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 $3 billion+ are included. Ties are indicated.
Table A
Correlation of Institutional Endowments to Rankings (2022)
| No. | College, University, or System | Fund Size ($ Billions) | USN&WR Rank |
| 1 | Harvard University | 52 | U3 (tie) |
| 2 | Yale University | 43 | U3 (tie) |
| 3 | University of Texas System | 43 | N/A |
| 4 | Stanford University | 38 | U3 (tie) |
| 5 | Princeton University | 38 | U1 |
| 6 | Massachusetts Inst. of Technology | 28 | U2 |
| 7 | University of Pennsylvania | 21 | U7 (tie) |
| 8 | University of Notre Dame | 18 | U18 (tie) |
| 9 | University of Michigan | 17 | U25 (tie) |
| 10 | Northwestern University | 15 | U10 (tie) |
| 11 | Columbia University | 14 | U18 (tie) |
| 12 | University of California System | 14 | N/A |
| 13 | University of Chicago | 13 | U6 |
| 14 | Duke University | 13 | U10 (tie) |
| 15 | Washington University in St. Louis | 13 | U15 (tie) |
| 16 | Emory University | 11 | U22 (tie) |
| 17 | University of Virginia | 11 | U25 (tie) |
| 18 | Vanderbilt University | 11 | U13 (tie) |
| 19 | Cornell University | 10 | U17 |
| 20 | Johns Hopkins University | 9 | U7 (tie) |
| 21 | Rice University | 8 | U15 (tie) |
| 22 | University of Southern California | 8 | U25 (tie) |
| 23 | Dartmouth College | 8 | U12 |
| 24 | Ohio State University | 7 | U49 (tie) |
| 25 | Pennsylvania State University | 6 | U77 (tie) |
| 26 | University of Pittsburgh | 6 | U62 (tie) |
| 27 | New York University | 6 | U25 (tie) |
| 28 | University of Minnesota | 5 | U62 (tie) |
| 29 | Brown University | 7 | U13 (tie) |
| 30 | Univ. of North Carolina – Chapel Hill | 5 | U29 (tie) |
| 31 | University of Wisconsin | 4 | U38 (tie) |
| 32 | University of Washington System | 4 | N/A |
| 33 | University of Illinois System | 4 | N/A |
| 34 | Williams College | 4 | C1 |
| 35 | Purdue University | 4 | U51 (tie) |
| 36 | Michigan State University | 4 | U77 (tie) |
| 37 | Boston College | 4 | U36 (tie) |
| 38 | Amherst College | 4 | C2 |
| 39 | Carnegie Mellon University | 4 | U22 (tie) |
| 40 | California Institute of Technology | 4 | U9 |
| 41 | University of Richmond | 3 | U27 |
| 42 | Georgetown University | 3 | U22 (tie) |
| 43 | Pomona College | 3 | C3 |
| 44 | University of Rochester | 3 | U36 (tie) |
| 45 | Wellesley | 3 | C5 |
| 46 | Boston University | 3 | 41 (tie) |
| 47 | State University of New York System | 3 | N/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 |
| 2018 | Johns Hopkins | Michael R. Bloomberg | $1.8 billion | Financial aid for qualified low- and middle-income undergraduate students, with the goal of making admissions permanently “need-blind”. |
| 2018 | MIT | Stephen A. Schwarzman | $350 million | Establish the Schwarzman College of Computing to integrate computer sciences and AI across MIT’s five undergraduate schools. |
| 2018 | Harvard | 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. |
| 2018 | Yale | Edward P. Bass | $160 million | Support for renovation and expansion of the Yale Museum of Natural History. |
| 2018 | University of Colorado – Denver | Anschutz Foundation | $120 million | Funds for new health-sciences building, research, faculty, and technology transfer programs. |
| 2018 | Michigan | Richard and Susan Rogel | $110 million | Support for scholarships for medical students and for research and professorships at the Rogel Cancer Center. |
| 2018 | Amherst | Anonymous | $100 million | Gift to the college’s capital campaign to raise funds for student aid, faculty support, and the new Science Center. |
| 2018 | Brown | Robert J. and Nancy D. Carney | $100 million | Support for the Carney Institute for Brain Science to research cures for Alzheimer’s disease and amyotrophic lateral sclerosis. |
