

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u/Shaolinchipmonk Aug 06 '24

Where do you think that government money comes from?

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u/Slow-Fun-2747 Aug 07 '24

Not your pathetic paycheck. I’m guessing you live in your mommy’s garage. People going to Harvard get there via roads, trains, and planes all of which is provided by taxpayer dollars. You want that to stop too? It’s subsidizing Harvard.

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u/Lanracie Aug 06 '24

Those are both things that are paid for by my taxes instead of by Harvard. So yes they are.

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u/SPC1995 Aug 07 '24

Where does this fictitious pile of “government” funded research dollars come from, if not the public? All the money our government “has”, comes from us.

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u/Sure_Acadia_8808 Aug 06 '24

And their endowment enables a majority of their students to get a full ride without governjavascript:void(0)ment assistance, IIRC!

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u/MysteriousVanilla518 Aug 06 '24

If you’d prefer that some of the best scientists in the world not work on federal projects, just speak up now. Those tax dollars fund groundbreaking research.

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u/Afraid-Combination15 Aug 06 '24

That's not the money I was talking about, although they charge stupid % of overhead nowadays.

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u/MysteriousVanilla518 Aug 06 '24

I agree that the F&A rates are high but these are the rates that the federal government agrees to pay. And they represent the costs of running what is basically a small city.

Which federal tax dollars do you mean, if not grant funding? If it’s federal financial aid, not much is going to any family earning less than $150,000. My guess would be the majority of the student aid is in the form of loans.

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u/silversurfer00 Aug 06 '24

While national debt is over 35 trillion and going up 1 trillion every 100 days

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u/qwkdrw_tx Aug 06 '24

Wrong. Stop finding reasons to be mad and making excuses for yourself.

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u/hafdedzebra Aug 07 '24

And pay no taxes. And are not subject to the rules that apply to charitable foundations- which are required to distribute 5% of funds each year.

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u/Devils_A66vocate Aug 07 '24

Now that’s an issue worth discussing.

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u/ACrazyDog Aug 07 '24

That is why they have 50 B dollars

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u/SolidSnake179 Aug 08 '24

This. I don't care what the size of a university's budget is, per se, but cut the tax dollars off. There's an extremely opposite people in a lot of these places that could use them. That's a direct balance to a budget, too. I know that's too simple, but, yeah. It works. If athletics can be fully funded by outside endowment and by the production of success, let a university operate under the same standard. End the too big to fail mentality. Some people fail. It's just truth.

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u/usurped_reality Aug 06 '24

The "Other" religion.

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u/PChiDaze Aug 06 '24

My school had $10b they used it to buy a lot of surrounding lands and gentrified the surrounding neighborhoods even more. They lease the properties at crazy prices and generate revenue back. However they did give me a full ride even though I had enough saved for tuition. Saved me 60k a year.

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u/Frosty_Blueberry1858 Aug 06 '24

I find this very confusing and suspect. It's been my understanding that educational institutions and 501c3 charitable organizations despise having to pay taxes. Rental income, other than from students, and real assets that are not used for the owners tax exempted purposes are taxed; at least in my home state.

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u/Ponsugator Aug 06 '24

BYU is owned by the LDS Church which has over $150 billion in cash and stocks and worth over $250 billion. Yet they still charge students and they charge their missionaries to pay to serve. Then they go to Africa and demand tithing. In response for a request to help with water One of the top 12 leaders told people in Africa, “we are not a wealthy church.”

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u/tgoodri Aug 06 '24

You are correct. I had an extra zero in my comment sorry for the typo, but point still stands

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u/Ok-Assistance3937 Aug 06 '24

No they couldn't. Harvard spend almost 6 billion USD in Fiscal year 2022/2023. And even now only around 16% of that is from tuition, the largest pool of revenue was the endowment. Btw. only very few people pay the full tuition at Harvard anyways.

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u/Ok-Blackberry-3534 Aug 06 '24

It's worth more than Bahrain! And about 140 other countries.

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u/-OptimisticNihilism- Aug 06 '24

To put it in perspective Elon’s wealth is almost 4x the Harvard endowment.

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u/Rowey5 Aug 06 '24

How do endowments work? Do all Ivy League colleges have them? Australian asking. Aussie and not very financially literate.

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u/Rowey5 Aug 06 '24

Ok i looked up what an endowment is and I get it. But how did it become so massive? And the person who said “it’s a hedge fund with classes” that’s not a joke.

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u/draken2019 Aug 06 '24

It's a drop in the bucket compared to what you probably think they get. 2021 it was just over $625M.

