How important is endowment?

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21

@tk21769 I think, when a school is able to spend more on students for things like paying them for un-paid internships, then that directly affects the students’ experience. I know a lot of schools where, if you write up a proposal and show you are doing something worthwhile over the summer but not being paid, the school will pay you $3000-$5000. That’s a pretty nice perk and allows kids to take unpaid internships and still make summer money. And smaller classes? Yes. Sign me up.

@TS0104 While Richmond (and Grinnell for that matter) benefitted from a big one time donation, it says more than that they have one happy alum. That money multiplies and then is able to change how the schools are run and what they can offer the students. I also think that, when a school gets a big donation, other alums start donating more as well.

22

I agree…it’s just one small part of the endowment and will have positive rippling effects. I guess if you are comparing schools’ endowment totals, you just have to keep in mind that a large endowment could be caused by several different factors, and I’m still not sure how you can use that in terms of selecting schools in anything but a general way. Do schools publish how they spend their endowment funds? PS your response to tk is what Richmond Guarantee is, I believe.

23

Regarding Richmond, I believe the big gift they received in the 60’s was in part a stock gift and they got very lucky with the appreciation on that. I don’t think that the % of alumni giving at Richmond is as high as other lacs. Colgate and College of the Holy Cross are 2 lacs that really excel at that. @homerdog - when you tour Richmond the size of the endowment will be evident. The grounds of that campus are perfectly manicured, I almost felt like there was a groundskeeper following our tour group around, to scoop up any random debris on the ground or pick a stray weed. And the money was on display in many other ways as well. Can’t afford a laptop? We’ll give you one. Traveling to DC for an internship interview? We’ll pay for your train and meals. Going to Cuba as part of the school orchestra? Your entire trip is covered. Want to attend a church service in town? We’ll provide your transportation. Add fee waivers for everyone. It felt like they were handing out money. It’s been kind of a running joke between myself and a friend who toured the same season and had a similar experience. Though despite all the money, I was surprise by all the triples for freshman. Was expecting to hear they were building a Four Seasons on campus to house first years!

24

I recalled that there was an older thread addressing the question why Bates’ endowment is relatively small: http://talk.collegeconfidential.com/bates-college/1353066-why-exactly-is-bates-endowment-low-compared-to-the-nescacs.html

25

Really? Strange. We’re an upper-middle income family, and we were tuition-free the freshmen year for my DS2 at Princeton this past year. Even with my DS1’s graduation from college this year, we pay Princeton far less than $44K. I don’t know where you come up with such misinformation.

In any case, when we were college searching for our application list, we did look at 1) overall endowment; 2) endowment per student; 3) endowment investment returns; 4) Moody’s ratings; 5) NPC results for COA; 6) spending on students, etc., among many other aspects.

In general, endowment has a significant impact in the way the college can operate. All top colleges compete to attract the best administrators, faculty and students. The endowment investment earnings typically fund more than half of the institution’s annual operating budget as well as its top strategic initiatives. One of these top strategic initiatives is college affordability so that students from all economic backgrounds can attend. In the 2018 fiscal year, Princeton with its excellent endowment investment returns for the year, for example, increased its undergrad FA to $172.4 million. That’s one of the ways in which endowment can significantly impact students and their families.

I don’t know the actual, average student spending figure at Princeton and others, but one thing I do know is that my DS2 has had three international trips just during his freshmen year fully subsidized. So were his private violin lessons. During fall, winter summer breaks, many students are taking advantage of its generous funding of travels abroad. Courses often take place in international settings, in Greece for an archaeology course, in Japan for a course in Japanese art, etc. If funding is necessary for completing one’s Senior Thesis, it’s likely to be granted. I know of a case where gold nuggets were required for a Senior Thesis, and the research project was granted (don’t know the total $ value or whether the nuggets had to be returned after the project was completed). I also know of a case where a student requested for establishing a photography studio on campus, and about $20,000 worth of equipment was granted. It seems anything that’d aid, further and improve one’s educational development and growth, Princeton is likely to back all legitimate individual pursuits. Whatever the average student spending is at Princeton, it also covers abundance of free food at all hours outside of dining plans and free laundry.

