The Old College Try
Why do alumni give to universities? To get their kids in, of course.
Charitable giving is a puzzle to cynics and economists who believe only in selfish motivations. Why would people give money to strangers while expecting nothing in return? While some giving is clearly altruistic—witness the outpourings of generosity after 9/11, Katrina, and the Asian tsunami—other charitable giving seems less so. If you are giving out of a concern for others, it's clear why you might want to give alms for the poor: The dollar can buy him a lot more happiness than it will buy you. But what's altruistic about giving more money to a wealthy institution of higher education? Harvard's endowment is nearly $30 billion. Yet alumni and others gave the institution $595 million in 2006, which amounts to a fifth of its annual budget. Why do alumni give?
The cynics will like the answer provided by a new study by Jonathan Meer of Stanford and Harvey S. Rosen of Princeton. It offers persuasive evidence that some alumni give to their schools in the hope of raising the chance of admission for their children.
The authors use a unique data set on alumni giving to a major research university, which, for confidentiality reasons, they don't name. The data include annual contributions by more than 32,000 alumni between 1983 and 2006, along with the birthdates of the alumni's children. This allows them to see how the pattern of giving evolves as kids of alumni approach college-application age. Anon U, as Meer and Rosen call their College That Shall Not Be Named, looks like a pretty elite place: More than 40 percent of the students attended private schools before college, and 40 percent attain an advanced degree afterward. As the authors point out, the "fields of education, finance, health care, and law are highly represented" in alumni careers. More than half of alumni (56 percent) donate in any given year. Their average gift is $466, with distribution heavily skewed by large gifts. In 2006, the top 1 percent of gifts accounted for 69 percent of the total.
Here's what Meer and Rosen find. Alumni with kids are 13 percentage points more likely than alumni without kids to give in any year. The tendency to give rises slowly—by three more percentage points total—through kids' early teens. At about age 14, as mom and dad see their kid's algebra and composition grades, they decide whether he or she will apply to the alma mater. If they decide against, then they need not give extra to grease his way in. But if the kid is legacy material, then the parents might feel a need to show some generosity to Anon U.
And, indeed, while giving declines after age 14 among parents of kids who do not go on to apply, giving rises between about 18 and 25 percentage points (above the level of the childless alums) for those whose kids do apply a few years later. The timing is certainly suggestive. Of course, it's possible that the kids who apply are from families who are more enthusiastic about the school, which would trigger both application and contributions. But if general enthusiasm for Anon U were the cause of both the decision to apply and contributions, then we'd expect the families with eventual applicants to start outgiving the families of the eventual nonapplicants even earlier, when their kids are young. And they do not.
There's more fuel for cynicism. In the spring of his or her senior year, the child gets either a thin rejection envelope or a fat acceptance envelope. Parents jilted by a rejection cease giving immediately. This isn't surprising. After all, who sends flowers after being dumped? But it does indicate that the courtship gifts weren't altruistic. For kids who are accepted, family giving continues to increase for a few more years, then by age 22 falls back to the giving level from alumni with young kids. The time pattern of dollar donations, as opposed to participation in giving overall, follows a similar arc. The authors estimate that half of giving by alumni with children is self-interested.
The study also points to the school's role in upping the gift ante during the teen years of a donor's child. Like a married woman who hides her wedding ring so that optimists will buy her drinks, Anon U benefits from leading parents on. Whether or not kids are more likely to be admitted if their parents donate, the school clearly benefits from alumni parents' perception that they will be. Some university presidents fuel these hopes. When asked why Princeton gives preferences to alumni's kids, President Shirley M. Tilghman replied, "We are deeply dependent on the generosity of our alumni each and every year. … They are extremely important to the financial well-being of this university." The subtext is pretty obvious.
I feel sad for the poor parents deluded by a school's not-quite-promise of quid pro quo. But with my kids entering their teen years, I also feel an urge to write some checks to my alma mater.
Joel Waldfogel is the Ehrenkranz Family Professor of business and public policy at the Wharton School of the University of Pennsylvania. His new book is The Tyranny of the Market: Why You Can't Always Get What You Want.
Photograph of university library by Darren McCollester/Newsmakers.