Money Issues at US Universities
Universities in the US may seem a bit expensive when people consider the school tuitions. However, universities in the US offer impressive scholarship opportunities to their students. They allocate large amounts of money to make education more accessible to everyone. The source for this money comes from the huge amount of endowment assets the universities have.
What are endowment assets?
University endowment assets are funds that colleges and universities receive from individuals and organizations as donations. For example, last year Harvard University received $1.4 billion, Stanford University $1.1 billion, and Columbia University $1 billion donations from different sources. The total endowment of a university is the sum of thousands of small endowments donated to the school. Yet, universities cannot use these donations completely freely. The donor may have set up some restrictions as to where this money can go. For example, Michael Bloomberg’s $1.8 billion donation to John Hopkins University is dedicated to financial aid for students. Regardless, the various and large amounts of donations provide great convenience to universities and students. Let’s examine the total endowment assets owned by some universities in the US to see a more concrete financial situation. Harvard University has $53.2 billion, Yale University has $42.9 billion, Stanford University has $37.8 billion, Princeton University has $37.7 billion, Massachusetts Institute of Technology (MIT) has $27.7 billion endowment assets.
What is the benefit of endowment assets for students?
Endowment assets enable schools to offer a better, more accessible level of education. Reliable long-term support provided by endowments is used to increase aid to students, make commitments to faculty members, develop education programs, invest in new technologies, maintain the school’s facilities, and support research. In 2020, 48 percent of university endowment spending was used for student financial aid, 17 percent for academic programs, and 11 percent for faculty positions.
Another important indicator of the possible opportunities is the amount of endowment per student. For example, Princeton University has $2.86 million endowments per student, Yale University has $1.86 million per student, Stanford University has $1.56 million per student, Harvard University has $1.55 million per student. These numbers give clues about the unique opportunities these schools can offer to their students. To give an example, Grinnel College has more than one million dollars in endowment assets per student. If this school’s one-million-dollar investment yields an annual return of 5 percent, that would equal $50,000. In other words, the school can cover the tuition fee of one student without losing any money.
If the schools are rich, then why do they charge their students?
Actually, they do not charge their students the full price. For instance, the average price of the 10 private institutions with the highest endowment assets is around $22,000, but this price is 70% less than the posted term bill, which is around $73,000. In other words, these prices are quite low due to the amounts that the schools themselves cover. In addition, the schools can easily meet the remaining part of the tuition fee for their more disadvantaged students or their successful students. Universities are very generous in that sense. Their aim is not profit, they spend their money very generously considering the opportunity equality for all students.
For example, Harvard University, which has the largest endowment asset in the US, offers a large amount of student financial aid to its students. It does not charge tuition fees for students whose family income is less than $65,000. And, families with incomes between $65,000 and $150,000 will contribute from 0-10% of their income. Furthermore, 55% of undergraduate students receive need-based Harvard scholarships. Another example is that Washington University allocated an extra $1 billion in student financial aid. Dartmouth College announced new investments such as eliminating any expected parental contribution for families making up to $65,000, an increase in the hourly minimum wage for student workers from $7.75 to $11.50, and a bonus of $1,000 for graduate students who currently receive stipends from the university. MIT has announced that it will increase its endowment spending by 30% in 2023. This amount, which corresponds to approximately $286 million, will be used to increase aid to students, modernize campus facilities, growing its investments in core research infrastructure.
To summarize, universities in the US are in a very strong financial position. The large amounts of endowment assets give schools the power of independence and self-sufficiency. Schools do not hesitate to offer this benefit to their students since they generally do not seek profit. They provide high amounts of scholarships to their students. Therefore, although the tuition costs in the US may seem intimidating at first, thanks to this system, the universities reduce the amounts to reflect a lower out-of-pocket cost per student using scholarships. With an impressive application, every student can receive high scholarship and benefit from the high education level in the US. Since the universities have the financial power, even small factors on an application can change the amount of scholarship given. Due to this reality, the help of an expert will have a great effect on the amount of scholarship the student will receive.
Sources:
https://www.acenet.edu/Documents/Understanding-College-and-University-Endowments.pdf
https://college.harvard.edu/guides/financial-aid-fact-sheet
https://www.bestcolleges.com/blog/university-endowments-college-decision/
Furkan Kan
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