Looking for a ‘Well Endowed’ College?

If you happen to be looking for a ‘well endowed college’ come the fall of 2012, the number with endowments above $500 million is 128; considering only 120 colleges and universities accept fewer than 50% of the applicants, there are a number of well-endowed schools to attend.  The number boasting endowments of $1 billion or more is 62, having fallen from 76 after the 2008 crash. (If you wish to see the 2010 college endowment list, just go to the National Association of College and University Business Officers, http://www.nacubo.org, and click on ‘2010 Market Value of Endowment Assets,’ the most recent study available).  Harvard at $27.5 billion; Yale, $16.6; Princeton, $15.8; and Stanford, $13.8 head the list. However, even number 49, Grinnell College, whose $1.2 billion endowment fund is in the capable hands of Warren Buffett, the 2nd wealthiest man in the world, have huge financial muscle.

Though the value of these endowments is impressive, probably a more meaningful figure to consider is the amount of endowment a school has per student. The list of the top 10 schools with the highest per student endowments still contains the select four: Princeton, Yale, Harvard and Stanford; it then rounds out with Grinnell College, Amherst, MIT, Swarthmore, Pomona College, and Franklin Olin School of Engineering, which features free tuition and a faculty without tenure. Amherst, Grinnell, Pomona, and Swarthmore are private, small liberal arts undergraduate-only schools. Their endowments give them the flexibility to add a department, expand their campuses, or attract elite faculty members.

Until the crash of 2008, most of these endowments were growing at a very healthy clip; they had increased, on average, over 17% per annum over the previous five years. Yale University, alone, under the leadership of David Swensen, an institutional investor, an erstwhile legend, had had a 20-year annual average growth rate of 16%. Then, during 2008-2009, Yale’s endowment plummeted from just under $23 billion to around $16 billion.

Prior to the crash, however, the wealth of these endowments attracted the attention of Congress (rarely a good thing). Congress wanted these colleges to spend at least 5% of their endowments, annually, to make attendance more affordable for those less well-endowed students. Private foundation endowments, after all, had a 5% spending requirement: why not university endowments?  A Congressional review discovered that most of the schools with annual pre-crash endowment returns of 17% spent a paltry 4% per annum. If the colleges in the billion dollar endowment club spent a full 5%, this would translate into $1.5 billion extra that could be used, among many areas, on tuition relief.  

Consequently, the top two dozen endowed universities and colleges, including Harvard, Princeton, Yale, Cornell, and Stanford were advised to begin using their generous endowments for tuition relief.

  • Cornell began replacing loans with grants for undergraduate students with household incomes (HHI) below $75,000.  
  • Stanford eliminated tuition completely for students with HHI below $100,000.
  • Dartmouth & MIT eliminated tuition for students with HHI below $75,000
  • Harvard implemented a descending total payment scale for families with HHI below $180,000; between $120,000 and 180,000, only 10% of their total income goes to Harvard. The amount continues to decline till, below $60,000, the family pays no tuition.
  • Yale implemented a similar program to Harvard’s, except that the 10% contribution will include families with HHI below $200,000.

Reducing the onerous debt most students who attend highly selective private schools are saddled with is a good use of endowments. Yet, another advantage of attending a well-endowed school is it provides a sense of security for the school’s financial future -something Antioch College alumni can’t say. Additionally, endowments provide resources to keep the facilities maintained, and the faculty of the highest quality. It’s good to share the wealth; at least, possibly, 5% of it.