To my student son and us as parents, that’s what endowment is about and why it’s important to look at it along with everything else when considering any particular schools.

Because a large portion of endowment is restricted and the institutional operation budget is largely funded by its endowment investment returns, one thing to also look closely at is institutional borrowing, i.e., debt. Most recently, the Moody’s downgraded Northwestern University for its financial health concerns. It’s my personal opinion that NU came to this state due to its pressure to compete. With its greater difficulty to borrow, how will it react and adjust to continue to stay in the competition in the future is a question mark:

https://dailynorthwestern.com/2019/10/14/campus/ratings-agency-downgrades-northwesterns-credit-rating/

26

It’s an important question. Having a large endowment can and does effect student’s experiences in college.

For example, Duke is in the process of completing construction on a new, 10,000 sq.ft state of the art Engineering building at a cost of over $100 million. They also have DukeEngage with an operating budget of $30 million which is a a free program to any student to spend 8-weeks in the summer in countries all over the world to give back to impoverished communities (e.g. building bridges in rural towns in Bolivia). Thirdly, Duke gives every undergrad $150/yr to spend on lunches with faculty/professors to engage in meaningful discussions. This program costs over $1 million a year. These are just a few of the types of programs that large endowments fund to the benefit of the student, the university, and the community at large.

27

@socaldad2002 right. So comparing the perks of each college could be important…especially if they are something your student will take advantage of.

28

100% agree with this. It’s just one of many factors when choosing colleges but definitely should be considered.

One additional thought sort of related to endowment and spending is construction. Will there be major, disruptive construction going on all four years. For example, we toured UCSD and there was tons of construction going on, which was a turn-off for us. Another thing to consider…

29

The article “Forbes’ 2019 College Financial Health Grades” (sorry, no idea how to link) is an interesting read. They list the individual criteria they used (but not the broken out scores, which is too bad), and give examples of colleges that did well or not well in them.

I was surprised to see Amherst with a 3.87 and Bates with a 4.31 (also better than Bowdoin’s 4.22 and Colby’s 4.09), even though it has by far the smallest endowment (and endowment per student) of any of those schools.

Bates was called out in the article for having a “near perfect score” in the “Core Operating Margin” category. I am not a finance person, but maybe having a lot of money and using it well are not necessarily the same thing. Middlebury (3.4) might be a good example of that. Colby (my alma mater) has been throwing around tons of money lately building a new athletic center and trying to rejuvenate Waterville. I have very fond memories of Colby and Waterville (which gets a bad rap on CC), so I hope that works out for them, but it’s not without risk.

I didn’t really agree with some of the metrics they used, like “Admission Yield” (as long as you can accurately estimate it, who really cares?), and “Percent Freshman Getting Institutional Grants” (mostly because it was % of students, not the actual amount handed out), but the article and ratings are definitely worth looking at.

30

@socaldad2002 when we visited Kenyon, they were building a new library and the “library” in the meantime was spread all over campus in different buildings and even trailers. Not a positive for a student who would have to live with that for three semesters before construction would be done.

31

@TiggerDad

Apparently, I neglected to consult your checkbook. LOL

https://profile.princeton.edu/finances

“Student fees” of $379M, which averages to $44k across 8600 students.

Have I misinterpreted?

39% of the class of 2023 receives no aid, which provide a good bit of funding, but doesn’t add up to $379M.

And the description for grad funding / fees is a bit cryptic. I suppose as a private institution, its books are mostly private.

But glad to hear you son is living it up. Most high achievers are shut out.

32

Which isn’t the same as your original statement of “…collects $44k from each student.” But never mind.

33

I think you have to look at what you want and how well it’s funded. If the school uses endowment to allow every kid who wants to study abroad do so but you don’t want to do that, does it matter?

If restricted funds support the art history department and the art museum and your passions don’t include art, who cares about the millions supporting it?

Overall, a big endowment could create a lot of possibilities and opportunities. It’s just a question of how they align with your interests. Depends on the person.

There are historical reasons for some endowments. Often, historically women’s colleges had less funding because fewer women had their own resources to direct to them. Schools that emphasized "helping " careers may not have produced as many robber-barons who assuaged their deathbed guilt through philanthropy.

