Tag: Endowment

  • Texas Technical College Gets “Transformational” Endowment

    Texas Technical College Gets “Transformational” Endowment

    Texas State Technical College is striving to fill the state’s workforce gaps, but college leaders say the institution has been hampered by out-of-date facilities and a lack of funding to expand.

    The technical college has historically been entirely reliant on state funding, which can fluctuate. Unlike the state’s community colleges, it’s not allowed to levy taxes or issue bonds. And yet, the institution is bursting at the seams with 45 out of its 127 programs at capacity this semester across its 11 campuses. Enrollment at the institution has risen steadily over the last few years, jumping up to 13,682 students this year from 12,518 last year.

    But this past election cycle, Texas voters gave the institution a rare gift for a technical college—an $850 million endowment.

    In November, almost 70 percent of Texans backed a constitutional amendment to create an endowment for TSTC out of the state’s general revenue fund, which will include annual disbursements for capital improvements. College leaders expect up to $50 million from the endowment each year, said Joe Arnold, the college’s deputy vice chancellor of government relations.

    He called the endowment “transformational for the institution and for the state of Texas.”

    “Texas has grown and grown and grown in businesses and population over the last 20 years, and it’s going to continue to grow,” Arnold said. “You’re going to have to have the workforce to meet the demand, and this is going to help us do that.”

    This is the second time TSTC has sought to get an endowment on the ballot. In 2023, an attempt to establish a $1 billion endowment for the college died in conference committee, The Texas Tribune reported.

    An Unusual Advantage

    Endowments at two-year institutions are rare compared to their four-year counterparts, but they aren’t unheard of. Southwest Wisconsin Technical College, for example, recently used its $700,000 Aspen Prize for a student success plan endowment run by its foundation. Ivy Tech Community College’s foundation also raises money for endowments to pay for student scholarships and other needs.

    Some states have also provided such funds for their public higher ed institutions. Alabama, for example, has an education trust fund for its institutions, including two-year and four-year colleges. Tennessee also put lottery reserves in an endowment to sustain Tennessee Promise, its free community college program. Texas’s Permanent University Fund also allows the University of Texas and Texas A&M systems to generate money from land leased by oil and gas companies.

    But still, “most public institutions don’t have state-provided endowments like that,” said Robert Kelchen, head of the Department of Educational Leadership and Policy Studies at the University of Tennessee at Knoxville. The advantage of an endowment is college leaders “know that the funds are going to be there and they have some level of control over how it gets drawn down.” But it’s a hard model for other states to replicate unless they have “a windfall [of] one-time funds” they’re willing to devote, without pulling back on state appropriations.

    “Because of a lot of the politically conservative legislation coming out of Texas, I think the perception is that Texas doesn’t financially support higher ed, but they do, and they’ve done some pretty innovative things in finance,” Kelchen added.

    Arnold said it makes a real difference knowing the institution has a set amount of money coming in each year.

    “We can plan for growth” and “plan ahead,” Arnold said.

    Support and Opposition

    Plans for the endowment had the backing of a wide range of employer groups, including the Texas Association of Manufacturers, the Texas Association of Builders and the Texas Economic Development Council, among others.

    It also drew opponents, including the Libertarian Party of Texas and a few other groups that support limited government. These organizations raised concerns that creating a separate tranche of long-term funding for TSTC could get in the way of its fiscal oversight.

    For example, Texas Policy Research, a research organization that seeks “liberty-based solutions” to improve Texas governance, recommended Texans vote no—arguing that “locking funding mechanisms into the Constitution erodes transparency and limited government” and that “programs should be funded through the regular budget process, where lawmakers justify spending every two years.”

    But Arnold stressed that the money can only be used for specific purposes, such as renovations, infrastructure improvements and buying new land, buildings and equipment for programs.

    Those types of funds are sorely needed, Arnold said. TSTC was founded 60 years ago and its flagship campus is on an old U.S. Air Force base. The funding will allow the college to update its “rather old facilities” and move forward with plans to add new campuses in three additional counties.

