Sen. Charles Grassley wants colleges and universities to boost their financial aid and use their multibillion dollar endowments to help struggling families pay tuition.
Endowments nationally totaled at least $340 billion in 2006, with an overall return of 15.3 percent, according to the Congressional Research Center.
Sixty-two institutions have endowments that exceed $1 billion, including Grinnell College in Iowa, which has a $1.5 billion endowment.
"What are universities all about? They're about educating kids," said Grassley, R-Iowa. "I think it's fair to say with the returns they've had, they can do a better job than they have in the past."
Yale University announced last week it would increase the money it spends from its $22.5 billion endowment by 40 percent. Harvard University, which tops the nation with a $35 billion endowment, earlier said it would reduce tuition costs for students in families earning as much as $180,000 a year.
Grassley, who sits on the Senate Finance Committee, is continuing to push for a mandated minimum payout on endowments to discourage what critics call "endowment hoarding."
Associations representing colleges and universities oppose a mandated payout, saying it would harm their ability to manage the funds. They say endowments are not like savings accounts that can be spent at will, but are comprised of individual funds that are restricted for specific uses.
Colleges already are using endowments to help pay college costs for low-income students and reduce the amount of college debt, said the American Council on Education, National Association of Independent Colleges and Universities, Association of American Universities and National Association of State Universities and Land-grant Colleges.
Grinnell College is already increasing financial aid to students and reduce and eliminate loans, said President Russell Osgood.
About 90 percent of Grinnell students get financial aid, most of it need-based, he said.
About $23 million in grants and scholarships were awarded during the 2005-06 school year.
Caitlin Carmody, 21, a senior political science major at Grinnell, said a lot of students are talking about the size of the school's endowment and its 12.6 percent increase in tuition.
"We're not quite sure why we don't spend more of (the endowment)," Carmody said. "There was a big hullabaloo about tuition being raised as much as it is. Students were very much against it."
William Davidson, 19, a sophomore planning to major in economics, said he believes there is enough money in the endowment to increase aid even further, especially in light of the tuition increase.
"I was personally very annoyed they needed to charge us more, instead of drawing on this huge amount of money they have," said Davidson, who receives financial aid and also works 10 hours a week as a dining hall custodian to help pay for school.