College Offers Students a No-Cost, No-Student-Loan Education With Funds From Its $1.1-Billion Endowment

Berea College is drawing the attention of lawmakers for its no-frills approach to education and its free tuition policy.
The private Kentucky college — founded 150 years ago to educate freed slaves and “poor white mountaineers” — accepts only applicants from low-income families and charges no tuition, according to an article in The New York Times (“With No Frills or Tuition, a College Draws Notice,” July 21, 2008).
Every Berea student is awarded a four-year tuition scholarship and the school doesn't offer student loans.
School Spends Endowment on Students, Not on High-End Amenities
Despite its $1.1 billion endowment Berea, unlike other colleges with large endowments, has no football team, coed dorms, hot tubs, or rock climbing walls. Students eat food from the college’s own farm, make the furniture used to furnish the school, and are required to work 10 hours a week in an on-campus job.
Although Berea keeps costs down with its streamlined approach to higher education, without tuition revenue to supplement its funding, Berea relies on endowment income to cover 80 percent of its $43 million education and general budget, and about two-thirds of its $55 million operating budget.
“You can literally come to Berea with nothing but what you can carry, and graduate debt free,” says Joseph Bagnoli, the school’s associate provost for enrollment management. “We call it the best education money can’t buy.”
A Push to Use Endowments for the Public Good
News of Berea’s unusual approach to higher education is spurring debates about whether the nation’s wealthiest universities are doing enough for the general public to warrant their tax-exempt status, or if they’re simply hoarding money to serve an elite few, writes New York Times reporter Tamar Lewin.
In January, the Senate Finance Committee requested detailed endowment and spending data from the 136 colleges and universities with endowments of at least $500 million, with an eye toward possibly forcing them to spend at least 5 percent of their assets each year, as foundations are required to do.
Dozens of wealthy colleges have since increased their financial aid to low- and middle-income students, in some cases, replacing loans with grants. More than three-quarters of the students at Berea already receive Pell Grants.
“You see some of these selective liberal arts colleges building new physical education facilities with these huge sheets of glass and these coffee and juice bars, and charging students $40,000 a year, and you have to ask, does this contribute to the public good, or is it just a way for the college to keep up with the Jones?” says Berea’s president Larry Shinn.
He adds, “We are a tax-exempt institution, so I think the public has a right to demand that out educational mission be at the heart of our expenditures.”