    Defenders of the proposition also argue TSTC’s funding model holds it accountable. The state tracks graduates’ wages five years after they leave TSTC, and state money is doled out to the college based on their wage gains. Select programs also refund students’ out-of-pocket tuition costs if they don’t get a job interview in their field of study within six months.

    The college’s funding depends on “graduates securing good jobs,” Meagan McCoy Jones, president and CEO of McCoy’s Building Supply, wrote in an op-ed in The Austin American-Statesman defending the endowment proposal. “That ensures accountability to students, taxpayers and employers alike.” She told voters the endowment would “strengthen our economy, support families with life-changing education and keep our state on a path of growth and innovation.”

    Since the funding formula was implemented in 2013, the college has discontinued programs that didn’t lead to well-paying or in-demand jobs.

    “It made us really work hard with our employers to understand what the needs were,” Arnold said.

    He believes the endowment is the next step in continuing to improve the institution.

    “We’re excited to be able to increase our capacity and put more people to work in Texas,” he said. “That’s kind of our thing.”

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  • Albright College declares ‘remarkable’ turnaround as it borrows $15M from endowment

    Albright College declares ‘remarkable’ turnaround as it borrows $15M from endowment

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    Dive Brief:

    • Albright College is set to borrow $15 million from its $65 million endowment after receiving approval from its board of trustees. 
    • In a Monday statement, the private Pennsylvania institution touted the board’s sign-off on the loan as a show of “confidence in Albright’s direction” and said it plans to use the capital to “strengthen the College, enhance enrollment, and secure Albright’s future.”
    • Albright projects a $10 million operating surplus for the 2025-26 fiscal year after recent years of expanding deficits and concerns about cash levels.

    Dive Insight:

    Borrowing from an endowment is often a red flag that a college is burning through its last available resources. In Albright’s case, the college says it is using the money to solidify a long-term turnaround. 

    Not long ago, the college was issuing signs of distress. When it requested legal permission to tap its endowment for capital, Albright noted that its net assets took a $46 million hit between 2022 and 2024. That pushed the college to take “significant measures to lower its deficit,” including cutting 53 employee positions, according to a Spotlight PA report. 

    In fiscal 2023, Albright reported a $20.3 million total deficit, well more than double the prior year’s deficit. Its deficit rose even higher, to $23.1 million in fiscal 2024. 

    Those fiscal woes followed years of enrollment declines. Between 2018 and 2023, fall headcount shrunk by nearly 15%, according to federal data. 

    For 2025, the college has 1,150 students, an increase of about 50 students compared to last year, while first-year and transfer enrollment increased 21.5% to 469 students, according to an Albright spokesperson.

    As it sought capital to fund a turnaround, the college couldn’t find a bank loan with manageable interest rates. And so it turned to its endowment.

    The $15 million loan will be drawn down as needed and “comes with a clear repayment plan that includes defined terms, scheduled payments, and quarterly reporting for full accountability and transparency,” Albright said. Per the authorization terms, the repayment period extends 20 years and the loan will carry a minimum of 3% interest. 

    It’s also being combined with major new gifts as well as $4 million in grant funding from the state Redevelopment Capital Assistance Program, according to the release. 

    With the new funding, Albright is investing in capital projects and deferred maintenance. The “centerpiece” of those improvements, it said, is an expansion and renovation of the college’s central library. The building, which is over 60 years old, will get a student support and disability center, a writing and tutoring center, expanded cultural and technological resources, new conference space and a cafe. 

    With the investments, budget stabilization and recent enrollment growth, Albright sounded a triumphant note in announcing the loan, describing a “remarkable financial turnaround” and gearing up for growth ahead.

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  • Senate Outlines Plans for Endowment Tax Hike

    Senate Outlines Plans for Endowment Tax Hike

    The Senate Committee on Finance is proposing to raise the endowment tax on private colleges and universities, but not to the extent the recently passed bill in the House calls for, according to a draft plan released Monday.

