As Tuition Goes Up, College Endowments Under More Scrutiny
Since the recession, endowments at public and private colleges and universities have bounced back to the tune of more than a half trillion dollars. But that hasn’t stopped increases in tuition at most schools, to the chagrin of some congressional leaders and others who accuse schools of hoarding endowment funds.
The House Ways and Means Committee held a hearing on endowments last fall and Rep. Thomas Reed suggested that, “If you just take 10 percent of that money and gave it to the kids going to school there, you wouldn’t have to charge one kid a dime to go to school there.”
Reed and some other congressional leaders say endowment money could pay for more scholarships for middle and low-income students and put the brakes on tuition increases. But so far, that’s not happening to a large degree.
Colleges and universities have relied on endowment funds for supplemental revenue for more than 300 years. The funds come from donors, who give the money to the schools, usually with restrictions, for use for say an academic program, a construction project or research. Schools with large endowments have about a thousand accounts in their funds.
Most schools in North Carolina do not fall in the elite group of colleges and universities with billion-dollar endowments, but there are a few in that club. At the end of 2015, Wake Forest had an endowment of nearly $1.6 billion; UNC Chapel Hill’s was about $3 billion and Duke University’s was nearly $7.3 billion.
At Duke University, where full tuition runs about $70,000, spokesman Michael Schoenfeld says there’s a lot of misinformation about endowments in the general public.
“Many people, especially students, believe there’s a safe in the president’s office with $7 billion and the president decides who his favorites are to get the money,” Schoenfeld said. “It’s much more complicated than saying you have $7 billion in the bank why not spend more.”
Schoenfeld says Duke spends about $1.3 billion in endowment funds annually.
“We spend about $150 million on financial aid annually. About half of what Duke spends on financial aid comes from the endowment and the rest from the operating budget. So, if we only used the endowment, it would only cover half of the need for students,” Schoenfeld said.
UNC Charlotte has a much smaller endowment that stood at $180 million at the end of June. More than 95 percent of those funds came with restrictions on how they can be spent says Beth Hardin, the university’s vice chancellor for business affairs.
“We have about $6 million for endowment spending each year and spend about $2 million on scholarships,” Hardin said. “We spend $1.6 million, 27 percent on professorships and $2.4 million on academic support, research and the library.”
Hardin says this year, 533 students received scholarships funded by the endowment. Some of the financial aid the endowment funds goes for merit scholarships and are not needs-based. But she added, “UNC Charlotte has a very high percentage of first generation college students and they tend to be less affluent, so when you look at the percentage of our students who receive financial aid of any form and then the percentage who get scholarships, financial aid and scholarships have a huge impact on our student population.”
Across town at Queens University the endowment is just over $100 million, up from $70 million five years ago. Queens’s CFO Matt Packey says the school spends about 5 percent of the endowment each year. With room and board, it costs more than $40,000 to attend Queens. Packey says about 30 percent of the student body is low income.
“Over 90 percent of students get some form of financial aid. A fraction, 20 percent, comes from the endowment,” Packey said. “About 70 percent of the earnings we pull out of the endowment each year goes to scholarships. The rest largely goes toward supporting professors and academic endeavors and a little on maintenance of facilities. The library is the primary user of those funds.”
Queens has more flexibility with its endowment than most schools. Only 60 percent of it is restricted for specific uses. At most schools, at least the ones interviewed, it’s about 95 percent.
Most schools spend an average of 4 percent to 5 percent of endowment funds annually, and opt for fundraising and tuition increases as major means of generating cash. Tuition at UNC System schools, Duke and Wake Forest all went up this year ranging from 3.2 percent to 4.3 percent. Tuition at Queens remained flat, with no increase.