34

I think it’s more important how they invest then the actual number. Since Beloit College was mentioned, my daughter graduates this May. She’s been able to plan trips and activities on their dime. They gave her over $3, 000 last summer to go to Indonesia to do a project. Just filled out a grant sheet. She gave a presentation on what she did when she got back. They are building on campus and in town. Google distribution is coming there also which is big for this small town. They gave her $30,000, merit as a junior transfer. They are using their money wisely… Lol ??.

35

Bard is an interesting outlier, refusing to build an endowment:

“Bard, located about 100 miles outside of Manhattan, is unusual among colleges. It operates its undergraduate program largely without an endowment and plows much of its money – from donors and tuition – into educational and cultural offerings in five states and five countries.“ Quote is from:

https://www.insidehighered.com/news/2014/01/09/donor-dependent-bard-college-faces-future

Then President Botstein said, in the article linked above, that he would rather spend what money he has on education than invest it. “He said Bard is an “educational cause” rather than “some retirement portfolio’s safe pension investment.””

36

The Bard article is interesting. Can’t say I’d sleep well as a parent knowing that financial situation. But some might see the benefits as worth the risk.

37

@homerdog I can answer in regards to Bates. I believe Bates has an excellent financial rating. Bates’ endowment is small for a few legitimate reasons. Bates was founded purposely to serve as a higher education institution for more working class people. It’s location in Lewiston was considered to be more central than some of the other colleges, and at the time, Lewiston was booming. It was also the first coed institution in New England. Finally, Bates has a history of welcoming African American students. This article has some interesting tidbits. https://www.bates.edu/150-years/history/progressive-tradition/chapter-2/

Typically, these groups of people (working class men, women, African Americans) didn’t go into high-earning jobs, and weren’t in a position to donate a lot of money to the college. Bates is also younger than it’s Maine NESCAC counterparts. All of these factors combined lead to a smaller endowment.

Clayton Spencer has massively increased the endowment since she became president and there have been many noticeable additions/renovations on campus since she came in. Yes, the endowment is small, but also remember that endowments at other colleges can fund a lot of stuff that doesn’t necessarily enhance the student experience.

Bowdoin is, of course, an exceptional school, but apparently the golf course and some other entities are funded by the endowment and operate at a loss. (I have no proof of this, btw. It’s the word on the street.) This just illustrates that yes, a large endowment is great, but I definitely don’t think kids at Bates are lacking educationally or otherwise compared to kids at Bowdoin, or any other LAC for that matter.

BTW, Bates is busy building a new science facility, is renovating Gomes Chapel, and has opened several sparkling new buildings in the last few years. They are doing very good things with their small endowment.

38

Regarding Bates College’s financial health from Moody’s:

“Bates College’s A1 rating reflects its very good strategic positioning as a highly selective and nationally recognized liberal arts college with strong student demand and clear, deliberate plans regarding academic programming, fundraising and capital investments. Consistently positive operations are expected to continue, underpinned by growth in net tuition revenue. A significant strengthening in fundraising in recent years, a traditional weakness, will add to financial resources.”

39

Bates has been fundraising aggressively in recent years and probably has the capacity to do so indefinitely. With their selectivity and strong brand, they are well positioned to manage enrollment disruptions. So I wouldn’t look only at the endowment number. The particular circumstances and strengths of a school do matter. But it’s telling that growing the endowment is one of the central goals of recent fundraising even at Bates, with all its relative strengths. Personally, that’d give me some confidence as a parent or applicant.

40

Forbes publishes a “grateful graduates” list. In terms of percent of alumni giving over three years the top 20 are below. These schools range in graduate giving rage between 48% and 34% W&L. Harvard’s alumni giving was listed at 17%.

  1. Wellesley
  2. Williams
  3. Amherst
  4. Bowdoin
  5. Holy Cross
  6. Davidson
  7. Carleton
  8. Colby
  9. Dartmouth
  10. Hamilton
  11. Bates
  12. College of Idaho
  13. Princeton
  14. Randolph-Macon
  15. Haverford
  16. Colgate
  17. Notre Dame
  18. Center
  19. Claremont-McKenna
  20. Washington and Lee