    The less dramatic excise tax tops out at 8 percent for the wealthiest institutions, compared to 21 percent in the House plan, but the Senate’s proposal keeps the House’s tiered rate structure, with some colleges paying more depending on the value of their endowment per student. The current rate for affected institutions is 1.4 percent.

    Institutional lobbyists and college presidents have warned that the sharp increase in the House plan would hurt their ability to provide need-based aid and be debilitating for some low-income students. Although the Senate’s iteration offers some relief, it’s not as much as they hoped for.

    “The Senate version of the so-called endowment tax is better, but it’s still bad and harmful tax policy,” said Steven Bloom, assistant vice president of government relations​​ at the American Council on Education. “They’re going to take money that would likely have been devoted to financial aid and research and other academic purposes on campus, and they’re going to send it to Washington, where it’s used largely for purposes unrelated to higher education.”

    The Senate committee’s plan, like the House proposal, also still exempts religious colleges and requires colleges to take international students out of the total roll call when calculating the endowment’s value per student. If passed, this stipulation would increase the tax rate significantly for institutions like Columbia University that have 20 percent or more foreign students.

    The finance committee legislation, which also includes cuts to Medicaid that could put pressure on states’ budgets, is part of a broader package of bills that would make significant changes to higher education policy and cut spending and taxes in order to pay for President Donald Trump’s priorities, which include increased deportations and tax cuts for the wealthy. The House version of the reconciliation bill known as the One Big Beautiful Bill Act passed by a one-vote margin last month. Senators are aiming to pass their version by July 4 and only need 51 votes thanks to the reconciliation process, as opposed to the traditional 60 votes.

    Unlike the House proposal, colleges that don’t accept federal financial aid would be exempt from the tax entirely. Hillsdale College president Larry Arnn blasted the House plan in an op-ed last month as an attack on the institution’s independence. (Hillsdale doesn’t participate in the federal financial aid system.)

    “The resources entrusted to Hillsdale College are not drawn from the public treasury,” Arnn wrote. “They are given freely by those who believe in our mission. To tax these gifts is to tax philanthropy itself—to burden those who would lift burdens. It is to weaken those who do good precisely because they are free to do it. It weakens them and strengthens the federal government, reversing the order intended by our Founders.”

    Hillsdale wasn’t the only college that pushed back on the rate increase. In recent weeks, private institutions big and small have pitched their own alternatives to Congress.

    Some of the largest and wealthiest research institutions that would be affected by the tax—such as Harvard, Stanford and Princeton Universities—pledged to spend 5 percent of their endowment’s value annually in exchange for a much lower 2.4 percent endowment tax rate, The Wall Street Journal reported. Bloom agreed that if the tax is to increase, he would like to see some kind of incentive introduced, like financial aid spending thresholds, to mitigate the tax rate.

    “They’ve created no incentive for schools to behave in ways that we believe that they would want schools to behave,” he said.

    Other institutions suggested that the tax rate should be based on what percentage of endowment revenue an institution spends each year on student financial aid or how many students enrolled come from a low-income background and receive the federal Pell Grant.

    A coalition of 24 smaller institutions, including Grinnell and Davidson Colleges, which would be hit hardest by the House endowment tax, proposed adjusting the excise rate based on the number of students enrolled. Colleges with fewer than 5,000 students have a different economic model than an institution with 30,000, they said.

    Grinnell president Anne Harris, who spent part of the last week educating lawmakers about the harm of the increased endowment tax, said Monday evening that the Senate plan still disproportionately burdens smaller institutions. She noted that her institution will likely still face the maximum 8 percent tax.

    “I deeply appreciate all the work that’s gone on and clearly all the consideration that has informed what we’re seeing this afternoon, but having said that, the current proposal still disproportionately burdens small colleges,” Harris said. “You’re going to find a school like Grinnell College with 1,700 students, a small college in a rural setting, bearing a much greater burden of this tax than a research institution in a large city.”

