By Marcelo Jauregui-Volpe
Colleges spend a substantial portion of their endowments on scholarships and groundbreaking research, according to a recent report by the National Association of College and University Business Officers (NACUBO).
Endowments are funds composed of charitable donations made to institutions of higher education. Money managers working on behalf of the university invest these funds in stocks, bonds, and other financial products and use the proceeds to provide financial aid to students and support a wide variety of institutional activities, including scientific and medical research.
A total of 658 colleges, universities, and education-related foundations participated in this year’s NACUBO endowments survey. The study found that universities spent $30 billion out of their endowments, a 6.4% increase from last year. Nearly half of all spending (48.1%) went toward funding student financial aid programs. According to NACUBO, 17.7% of all spending went to academic programs and research; 10.8% to endowed faculty positions; and 6.7% to campus facilities’ operation and maintenance.
In the 12 months preceding June 30, 2024, endowments at colleges and universities represented in the study reported an 11.2% return, according to the NACUBO report.
“Faculty and staff certainly benefit from this philanthropy, but students remain the primary beneficiaries, as the bulk of these resources is used to maintain student aid and affordability. This is incredibly important work and demonstrates how short-sighted it would be to further tax these funds and divert them from their true purpose,” said NACUBO President and CEO Kara D. Freeman, referring to threats to raise an endowment tax first created by Congress in 2017.
AAU has countered efforts to raise the endowment tax because doing so would hurt universities’ ability to fund student aid, research, and teaching. As AAU President Barbara R. Snyder wrote back in 2022, the roughly $200 million generated annually from the endowment tax goes to the United States Treasury’s general fund, without any specific designation to support education programs.
“Endowments are like charitable trusts, designed specifically to make a college education more affordable. Taking money from them to pay for any other cause – including taxes – actively undermines the purpose of making college more affordable,” said President Snyder.
Marcelo Jauregui-Volpe is editorial and communications assistant at AAU.