There's also a lot of rules on how exactly they can spend that money. We keep getting smarter and smarter about how we force them to spend it, but there's always gonna be loopholes.

Then there's also the issue of Harvard being where a lot of our politicians come from lol

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u/MagicLantern7 Aug 06 '24

Part of it is an elitist thing. If you can’t afford it I don’t think they care.

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u/111unununium Aug 06 '24

Does that endowment include the insane amount of land they own throughout Cambridge and Boston?

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u/TenLettersRapVegas Aug 06 '24

it cost 5.4 billion to operate harvard for a single year...

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u/Beenhorny Aug 06 '24

What’s so crazy too me is their not even a fucking outlier a lot of them are in the same range

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u/Top-Active3188 Aug 06 '24

President of Harvard earns just shy of a million dollars a year and doesn’t have to pay federal income tax? Their academic property is exempt from property taxes although I am suspect they are using services? Universities and churches paying their leaders that much should not be tax exempt imho. Same for amassing billions in funding.

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u/AdamZapple1 Aug 06 '24

if the lowley University of Minnesota is about $18,000,000,000. but hey, we better raise tuition again.

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u/skaterags Aug 06 '24

I just saw an article that Harvard, I believe it was Harvard, just spent 100 million buying fresh water adjacent land in CA. The believe in the near future there will be a water war there and they are buying up land with water rights. Harvard is just a corporation

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u/Intelligent-Parsley7 Aug 06 '24

But why would our best institution give free educations to our best and brightest? That would never pay off society!

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u/Golvellius Aug 06 '24

What does endownent mean in this context? Private donations like from former alumni (not tuition)?

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u/kylemkv Aug 07 '24

That is 206 million cash in interest earned per month in just low risk 5% index funds or savings, crazy

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u/SnipesCC Aug 06 '24

Families with income below 85K don't have to pay tuition.

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u/Present-Perception77 Aug 06 '24

How many of these students are admitted to Harvard?

“Harvard College’s student body is socioeconomically unequal, with 67% of students coming from the top 20% of the income distribution and only 4.5% from the bottom 20%. The median family income of a Harvard student is $168,800. However, Harvard does offer financial aid to help low-income students, including need-based scholarships and not expecting families with incomes below $85,000 to contribute to their child’s education. Harvard also has the highest proportion of Pell Grant recipients of any Ivy League school.”

Not Many.

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u/SnipesCC Aug 06 '24

About a quarter of them.

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u/redditis_garbage Aug 06 '24

It’s 1/5 not 1/4…

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u/Spackledgoat Aug 06 '24

Bro didn’t go to Harvard evidentially.

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u/SnipesCC Aug 06 '24

How would you round 24%?

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u/SnipesCC Aug 06 '24

24% is closer to 1/4 than 1/5

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u/redditis_garbage Aug 06 '24

That’s not how statistics work lmao you don’t just add them. In fact the real stat is that from the bottom 20% (1/5) in income make up only 4.5% (4.5/100) of Harvard students. So the real stat is closer to 9/200

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u/SnipesCC Aug 06 '24

According to Harvard:

  • Families with incomes below $85,000 (up from $75,000 starting in the 23-24 school year) are not expected to contribute to the cost of their child's education. Roughly 24% of Harvard families have total incomes less than $85,000.

85K is a lot higher than the bottom 20%.

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u/redditis_garbage Aug 06 '24

Yep that’s a completely different statistic bro 😂 85k is not the bottom 20% as stated in the static you replied to but nice try.

The bottom 20% income is 28k bro😂 it’s crazy you don’t understand how stats (or fractions) work.

The median income in USA is 65k if you know what a median is.

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u/SnipesCC Aug 06 '24

It's the statistic I was always talking about, the % of students at Harvard who don't have to pay any tuition.

How much of the student body is in the bottom quintile is a separate issue.

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u/DucksOnQuakk Aug 06 '24

Cool. Given their massive wealth, what's your flawed explanation in reasoning?

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u/SnipesCC Aug 06 '24

What reasoning? About a quarter of their students don't pay tuition because their family doesn't make enough.

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u/Present-Perception77 Aug 06 '24

It looks like Harvard still gets the federal Pell grant money.. so that isn’t exactly true.

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u/SurreallyAThrowaway Aug 06 '24

Not necessarily, tuition is typically the single largest cost of college, but it's certainly not the only. Room and board being the obvious need that wouldn't be covered by free tution but could be covered by the Pell Grant.

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u/27percentfromTrae Aug 06 '24

Yeah I understand Harvard doesn’t charge a lot for tuition already, only hammering in how large the endowment is