    She could only speculate that senators stuck with a tiered structure for simplicity, but added that “the simple fix” would be to make a stipulation that places all small private colleges in the lowest bracket and maintain the current 1.4 percent tax rate.

    Harris is hopeful that there will still be further opportunities for compromise and said she will continue to advocate for small liberal arts institutions like her own. But in the meantime, her executive team will also continue to plan out all the possible scenarios to figure out the best course of action to protect student aid if the bill passes as it currently stands.

    “All responsible options that provide the most money for financial aid and mission fulfillment are on the table as part of our scenario planning with the board,” she said.

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  • House Republicans Propose Significant Endowment Tax Increase

    House Republicans Propose Significant Endowment Tax Increase

    Efforts to raise endowment taxes are in motion as the House Ways and Means Committee reportedly plans to unveil changes next week that will increase rates and include more colleges.

    Education leaders have worried about such a rate increase for months. Now the GOP-led committee is expected to propose raising endowment excise taxes from 1.4 percent to up to 21 percent, depending on endowment value per student, Punchbowl News, Politico and other outlets reported. 

    The proposed endowment tax would only apply to private institutions, as it does currently.

    Under the proposed formula, institutions with endowments of $750,000 to $1.25 million per student would reportedly be hit with 7 percent excise tax. That number would climb to a 14 percent tax for colleges with endowments valued at $1.25 to $2 million per student. Colleges at the highest level with endowments of $2 million or more per student would pay 21 percent. (Currently, colleges with endowments worth $500,000 per student or more pay the 1.4 percent tax.)

    The specifics of the tax increase aren’t final and could shift before the committee’s hearing Tuesday.

    Republicans are preparing to move forward with endowment tax increases as part of a broader effort known as reconciliation to cut billions in federal spending and pay for President Donald Trump’s priorities. Other House committees have unveiled their proposed cuts for reconciliation, including a sweeping plan to upend the student loan system, but the Ways and Means bill is crucial to this process.

    GOP motivations for the tax increase appear to be twofold in that it would help fund tax cuts and serve as a punitive measure for colleges they believe have gone “woke.” In 2023, a total of 56 universities paid roughly $380 million in endowment excise taxes.

    “Seven years ago, the Trump tax cuts sparked an economic boom and provided needed relief to working families,” committee chairman Rep. Jason Smith, a Missouri Republican, said in a Friday statement. “Pro-family, pro-worker tax provisions are the heart of President Trump’s economic agenda that puts working families ahead of Washington and will create jobs, grow wages and investment, and help usher in a new golden age of prosperity. Ways and Means Republicans have spent two years preparing for this moment, and we will deliver for the American people.”

    The proposal comes amid the president’s full blown attack on higher education, which has seen the federal government clamp down on research funding, go after colleges for alleged antisemitism, take aim at diversity, equity, and inclusion programs, and attempt to deport international students.

    Since the 1.4 percent endowment excise tax was passed in 2017 during the first Trump administration higher education leaders have long worried that the president would raise it in his second term. 

    As universities increased their lobbying efforts in the early days of Trump 2.0, the potential increase to the endowment tax has been a key concern. Recent lobbying reports show that Harvard University, which has the largest endowment, recently valued at more than $53 billion, Princeton University, Northwestern University, and multiple others, have pressed Congress on the issue. (Northwestern’s chief investment officer said last week that the potential increase would be “destructive.”)

    Smaller institutions, some of which had never hired federal lobbyists before 2025, have also raised concerns about how expanding the endowment tax would harm their educational mission.

    According to an analysis from James Murphy, director of career pathways and post-secondary policy at Education Reform Now, only three universities would pay the highest rate at 21 percent – Princeton, Yale University and the Massachusetts Institute of Technology. Another 10 universities, including Harvard, would get hit with the 14 percent rate.

