Donating Money to Your College

collegeEvery year right around this time, I receive a call from my college’s alumni association asking me for a donation.  For those that listened to a recent Malcolm Gladwell podcast, he put together an excellent synopsis of why you shouldn’t donate money to universities with large endowments.  I encourage you to listen if you haven’t.

 

My college’s endowment is $1 billion.  Yet they are still asking for more to “invest” in their future.  I contend that there may be a better way to donate your money to your college to get a bigger return on your investment.  Instead of giving directly to the university, I think it is much wiser to support the school’s athletic program. 

 

collegeNick Saban & the University of Alabama

Nick Saban is a premier college football coach at the University of Alabama.  The Crimson Tide have won four national championships since he arrived in 2007.  When he first became Alabama’s head football coach, he signed a deal for 8 years at $32 million.  This made him the highest paid college football coach in the nation.

 

In 2007, an annual salary of $4 million was unheard of for a college football coach.  At that time, Bob Stoops, the Oklahoma Sooners coach, was the highest paid college football coach making $2.5 million dollars.  There were howls among the media that this was excessive, especially for a public school.

 

Before Saban arrived, Alabama’s athletic department generated $67.7 million in revenue.  In 2015, Alabama’s athletic department generated a whopping $148.9 million in revenue.  In the same year, Alabama’s football program alone produced $95.1 million in revenue.  This is the highest figure produced by any single collegiate team ever.  Needless to say, Nick Saban has earned his paycheck.

 

collegeNick Saban’s football team is virtually supporting all the other sports in Alabama’s athletic department.  On top of that, Alabama is one of a few schools that does not charge students an athletic fee to subsidize the athletic department.  For instance, Florida State University charged its 32,000 students $237 in 2014, claiming that this charge would allow students to go to football games for free.  However, they failed to mention that there were only 16,000 student seats available.

 

The Saban Effect

As you know, people like to be among celebrities, and that is no different for college students.  Since 2007, enrollment at the University of Alabama has gone up more than 50% from 23,000 students to over 37,000 students.  This surge in applications has been called the “Saban Effect”.  This is much like the “Doug Flutie Effect” in 1984 at Boston College or the “Michael Vick Effect” in 2000 at Virginia Tech.  Each of these schools benefited from a star coach or athlete to increase enrollment numbers.

 

College Applications

There are strong statistics showing that increased athletic success is correlated with an increase in applications.  A study done by Virginia Tech and the University of Pennsylvania showed that when a college team won a football championship, applications increased by more than 7%.  On average the following year, applications also increased by 10%.

 

“The sheer fact that you gain that national attention does help in terms of students becoming aware of the institution, and it gives you the opportunity, if you have their attention, to help them understand what the university has to offer academically,” said Roger Sayers, president of UA from 1988 to 1996.

 

COLLEGEOut-of-State Students

With that national exposure, out-of-state students have become more aware of Alabama’s academics.  In 2004, Alabama had 28% out-of-state students.  It is now made up of 64% out-of-out state students.  In-state fees are currently $9,220, while out-of-state fees are $16,156, so that’s about $7,000 more per out-of-state student.  With an increase of enrollment in general and also out-of-state students, the school has been able to take in more than $93 million in tuition fees.

 

With the ever-increasing applications, Alabama can be more selective in who they choose to attend, even with an increased number of students.  The year before Nick Saban came to Alabama, the acceptance rate was 64%.  Now it has dropped to 51%.  Meanwhile, the GPA and SATs of these students has also risen steadily.

 

Finally, since Alabama’s athletic program is doing so well, they are one of a handful of schools in the U.S. that gives back surplus money to the university to support academic scholarships, according to a 60 Minutes program in 2013.  When you add all this up, it appears that Nick Saban has made the University of Alabama much more money than he is paid.

 

I wish my university had paid Nick Saban whatever he wanted, so it could have had the meteoric rise that Alabama has had.  While some will say that colleges should focus more on academics, it’s clear that college students like spending their free time being entertained by sports, specifically football.  Since this is the case, I think next time my athletic department calls, I should make a donation, since there is a good chance that this could ameliorate the profile of my university.

 

What are your thoughts?  Do you contribute to your Alma Mater’s sports program?  Are you more motivated to do so now?  Share your thoughts below.

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24 Comments

  1. While I agree that donations should be targeted I’m not really on board with sports donations, especially to football. Back in college I tried to walk on to a top 25 football team. Ultimately I was deemed medically ineligible due to something in my medical history and them not wanting to take a chance. That being said something they told me at that time sticks in my head. This is a business not a sport. Decisions are made as a business. I enjoy watching my alma matter on television, but I have no desire to pay them beyond my tv ad revenue and the occasional seat purchase.
    Full Time Finance recently posted…Online Finance Education Options: The future of University Education?My Profile

  2. I like the post! That is quite a story for Alabama. While not ever university can do what they have, it is quite impressive the carry-over effect athletics has on the academics side. My alma mater, a mid-major school, has had a couple nice runs in the NCAA bball tourney and they’ve seen a nice enrollment increase in the years following such runs. Funny how that works, but great exposure for the university.
    The Green Swan recently posted…The Swan Life: September 2016My Profile

    • I agree it’s very interesting how athletics can change the dynamics of enrollments. I had never previously considered giving to my athletics program but if they could potentially have the type of return that Alabama has I would definitely consider.

