By Bruce R. McClintock, Chair

As educational costs continue to outstrip inflation, the day may come—it might already be here—when young couples are trying to save for their children's education while still paying off their own student loans. Under these circumstances, it is tempting to agitate for sweeping reforms or to look for scapegoats, neither of which offers realistic hope. But having spent three decades personally advising hundreds of schools, colleges and universities in their fundraising efforts, I believe there are some modifications to the current system that could make things a little better both for institutions and for the families of young people who wish to attend them.

Without judging these institutions or some of the decisions they make, I do believe it is important to understand the environment in which they exist. Schools, colleges and universities may be nonprofits, but they operate in a highly competitive market. To survive, they must make their facilities and their programs as attractive as possible to students and parents, which means they sometimes need to compete in areas that have little to do with the classroom experience per se.

The dorms at Harvard can be pretty rustic, and Harvard will still attract some of the brightest young people in the world. Less prestigious institutions, however, have to make the best possible impression on that one and only day when a high school student and his or her parents arrive for a tour. That's one reason why millions of dollars are invested in dorms, dining halls and recreation centers—facilities that must be paid for by somebody.

Of course, major expenditures are also required for programs and facilities that address the core educational priorities of the institution. What's a parent to do, after all, when two schools offer comparable educations, but one boasts of the finest chemistry lab in the state, while its rival says Junior will have to bring his chemistry set from home?

America's educational institutions are painfully aware of the crisis they find themselves in. Most have no choice but to tighten their belts, because their endowments were hit hard by the recession. None of these institutions want to price themselves out of the market, which is why many are making financial aid their highest fundraising priority. Some institutions have been adopting “need-free” or “need-blind” admissions policies in response, meaning students are admitted without regard to their families' ability to pay. Once the student is “in,” the school uses its own funds to make sure that that student can attend. Others are considering still other responses, including reducing the time required to earn a degree from four years to three.

In any case, the issue of how colleges and universities raise money and allocate the funds they raise has never been of greater urgency. Because tuition and tax money simply do not cover the full costs of an education, schools, colleges and universities typically make up the difference through fundraising initiatives.

These campaigns usually include some combination of annual fund appeals to support current programs and special capital projects to fund longer-term priorities. About 70 percent of capital gifts are given to the school's endowment; only about 30 percent of these gifts are earmarked for bricks-and-mortar construction projects—meaning those dining halls and rec centers—as determined by the donor (and agreed to by the institution).

Educational institutions generally do a great job with their campaigns. Some now set $1 billion goals and achieve them. But many institutions are not nearly effective enough in their annual fund drives, which often take a backseat to the more glamorous capital projects. One reason why annual funds are less successful is because some schools insist—irrationally and unjustifiably, in my opinion—that gifts to them be made with no strings attached. That means the institution can use these gifts for whatever purposes it chooses, giving the donor no say in the matter. This might work to the advantage of the institution— its short-term advantage—but it denies donors the opportunity to follow their gift, to watch it work on behalf of the institution, and to derive a sense of satisfaction and fulfillment by knowing how their gift impacts the institution they care so deeply about. Result? Institutions often receive smaller gifts than might otherwise be considered by the donor.

Here's what schools, colleges and universities (that are not already doing so) might consider as an alternative to the unrestricted gift request. To help keep tuition affordable and to encourage donations, they could establish special scholarship funds to be financed through annual gift contributions. Potential major gift donors would be encouraged to consider levels of gifts that reflect the levels of financial aid awarded to students (anywhere from $5,000 to $50,000 at many institutions). The institution would determine the student recipient of these funds and then inform the donor of the individual who is benefiting from her or his generosity. This initiative could make schools, colleges and universities more affordable for thousands of students while also providing donors the opportunity to take great pride in the impact of their philanthropic support. It could also lead some donors to ultimately establish an endowed fund that “capitalizes” their annual financial aid gift in perpetuity.

A program like this does not represent revolutionary change. But it is realistic and achievable and works within a system that, however flawed, has nonetheless brought a high level of quality education to the masses.