| 2018 | Harvard | Anonymous | $100 million | Support for the Science Center and a fellowship in math; resources for undergraduate School of Arts and Sciences |
| 2018 | United World College System | Shelby Davis | $100 million | Support for 100 annual undergraduate scholarships for 20 years for students to attend the system’s campuses. |
| 2018 | Western State University in Colorado | Paul M. Rady | $80 million | Support for the new Paul M. Rady School of Computer Science and Engineering, including a new building. |
| 2018 | Johns Hopkins | William H. Miller | $75 million | Endowed chair of philosophy department and 8 other professorships, support for faculty and undergraduate philosophy students. |
| 2018 | Princeton | Perelman Foundation | $65 million | Establishment of Perelman Residential College to help advance the institution’s goal of expanding undergraduate enrollment by 10%. |
| 2018 | Amherst | Anonymous | $50 million | Gift to support the college’s Science Center, hiring of faculty, and establishment of need-based scholarships. |
| 2018 | Brown | Samuel M. and Ann S. Mencoff | $50 million | New professorships and research at Brown Institute of Translational Science. |
| 2018 | Carleton | Wally Weitz | $50 million | Contribution to the college’s capital campaign to increase financial aid and internships. |
| 2018 | Carnegie Mellon | Tod Johnson | $50 million | Support for undergraduate scholarships and programs to help students graduate. |
| 2018 | Northeastern | Amin and Julie Khoury | $50 million | Endowment to build the undergraduate Khoury College of Computer Sciences. |
| 2018 | Oregon State | Gary R. Carlson | $50 million | Support for Carlson College of Veterinary Medicine. |
| 2018 | St. John’s of Annapolis | Winiarski Foundation | $50 million | Funds for capital campaign intended to allow the college to lower tuition by a third. |
| 2018 | Saint Louis University | Jeanne and Rex Sinquefield | $50 million | Support for the new Research Institute – the Sinquefield Center for Applied Economic Research, and the chess team. |
| 2018 | UC San Diego | Andrew J. Viterbi | $50 million | Gift for the Viterbi Department of Ophthalmology and Viterbi Vision Research Center. |
| 2018 | University of Pennsylvania | Marc J. and Carolyn Rowan | $50 million | Support for the Wharton Budget Model, an economic-policy analysis program, and for new professorships. |
| 2019 | UCLA | Henry Samueli | $100 million | Expansion of the UCLA engineering school. |
| 2019 | NYU | Anonymous | $75 million | Establish Center for Blood Cancers, improve care, and research multiple myeloma. |
| 2019 | UVA – Darden School | Frank M. Sands Sr. | $68 million | Extend online reach through the Sands Institute for Lifelong Learning; 12 professorships, building of conference center. |
| 2020 | Stanford | John and Ann Doerr | $1.1 billion | Establish the John Doerr School of Sustainability. |
| 2021 | HBCU’s | MacKenzie Scott | $1.5 billion | Unrestricted. |
| 2021 | Bard College | George Soros | $500 million | To encourage donors to back the college’s effort to raise $1 billion over five years. |
| 2021 | University of Oregon | Phil and Penney Knight | $500 million | To speed the transformation of scientific discoveries into medical treatments. |
| 2021 | Northwestern | Patrick Ryan | $480 million | Research in microeconomics, business, medicine, global health, and neuroscience. |
| 2021 | Johns Hopkins Univ. | Michael R. Bloomberg | $150 million | To enhance student diversity in STEM fields. |
| 2021 | Montana State Univ. | Mark Jones | $101 million | To expand rural nursing education. In Montana. |
Sources: Council for Advancement and Support of Education and the Chronicle of Higher Education
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