  3. I’m not an advocate of general donations, which are what we receive pitches for. I would feel better about a targeted donation-that is, if Mr G or I felt affection for some aspect of the universities we attended. But we don’t. And none of them were known for sports. For our cousin it’s a different story. He went to Vandy and was drafted by Major League Baseball. That was the same year his teammate was the #1 draft pick. And he gushes over his college experience and his coach. I could definitely see motivation to contribute there.
    Mrs Groovy recently posted…If No One from the Fab Five Steps Up, the Groovy Two are ScrewedMy Profile

    • Vandy is an amazing baseball school.

      Your cousin must be a terrific player to play there and get drafted.

      Curious, did he play with David Price or Dansby Swanson?

      BTW…I love baseball

  4. We get a flyer in the mail every year, but I never felt any pull to contribute to that. There are two organization we give to month after month. The rest of our giving are one time donations to smaller organizations or to people we personally know if tough situations. I like groups who can leverage small donations into big results. CASA can train and support a CASA advocate for a year for about $2000. Their advocates give about 10 hours a week to very challenging work. So I love to support them. Mr. Mt’s old college… eh.
    Ms. Montana recently posted…Moderate MinimalismMy Profile

    • Thanks for sharing Ms. Montana. I am a big fan of seeing an immediate ROI for the money I donate. I wish more organizations would be transparent and share this information to better inform potential donees.

  5. Thanks for the thought-provoking post. I agree completely on the preference for targeted donations to universities instead of general, although I’m not really sold on the sports angle. You’ve done a great job of showing how a good team can benefit the rest of the university and you’ve done a great job of showing how a great coach or athlete can get you to that point. I’m just having trouble connecting the dots between my donation and that new coach or player. Is my $1000 really going to be the thing that helps hire Nick Saban or nab the next big star?

    Personally I like my targeted donations to my alma mater to be to the band program. The band was a huge part of my experience while I was there and I still have some great friends that I met through it. Add to that that I got a bunch of money through music scholarships and I feel like I should show my gratitude. Plus, music budgets are always getting cut, so they could definitely make use of my donation and it wouldn’t be just another check on the pile.
    Matt @ Optimize Your Life recently posted…Spending for Maximum HappinessMy Profile

    • I totally understand where you are coming from.

      I’d probably have a difficult time giving a donation to my athletic program as well especially when there are so many worthy causes.

  6. Interesting! Great post! My husband and I both went to a small, private college and we get a letter every year, plus a card on valentine’s day (isn’t that sweet!?). I don’t donate because I don’t know where my money will go. If I were asked to do a targeted donation to my graduate program or a student group, I would definitely give it more consideration.
    Amanda @ centsiblyrich recently posted…Weekend Money Tip: Do you need to have a hot money date with your partner?My Profile

    • Thanks for sharing. I am with you if I had a better sense of what they would do with the money I would feel much more comfortable. I sometimes feel like I am throwing money into the abyss and then they will come back a year later saying I need more without an explanation of what they previously used the money for. At times I feel like college endowment funds are an arms race to see who can have the biggest amount of cash.

  7. Nice perspective!

    I’ve given to the alma mater (but never the athletics program directly). This wasn’t a strictly defensible economic contribution. It was more a “feel-good” thing. My sense is that individuals who might donate to their schools in hopes of helping raise the school’s profile could do better by “reinvesting” the allocated amount in themselves instead. If a former student from your college writes an important book or solves a big societal problem or makes the news (for a good reason), that’s probably more beneficial for the school’s profile/applications/etc. than a few thousand bucks in donations. So maybe that couple grand can do a few things at once if reinvested in the alum-giver the right way. Just a thought that I can’t back up in any quantifiable way! Nice post – and thanks!
    FinanciaLibre recently posted…Yes, You Can Have It Both Ways (And You Already Do)My Profile

    • That’s a really interesting perspective that I haven’t thought about. Bill Gates and Mark Zuckerberg have definitely raised the profile of Harvard more than money ever could.

  8. Wow this is so interesting. No wonder my alma mater put so much emphasis in football.

    I actually worked in the call center where I called alums for donations (man some of them were downright rude, cussing at a 17 year old trying to do a job) so I know how hard they have it. I may donate just like $5 here and there because it helps with school rankings and helps the callers know that someone went through what they went through.
    Finance Solver recently posted…How to Have More Money This MonthMy Profile

  9. College football has become a business and likely a good source of revenue for schools. I wasn’t good in sports so I don’t follow my college team other than occasional highlights.

    As for contributing, we contribute towards various academic scholarships at our schools. We both benefited from academic scholarships when we were in college, and it greatly made college affordable for us.

  10. I’m surprised you didn’t bring up the salary that’s paid to the players. It’s an absolute shame that college football players receive no salary despite all the wealth they’re generating for the school. The NCAA is such a racket!

  11. Interesting analysis on the positive impacts of a successful sports program for a university, at least for a Division I school. Although I occasionally watch a football or basketball game from my alma mater, I’m just not that connected to their sports programs.

    Having attended a large public university, I feel like I have no idea where my money would go if I made a donation – so I haven’t made any donations to the alumni association or other university groups.

    With one son in college now and our other son going next year, I think all of our college money is spoken for 🙂
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  12. I used to donate a little bit to my alma mater (a state university), but only because I worked as a telemarketer at the school my first two years. So I felt bad saying know. When my grad school called, they outsourced the job to some company of telemarketers…I didn’t feel bad saying no…plus I had significant student loan debt of that school so I felt no further obligation. As with a few of the other commenters, the NCAA is such a racket. It is a dirty dirty business..

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