The dangerous wealth of the Ivy League

By Anthony Bianco, with Sonal Rupani

updated 2:02 p.m. ET Dec. 3, 2007

It's only fitting that Whitman College, Princeton's new student residence, is named for eBay CEO Meg Whitman, because it's a billionaire's mansion in the form of a dorm. After Whitman (Class of '77) pledged $30 million, administrators tore up their budget and gave architect Demetri Porphyrios virtual carte blanche. Each student room has triple-glazed mahogany casement windows made of leaded glass. The dining hall boasts a 35-foot ceiling gabled in oak and a "state of the art servery." By the time the 10-building complex in the Collegiate Gothic style opened in August, it had cost Princeton $136 million, or $272,000 for each of the 500 undergraduates who will live there.

Whitman College's extravagance epitomizes the fabulous prosperity of America's top tier of private universities. Princeton and its "Ivy Plus" peers (the seven other members of the Ivy League, plus Stanford University and Massachusetts Institute of Technology) have long flourished as elite institutions, both socially and academically. Increasingly, though, their predominance is defined by the great magnitude of their wealth relative to their modest size and to the rest of the higher-ed universe. The gilding of the Ivies offers a striking manifestation of the contemporary American tendency of the rich to get much richer.

Fancifying campus living isn't the half of it. The Ivy Plus schools also are investing huge sums to enlarge their central role in research. Harvard, Columbia, and the University of Pennsylvania are developing whole new science-centric campuses, and Yale just acquired one ready-made, buying a 30-building complex from pharmaceutical giant Bayer. The schools are adding more top-notch faculty members and shrinking class sizes. And they are increasing financial aid outlays for lower-income students who otherwise couldn't afford to attend.

The question of whether all this spending is a good thing defies easy answers. Gold-plating new dorms raises issues of taste and donor ego. More than before, impressionable students and ambitious parents have come to view college as a form of conspicuous consumption. But there's no evidence that the tilt toward super-luxury on some campuses has hurt the quality of Ivy Plus education. Smaller classes draw universal applause. Graduation rates remain impressive, and products of the Ivy Plus schools continue to ascend to leadership positions in business, science, the arts, and politics.

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However, the increasingly plush Ivy Plus model casts into sharp relief the travails of America's public institutions of higher learning, which educate 75% of the country's college students. While the Ivies, which account for less than 1% of the total, lift their spending into the stratosphere, many public colleges and universities are struggling to cope with rising enrollments in an era when most states are devoting a dwindling share of their budgets to higher ed. "Policymakers seem to have concluded that flat funding is all that public higher education can expect from the state," says Ronald G. Ehrenberg, an economist who directs Cornell University's Higher Education Research Institute.

Stealing stars
The Ivies cannot fairly be blamed for public education's financial predicament, but they certainly are exploiting it. Even the most prestigious of public universities are increasingly hard-pressed to repulse richly financed Ivy Plus raiding sorties seeking to steal distinguished faculty members and their research grants. Public schools are being drained for the benefit of the ultra-elite, says Robert J. Birgeneau, chancellor of the University of California at Berkeley. "The further you project into the future, the more frightening it becomes."

It's unlikely that more money has ever been lavished on the education of so few. 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.

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