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Indian Universities Shouldn't Fall for the Allure of the Yale Model of Financing

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The current discourse on the establishment of a Higher Education Commission to replace the University Grants Commission has finally brought attention to a major crisis brewing in India: university financing. Campuses both private and public are suffering from pressure on multiple fronts. On the one hand, expectations regarding quality and access to higher education are at an all-time high; on the other hand, campus administrations are increasingly finding it difficult to find the resources to feed their ambitions. Any attempts to get additional public funding is being met with resistance, both in India and abroad, as governments seek to run more “fiscally sound” budgets. Any proposals regarding increasing student fees are met with resistance by students: in the last year alone protests have occurred at BITS-Pilani, Tata Institute of Social Sciences, Delhi University and Jawaharlal Nehru University.

The standard response to a shortfall in funding is to look to the private sector, and the university financing system is no different. While the concept of privatising higher education has seen both detractors and supporters, one area that has only recently been gaining attention is the idea of adopting an endowment model in India, similar to that run by some of the biggest universities in the US.

Understanding endowments

Endowments are large pools of money collected by universities from donors, with the intention of investing them in a variety of markets. These markets generate returns in the form of interest and capital gains, which can then be used as an income source for the university. Donors are typically alumni seeking to “give back” to their alma mater, rich philanthropists aiming to secure their legacy, or corporate interests looking for means through which their corporate social responsibility goals can be met.

The key point of an endowment is that the core amount is not meant to be spent; only the returns generated by the endowment are actually spent. This is meant to protect the size of the endowment for future generations, and protect the endowment from being........

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