    An analysis published last month by the investment firm Hirtle Callaghan noted that recently proposed changes to the endowment excise tax would “significantly broaden the universe of colleges and universities that pay the tax from large, wealthy institutions to smaller, regional ones.” That analysis warned that such increases “threaten to do irreparable damage to many schools which are significantly weaker financially than the schools paying the current tax.”

    Multiple higher education associations have previously expressed opposition to the increase. 

    Last fall, American Council on Education president Ted Mitchell sent a letter to Congress, co-signed by 19 other associations, calling for the repeal of the existing endowment tax, arguing that “this tax undermines the teaching and research missions of the affected institutions without doing anything to lower the cost of college, enhance access, or address student indebtedness.”

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  • Johns Hopkins Taps Endowment Earnings for Research Funding

    Johns Hopkins Taps Endowment Earnings for Research Funding

    Johns Hopkins University is turning to earnings on its $13.2 billion endowment to preserve research and protect researchers, trainees and staff amid drastic cuts to federal funding, The Baltimore Banner reported Monday.

    Since President Donald Trump started his second term in January, federal agencies have terminated or stalled billions in research grants to colleges and universities in a move scientists and higher education advocates warn will decimate university budgets, slow scientific innovation and hurt local economies. Johns Hopkins estimates that it has so far lost 100 federal grants, while others remain under review by the Trump administration to ensure they align with the federal goal of rooting out diversity, equity and inclusion, among other things. As a result, the university said it’s approaching $1 billion in federal funding losses so far this year.

    While Trump and his allies have suggested universities can use their endowments to fund research, officials at Johns Hopkins—which received more funding from the National Institutes of Health in 2024 than any other university—said Monday that’s not so easy.

    “It’s a common misconception that universities can simply ‘use the endowment’ in moments like this,” university officials said in a statement. “The reality is that most of our endowment is made up of legally restricted funds designated by donors for specific purposes. The principal of the endowment must legally be preserved in perpetuity—to support Johns Hopkins’ mission now and for future generations—and cannot be drawn down like a reserve fund.

    “That said, we are using flexible resources—some of which are tied to endowment earnings—to help sustain critical research in this moment of uncertainty.”

    Johns Hopkins hasn’t disclosed how much total earnings it plans to take from its endowment to help faculty and students continue their research, according to a news release.

    But in the plan released Monday, it said individuals will receive up to $100,000 for delayed grants or $150,000 for terminated grants during a 12-month period. The university will also offer a year of support to Ph.D. students completing their dissertations and postdoctoral fellows who had been expecting support from federal grants that were terminated, as well as expand a program that offers editorial support for grant proposals and journal articles and another that enables undergraduates to work with faculty mentors on original research or projects.

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  • Endowment returns climb amid fiscal uncertainty

    Endowment returns climb amid fiscal uncertainty

    Endowment returns climbed in fiscal year 2024, offering a boost to university coffers at a time when even the richest institutions have been gripped with financial uncertainty amid the Trump administration’s attempts to freeze federal funding and change research reimbursements.

    One-year returns averaged 11.2 percent for FY 2024, according to the latest study by the National Association of College and University Business Officers and the Commonfund Institute—up from 7.7 percent in FY 2023 and negative returns in FY 2022.

    The overall 10-year return averaged 6.8 percent, the study found.

    In a press call Tuesday, Commonfund Institute executive director George Suttles noted that FY24 “was characterized by a strong U.S. economy, steady consumer spending, strong employment data, including higher wages, easing inflation accompanied by the prospect of lower interest rates, reasonable energy costs” and a prosperous technology sector, among other factors.

    The endowment study also noted increased philanthropy in FY 2024. Donors contributed $15.2 billion in new gifts to university endowments included in the study—a nearly 20 percent bump from the $12.7 billion donated in FY23.

    Altogether, 658 institutions with combined endowment values of almost $874 billion participated in the voluntary survey, with the median endowment value at $243 million. Nearly a third (30 percent) of the respondents reported an endowment valued at $100 million or less.

