Getting and Giving: How Does Receiving Financial Aid Affect Later Donations?

We ran a blog post a while back about how alumni should think about giving money to their alma maters. A recent NBER paper (abstract; PDF) by Jonathan Meer and Harvey S. Rosen looks at the “donative behaviour” of alumni who received financial aid. It has some really interesting conclusions:

The empirical work is based upon micro data on alumni giving at an anonymous research university.  We focus on three types of financial aid, scholarships, loans, and campus jobs. …

Our main findings are:  1) Individuals who took out student loans are less likely to make a gift, other things being the same.  We conjecture that this phenomenon is caused by an “annoyance effect” — alumni resent the fact that they are burdened with loans.  2) Scholarship aid reduces the size of a gift, but has little effect on the probability of donating.  The negative effect of receiving a scholarship on donations decreases in absolute value with the size of the scholarship.  We do not find any evidence that scholarship recipients give less because they have relatively low incomes post graduation.  3) Aid in the form of campus jobs does not have a strong effect on donative behavior.

 


Heather

I would feel more inclined to give back to my university if I knew it would go to good use, and not furthering the athletics so much. Nothing against athletics, but I believe there should be a balance, and emphasis should be on academics at a place of higher education.

James

Same here, except for the "nothing against athletics". At a time when academic programs were being cut to the bone (and further), they increase the football coach's salary, spend millions on stadium upgrades, drop a pile on legal fees litigating over which conference they're going to play in... No, this is not where my money is going to go.

D

Like I said below... Athletics, at least at my university (a major football school) is from a completely different fund. They make all the money they spend (and then some) through donations and profits to the school. It's usually not an either/or thing. The same thing goes with building buildings... it's complicated, but they're all different pots of money.

Seminymous Coward

Scholarship recipients may not have lower incomes after graduation, but I'd bet they have lower total wealth.

Mike

I'd also argue that individuals with student loans are less likely to give a gift because they're still paying for their education. Every time my school calls me, I tell them I'm already paying hundreds a month and they can call back in a few years when I'm done paying off my loan.

The Author

This is discussed in the paper. The gap in giving does not narrow after loan terms have ended.

Enter your name...

I'd like to know whether there's a difference in donative behavior between people who received "need-based" vs "merit" scholarships.

The two groups might have identical incomes after college, but the need-based group probably has lower wealth and a higher risk of needing to support family members. Imagine that you give one student $10K because her parents are poor and another student $10K because she's a good soccer player, even though her parents could afford to pay the full cost. The first student may be worrying about phone calls from her parents asking for "loans" if her parents' car breaks down or if they miss work, and that if she has any problem, she's on her own. The second student likely has no expectation of needing to help the rest of her family, and may well be aware that if she has any problem, that her parents could easily give her some money. It would be rational and prudent for the first student to be more dedicated to savings and less free-handed with donations.

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The Author

All financial aid at this school is need-based. Your point is well-taken, though.

Dan Aris

"We do not find any evidence that scholarship recipients give less because they have relatively low incomes post graduation."

What about incomes pre-matriculation?

It seems to me that the income with which one was raised would make a large difference in how willing one was to donate some of one's hard-earned money to a college or university that (with some exceptions) appears to be pretty well rolling in it, at least from a student's perspective.

The Author

This is discussed in the paper. A number of controls for parental income are included.

uthor

I feel that I paid for my schooling and don't see the need to give the university any more. I'm fine giving money to, say, a scholarship program, just not to a specific school.

Part of it is also the annoyance that the school keeps trying to sell me insurance. That just seems shady as hell.

KB

The conclusions sound reasonable to me. Though I have nothing but warm feelings for my college, I have absolutely no intentions of making a donation until I've actually finished paying for the place. 15th reunion is next year...

Susie Watts, Private College Counselor, Denver, Colorado

Really interesting information and something I had not considered. However, I can see how this could also affect college admissions.

http://www.collegedirection.org

caleb b

Isn't it weird how colleges ask for money after you've already paid to attend?

Imagine if restaurants did this? "Hi Mr. Smith, did you enjoy that steak from last week? Would you consider donating $50 to the chef’s fund?"

caleb b

...And don’t spout off that crap about how tuition doesn’t cover the full cost of attendance…that is the biggest load of bullcrap ever.

$18k a year to attend a STATE school? If that doesn’t cover it, then maybe, just maybe, the university should stop building so many Student Life centers, super-dorms, and parking decks that NO ONE parks in because the fees are too high. Did the business college really need a new $3.4 million building, on top of the $2.0 building that is less than 10 years old? Did the school really need to destroy 200 old living units just to build 250 new living units on the other side of the campus? Considering I had exactly 6 classes that were not taught by grad-students or adjuncts, I’d say $18k/year was plenty to pay for my education.

Kevin

Alumni donations can actually raise alumni salaries. One factor of school rankings is alumni donation rate. Donating to you school can raise donation rates, raising school rankings, making a degree worth more.

Joe J

When many universities have bilion dollar endowments that are not being used to keep tuition down why donate.
I think Americans would be really shocked at a balance sheeet breakdown of costs, tuition and endowment growth of many major universities. According to USnews article, the average endowment of US universitied reported to them (2009) was just shy of 300 million. These are not poor organizations that need donations.

Harvard is the top one with $32 billion endowment (2011) . A hefty bit of change.
It has 6700 undergrad students with tuition $38,000 yr. In other words takes in $254 million from tuition. A lot of money but not compared to its endowment. A laughable, interest on the endowment of 2% would be $640 million. Over double what the complete tuition of all undergraduate students is.
So Harvard could in a normal year just spend a fraction of it interest on the endowment still have the endowment grow faster than inflation and pay 100% of all undergraduates tuition.

Yet none of the OWS people is calling Harvard the greedy ones for raising tuition at double inflation.

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