How Do University Endowments Work?

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While applying to college, students and parents may consider a variety of factors before enrolling. Those factors could include everything from the programs the school offers, to its location, sports programs, tuitions, and potential financial aid.

But, one more thing families may want to think about is a college or university’s endowment. Not familiar with the term?

Here’s helpful information about university endowments, how they work, how they are managed, which schools have the largest ones, and how those university endowments could potentially benefit students.

What Is an Endowment?

scholarship that provides financial support for a student or student’s tuition and fees. A donor could even provide the university with $5 million for a named deanship, which will be used for unrestricted support for the department at the discretion of the Dean.

Who Manages a University Endowment?

Every school decides how to best manage its own endowment. Some colleges and universities hire internal staff to manage its endowment while others hire outside firms and professional investors to oversee the money.

There may be an endowment manager or a committee or team that works to manage the funds. They will generally work with the university to decide its goals for the endowment, such as making as much income as quickly as possible, or going for more long term sustainable growth. Then, decisions about how and where to invest the money are made to help the endowment meet its goals.

Which Universities Have the Largest Endowments?

According to US News and World Report, Harvard University in Massachusetts has the largest endowment at nearly $41 billion. Yale University in Connecticut comes in a distant second with just over $30 billion, and Stanford University comes in third with nearly $27.7 billion.

Princeton University in New Jersey comes in at number four with $25.6 billion and Massachusetts Institute of Technology in Massachusetts rounds out the top five with $17.4 billion.

University of Pennsylvania, Texas A&M University, University of Michigan—Ann Arbor, University of Notre Dame, and Columbia University, make up the remaining top 10 with endowments ranging from $10 to $14 billion.

However, these schools can be considered major outliers on the endowment scale. In 2019, the National Association of College and University Business Officers analyzed 774 university endowments and found the median fund balance was $144.4 million.

How Are University Endowments Used and Why do They Matter?

University endowments can be used for a variety of financial needs including hiring new professors, building new buildings or upgrading new ones, and can even be used for fellowships or scholarships.

specific scholarships funded by donors, or by applying for any and all available financial aid to help them pay for college.

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