Attending a college that receives major gifts from deep-pocketed benefactors and possesses a multi-billion dollar endowment has advantages. Among these is the possibility that some of that money will trickle down to students as financial aid. As preoccupied as seniors are, they should find the time to verify that a targeted college is financially stable and they should review its endowment status. 

Has the college been the recipient of major gifts? How is it obligated to spend them? How does the college spend the income generated by its endowment? Answers to these questions provide insight into how a college’s financial assets are used to the benefit of its students. They indicate how generous the college can be in granting financial aid.

The Importance of Endowments

A college’s endowment is a trust structured in a manner that suits its status as a not-for-profit entity. It allows for withdrawals from invested principal and accumulated earnings, but it must abide by its own bylaws. Based on the rules within its bylaws, a college may be able to use funds to accomplish goals such the construction of new facilities and the initiation or expansion of programs.

There are three types of rules in the bylaws of endowments. The first is the investment policy, which stipulates the type of investments the fund manager is permitted to make. It dictates the level of risk that can be assumed by the manager in striving to achieve a targeted rate of return. The second set of rules is the withdrawal policy, which establishes the minimum and maximum amounts or percentages that the institution is permitted to withdraw from the fund annually. The third is the usage policy. These rules govern the purposes for which fund proceeds may be used.

A criticism that’s directed at institutions with large endowments is that the funds could be used to lower tuition for all students or for disadvantaged groups. However, if doing so is not permitted by the bylaws, the fund manager wouldn’t be able to comply even if the institution’s CEO and the fund’s Board of Directors were to issue such an order. The action would need to be approved by a majority of the donors (or their estates) who made donations under the existing rules. Votes would be cast in proportion to the size of donations. Such stringent requirements make changes to bylaws highly impractical. Colleges assert that this is the reason why they couldn’t bail themselves out of the pandemic-induced fiscal crisis by simply accessing their own endowment funds. Most used taxpayer dollars instead.

Donations to endowments are meant to be “Gifts that keeps on giving”. For the most part, the income earned by the fund’s investments is to be spent, but the principal is to remain untouched. However, the bylaws of most endowments permit a fixed annual rate of withdrawal regardless of how the fund performed in a given year so that long-term plans aren’t impacted by short-term market swings. The average annual rate of withdrawal from college endowment funds is 4.6%.

Using the U.S. News & World Reports (USN&WR) rankings as a proxy for academic reputation, Table A, below, shows the degree of correlation between academic reputation and the size of endowments. Since National Liberal Arts Colleges and National Universities are ranked separately by USN&WR, institutions are shown as C1 or U1, C2 or U2, and so on. Endowments of $3 billion+ are included. Ties are indicated.

Table A

 Correlation of Institutional Endowments to Rankings (2022)

 No. College, University, or SystemFund Size ($ Billions)USN&WR Rank
1Harvard University52U3 (tie)
2Yale University43U3 (tie)
3University of Texas System43N/A
4Stanford University38U3 (tie)
5Princeton University38U1
6Massachusetts Inst. of Technology28U2
7University of Pennsylvania21U7 (tie)
8University of Notre Dame18U18 (tie)
9University of Michigan 17U25 (tie)
10Northwestern University15U10 (tie)
11Columbia University14U18 (tie)
12University of California System14N/A
13University of Chicago13U6 
14Duke University13U10 (tie)
15Washington University in St. Louis13U15 (tie)
16Emory University11U22 (tie)
17University of Virginia 11U25 (tie)
18Vanderbilt University11U13 (tie)
19Cornell University10U17
20Johns Hopkins University9U7 (tie)
21Rice University8U15 (tie)
22University of Southern California8U25 (tie)
23Dartmouth College8U12
24Ohio State University 7U49 (tie)
25Pennsylvania State University 6U77 (tie)
26University of Pittsburgh6U62 (tie)
27New York University6U25 (tie)
28University of Minnesota 5U62 (tie)
29Brown University7U13 (tie)
30Univ. of North Carolina – Chapel Hill5U29 (tie)
31University of Wisconsin 4U38 (tie)
32University of Washington System4N/A
33University of Illinois System4N/A
34Williams College4C1
35Purdue University4U51 (tie)
36Michigan State University4U77 (tie)
37Boston College4U36 (tie)
38Amherst College4C2
39Carnegie Mellon University4U22 (tie)
40California Institute of Technology4U9
41University of Richmond3U27
42Georgetown University3U22 (tie)
43Pomona College3C3
44University of Rochester3U36 (tie)
46Boston University341 (tie)
47State University of New York System3N/A

Source: USN&WR for Rankings and Wikipedia for Endowments

Note: Some statewide university systems treat their endowment funds in the aggregate.  However, USN&WR ranks each branch of the universities as a separate entity. These systems are noted as “N/A” . 

Table A shows a high correlation for the first 10 institutions. The next 10 correlate within four places. The lower end doesn’t correlate well, with a few exceptions like UNC-Chapel Hill, USC, and NYU. Looking beyond the 47 schools in Table A, the degree of correlation get weaker. These findings indicate that endowment size and reputation do correlate, but only among elite institutions. 

Private Gifts Support Selected Colleges

Michael R. Bloomberg, former mayor of New York and founder of the company that bears his name, is an alumnus of Johns Hopkins. In 2018, he bestowed $1.8 billion on his alma mater, the largest gift from an individual in the history of higher education. The purpose of the gift was to make Johns Hopkins truly need-blind in admissions.

Nationwide, gifts of more than $10 million totaled over $6 billion for the first time in 2017, continuing a post-recession surge in gifts. Gifts were up 7% in 2021, topping $52 billion. Even community colleges reported a 52% increase in gifts in fiscal 2021.