    “While a handful of institutions receive wide public attention for the size of their endowments, the vast majority of colleges and universities are working with a much smaller set of resources,” NACUBO CEO Kara Freeman said on Tuesday’s press call. “And as we review the total market value, 86 percent was held by endowments with more than $1 billion in assets.”

    NACUBO has conducted annual college endowment studies since 1974. This year’s iteration had slightly fewer participants than the 688 who responded last year.

    Top Endowments

    The nation’s richest institutions kept their status in this year’s study, with no changes among the top 10 and only minor fluctuations among the 25 universities with the largest endowments.

    Harvard University is still the nation’s wealthiest institution with an endowment of almost $52 billion, followed by the University of Texas system ($47.4 billion), Yale University ($41.4 billion), Stanford University ($37.6 billion) and Princeton University, with just over $34 billion.

    Endowment values grew at all of the five wealthiest universities except Princeton.

    Though average annual one-year returns for FY 2024 were 11.2 percent, the nation’s top 25 wealthiest universities mostly missed that mark. The outlier among those was Johns Hopkins University, which had a nearly 24 percent one-year return in FY 2024.

    In all, 149 of the 658 participating institutions reported endowments valued at or over $1 billion.

    Endowment Performance

    Like last year, smaller endowments performed better on one-year returns than large ones. Institutions with endowments valued under $50 million saw an average return of 13 percent, while those with endowments over $5 billion had the lowest one-year returns, with an average of 9.1 percent.

    However, larger endowments outperformed smaller ones over the long term.

    Across the 10-year mark, institutions with assets above $5 billion reported returns of 8.3 percent, compared to 6.5 percent for those with less than $50 million. Large endowments also fared better on 25-year returns, reporting 8.5 percent compared to 4.5 percent for those under $50 million.

    On the spending side, endowments funded an average of 14 percent of the annual operating budgets at the institutions surveyed, up from 10.9 percent in FY23. That figure was slightly higher at institutions with multibillion-dollar endowments.

    Study respondents spent a total of $30 billion from their endowments in FY24, up from $28.4 billion in FY23. The most common use of endowment dollars was for financial aid.

    Issues Affecting Endowments

    With the return of Donald Trump to the White House, college leaders have publicly and privately fretted about the likelihood that Republicans will ratchet up endowment taxes.

    During his first term, the Trump administration passed an endowment excise tax of 1.4 percent on investment income at universities with endowment holdings of at least $500,000 per student and a minimum of 500 students. Earlier this month, Republican congressman Mike Lawler proposed raising that rate to 10 percent and changing the per-student endowment threshold from $500,000 to $200,000, which would affect more institutions. Another legislative proposal would raise that rate to 21 percent.

    In a question-and-answer session on Tuesday’s press call, the tax issue was the first to arise.

    Freeman said NACUBO “remains opposed to the endowment excise tax,” arguing that it “diminishes the charitable resources that would otherwise be available” to universities for financial aid, student services, academic support, research and innovation, among other uses.

    Mark Anson, CEO of Commonfund, said the tax could hit some universities hard, including many Ivy League institutions whose robust endowments make up a higher percentage of their operating budgets.

    On the press call, Inside Higher Ed asked about the fallout of last spring’s pro-Palestinian protests, in which students at numerous universities demanded divestment of their endowment holdings from Israel or companies profiting off the war in Gaza. While the study did not touch on that issue, experts noted the protests sparked questions from colleges; Anson said some asked for more information about their holdings.

    While colleges have largely rejected student divestment demands, one win for protesters has been more transparency around institutional investments.

    “What’s come out of this is a continued push for transparency around how endowments are invested,” Suttles said. “Thinking about transparency for stakeholders is an important part of this work. I am encouraged by the calls for transparency, but in terms of actual investment or divestment strategies and a shift in that, we haven’t seen much from our perspective.”

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