Why it’s hard to raid a university endowment

Nancy Marshall-Genzer Jan 15, 2016
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Why it’s hard to raid a university endowment

Nancy Marshall-Genzer Jan 15, 2016
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There is a small but growing move afoot to require universities with multi-billion dollar endowments to stop charging tuition. In fact, some proponents of the idea are trying to get a seat on the board that oversees Harvard, and a New York congressman is sponsoring legislation to require rich universities to spend more of their endowments on tuition assistance.

Sounds like they’re making a simple argument, right? But University endowments aren’t big, liquid pools of money, like what parents with a kid in college wish for.  

“They’re not rainy day funds or simple checking accounts that colleges and universities have to call on,” said Liz Clark, director of federal affairs at the National Association of College and University Business Officers. 

Clark also said schools can’t always spend their endowment money any way they want.

‘There are spending restrictions and those restrictions come from donors’ wishes to institutions,” she said.

 So a donor might say, here’s $300 million. But it’s for the medical school.

And Clark said, an endowment is a collection of different donations. In Harvard’s case, thousands.

“Harvard’s endowment is actually made up of more than 12,000 individual funds,” said Harvard University spokesman Jeff Neal. He added, there other limits. “Endowments exist to live in perpetuity.”

Meaning they outlive their donors. So, Neal said, universities largely leave the original donation alone, and just spend whatever they make investing it.

Some people say, at the richest schools, that return on investment would more than pay for free tuition. “A lot of these endowments have had very impressive returns,” said Victor Fleischer, a professor of law at the University of San Diego.  “There’s still some additional flexibility there in terms of the spending of the funds.”

But tuition assistance may be growing, regardless.

Liz Clark, of the National Association of College and University Business Officers, said more donors are earmarking their gifts for student aid.

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