Dartmouth College is preparing to lobby against the September legislative proposal made by Sen. Chuck Grassley, R-Iowa, that would require United States universities to spend more of their endowments in an attempt increase financial aid awards.

The proposed legislation would force colleges with endowments greater than $500 million to spend 5 percent of their endowments annually. Failure to do so would result in a loss of tax exemption status for endowment earnings. Dartmouth, with an endowment totaling $3.8 billion at the end of June, would be directly affected by this regulation.

“Dartmouth plans on increasing its endowment distribution above five percent next year, so [the proposal] wouldn’t have any impact on Dartmouth,” Adam Keller, executive vice president for College finance and administration, said.

Although the college plans to increase annual spending from the current average of just more than 4.5 percent, not all of the additional money will go toward financial aid, as Grassley has hoped. Private or “restricted” gifts allow donors to designate where their money will go. As up to 75 percent of the college’s endowment consists of these gifts, Grassley’s goal of decreased tuition costs may not be achievable, at least in the case of Dartmouth.

“It’s a little bit naive in terms of the complexity of our endowment.” Keller said. “When somebody restricts [their gift] for the Dickey Foundation or for Rocky, we can’t use that money for financial aid. Increasing distribution may not necessarily have an impact on tuition.”

Keller added that Dartmouth already decreases tuition costs with its need-blind admissions policy and its guarantee to meet 100 percent of demonstrated student need.

Grassley’s proposal also does not allow any flexibility for colleges that experience a bad year in endowment performance, a factor that could hurt schools in the long run, Keller explained. In the case of “terrible performance”, Keller said, having to spend the 5 percent minimum would cut into the College’s future ability to meet its basic financial needs. …