The incredible generosity during the most challenging period in generations demonstrates how strongly alumni and other supporters value colleges and universities in the United States,” observed Sue Cunningham, CEO of  theCouncil for Advancement and Support of Education (CASE). CASE’s annual survey is considered the authoritative source on philanthropy in higher education in the United States. 

Gifts are only one source of income for colleges, but they are often used to underwrite new construction and initiate large-scale innovative programs. Students should research the major gifts that a college has recently received. This can help a student to assess the ability of a particular college to meet the student’s educational goals. 

Foundations (33%) and alumni (23%) were the leading gift-givers to colleges, accounting for a combined 56% of all reported gifts in 2021. Non-alumni individuals (17%), corporations (13%), and other organizations (14%) were the other donor categories. Giving from alumni showed the largest increase (11%), followed by a 9% increase in gifts from “other organizations,” which are usually donor-advised funds.

Gifts to institutions are usually distinct from donations to endowments. Major gifts tend to be earmarked for specific purposes. Unrestricted gifts, which give institutions maximum flexibility in how they’re used, increased by 30%, but they still only represented 7% of all gifts. 

Table B, below, lists private gifts to colleges of $50 million or more in 2018 and $60 million or more in 2019, 2020, and 2021.

Table B

 Largest Private Gifts to Colleges 2018-21)

Year  Institution       Donor  Gift     Purpose
2018Johns HopkinsMichael R. Bloomberg$1.8 billionFinancial aid for qualified low- and middle-income undergraduate students, with the goal of making admissions permanently “need-blind”.
2018MIT Stephen A. Schwarzman$350 millionEstablish the Schwarzman College of Computing to integrate computer sciences and AI across MIT’s five undergraduate schools.
2018Harvard  Blavatnik Family Foundation $200 million Support for medical research to develop tools to diagnose, prevent, and treat disease; space for biotech start-ups in Harvard Life Lab.
2018Yale Edward P. Bass$160 millionSupport for renovation and expansion of the Yale Museum of Natural History.
2018University of Colorado – DenverAnschutz Foundation $120 millionFunds for new health-sciences building, research, faculty, and technology transfer programs.
2018MichiganRichard and Susan Rogel$110 million Support for scholarships for medical students and for research and professorships at the Rogel Cancer Center.
2018Amherst Anonymous$100 millionGift to the college’s capital campaign to raise funds for student aid, faculty support, and the new Science Center.
2018BrownRobert J. and Nancy D. Carney$100 millionSupport for the Carney Institute for Brain Science to research cures for Alzheimer’s disease and amyotrophic lateral sclerosis.
2018Harvard Anonymous$100 millionSupport for the Science Center and a fellowship in math; resources for undergraduate School of Arts and Sciences
2018United World College SystemShelby Davis$100 million Support for 100 annual undergraduate scholarships for 20 years for students to attend the system’s campuses.
2018Western State University in  Colorado Paul M. Rady$80 millionSupport for the new Paul M. Rady School of Computer Science and Engineering, including a new building.
2018Johns HopkinsWilliam H. Miller $75 millionEndowed chair of philosophy department and 8 other professorships, support for faculty and undergraduate philosophy students.
2018Princeton Perelman Foundation $65 millionEstablishment of Perelman Residential College to help advance the institution’s goal of expanding undergraduate enrollment by 10%.
2018Amherst Anonymous$50 millionGift to support the college’s Science Center, hiring of faculty, and establishment of need-based scholarships.
2018Brown Samuel M. and Ann S. Mencoff$50 millionNew professorships and research at Brown Institute of Translational Science.
2018Carleton Wally Weitz$50 millionContribution to the college’s capital campaign to increase financial aid and internships.
2018Carnegie Mellon Tod Johnson$50 millionSupport for undergraduate scholarships and programs to help students graduate.
2018NortheasternAmin and Julie Khoury$50 millionEndowment to build the undergraduate Khoury College of Computer Sciences.
2018Oregon State Gary R. Carlson$50 millionSupport for Carlson College of Veterinary Medicine.
2018St. John’s of AnnapolisWiniarski Foundation $50 millionFunds for capital campaign intended to allow the college to lower tuition by a third.
2018Saint Louis UniversityJeanne and Rex Sinquefield$50 millionSupport for the new Research Institute – the Sinquefield Center for Applied Economic Research, and the chess team.
2018UC San DiegoAndrew J. Viterbi$50 millionGift for the Viterbi Department of Ophthalmology and Viterbi Vision Research Center.
2018University of  Pennsylvania Marc J. and Carolyn Rowan$50 millionSupport for the Wharton Budget Model, an economic-policy analysis program, and for new professorships.
2019UCLAHenry Samueli$100 millionExpansion of the UCLA engineering school.
2019NYUAnonymous$75 millionEstablish Center for Blood Cancers, improve care, and research multiple myeloma.
2019UVA – Darden SchoolFrank M. Sands Sr.$68 millionExtend online reach through the Sands Institute for Lifelong Learning;  12 professorships, building of conference center.
2020StanfordJohn and  Ann Doerr$1.1 billionEstablish the John Doerr School of Sustainability.
2021HBCU’sMacKenzie Scott$1.5 billionUnrestricted.
2021Bard CollegeGeorge Soros$500 millionTo encourage donors to back the college’s effort to raise $1 billion over five years.
2021University of OregonPhil and Penney Knight$500 millionTo speed the transformation of scientific discoveries into medical treatments.
2021NorthwesternPatrick Ryan$480 millionResearch in microeconomics, business, medicine, global health, and neuroscience.
2021Johns Hopkins Univ.Michael R. Bloomberg$150 millionTo enhance student diversity in STEM fields.
2021Montana State Univ.Mark Jones$101 millionTo expand rural nursing education. In Montana.

Sources: Council for Advancement and Support of Education and the Chronicle of Higher Education