Not so ridiculous. It’s a common misconception that an endowment is just a pile of spare cash. It’s not. It’s a set of investments that produce an annual revenue stream to support ongoing operational expenses. At a standard 4% to 5% annual payout, an endowment of $1 billion would produce an average annual revenue stream of $40 to $50 million. Not peanuts, to be sure, but a major research university typically has an annual budget measured in the billions. And the endowment does more than subsidize undergraduate tuition. Some of it is earmarked for the support of endowed professorships. Some supports research. At most schools, most endowment funds are restricted to specific purposes designated by the donors. At my undergraduate alma mater, for example, about 20% of the endowment is designated for support of the university’s medical school and health systems; there’s just no way those funds could be used to support undergraduate financial aid, but it counts toward the university’s total endowment.
But like many schools, my alma mater makes it easy to designate contributions for support of undergraduate financial aid. It’s as simple as checking off a box on the online donation form. So if you want to support undergrad FA, bingo, it’s done. What other donors choose to do with their money is their business.