Better Community Investment Will Pay Dividends for Colleges

May 19, 2015

We need to start holding colleges accountable as anchor institutions that provide economic growth and stability to their communities.

In recent weeks, the debate about holding colleges accountable has focused on schools’ responsibilities toward failing students, continuously rising tuition, and increasing student debt. What’s been overlooked is the role of colleges as a potential force for good within their more immediate communities. Indeed, one of the most profound ways a university can improve the holistic experience of its students is to invest more in the surrounding community.

Presently, many four-year institutions entrust the bulk of their money to low-risk funds or national banks like Bank of America. The money that flows into a school never directly returns to the community, and it is often the case that low-income residents near a college must battle gentrification, stagnation, or both. For example, New York University’s $3.5 billion endowment is currently invested in national banks such as Bank of America, Chase, and Citibank, none of which are directly involved in developing the community around NYU.

Outside of investment, universities and colleges spend a huge amount of money that has the potential to directly affect the communities around them. Big schools like Michigan State University, which purchases nearly $87 million worth of goods and services annually, could spend mere fractions of this number on local small businesses, causing them to flourish like never before.

As a student at a four-year public university in Northern Virginia, I know a few things about debt and personal economic stagnation. To say “the United States can’t afford the status quo in higher education” might be the understatement of the decade. So how can we shake up the status quo?

We need to start holding colleges accountable not just to the government but to their communities. As anchor institutions, they have the power to provide economic growth and stability and serve as cornerstones of their communities due to their role as large permanent employers with significant investment capabilities. They are also permanent physical landmarks that serve as points of pride for their members as well as nearby residents.

Colleges and universities tend to be huge anchor institutions due to their extensive reach in a variety of commercial activities, immense diversity of employment throughout their numerous departments, and the vital exchange of wealth between students, alumni, trustees, fans, and neighbors to the school. It is time for these institutions to begin making a concerted effort to develop and invest locally for the long term.

The first way we can hold colleges accountable as anchor institutions is by encouraging and facilitating responsible purchasing from locally owned and operated businesses for anything from food to office supplies. This would allow small businesses to leap into the big leagues, and colleges have a responsibility to support the entrepreneurial efforts of graduates who choose to settle nearby as well as the local business owners who employ their students and alumni. Even 10 percent of the funds earmarked for paper products for a large public institution such as the University of Michigan would be the number one account for a local business struggling to compete with national suppliers. Working with these businesses to help increase their production capacity and streamline various processes would ultimately result in a symbiotic exchange of tailored quality for vital business development. Colleges have too long relied on one-size-fits-all corporations to supply their food, office supplies, cleaning services, and more. In the long-run, establishing relationships with local providers enables both the institution and the businesses to thrive as each respects and relies on the other.

Second, universities should be responsible for investing locally. Universities often have access to far more capital than the cities and towns that surround them, but they invest in distant fossil fuel companies, huge national banks, or even Israeli military efforts.  As anchor institutions, colleges should invest in their communities through community development financial institutions (CDFIs). By promising to invest a majority of its cash-on-hand in the surrounding community, a CDFI is able to safely give loans to small businesses, prospective college students and families, and new homeowners. These kinds of investments improve the lives and livelihoods of community members not directly affiliated with the anchor institutions. This is particularly vital because non-anchor institutions like large-scale banks are often unwilling to invest in these low-income communities because of the economic risk.

Colleges are institutions that can help a struggling or non-competitive community find its feet. If we hold them accountable in the right way, as institutions of economic growth for the long-term, colleges can begin to boast many more achievements and far fewer failures.