Tag: Endowments

  • Big university endowments grew 11.5% in FY25, TIFF says

    Big university endowments grew 11.5% in FY25, TIFF says

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    Dive Brief:

    • Amid volatile markets and shifting investment strategies, big U.S. university endowments posted their second straight year of double-digit gains, according to an analysis from TIFF Investment Management. 
    •  Endowments worth over $1 billion that have reported earnings so far made average returns of 11.5% in fiscal 2025, TIFF found. That’s on top of 11.2% average annual returns experienced sectorwide the previous year, according to the National Association of College and Business Officers-Commonfund endowment study. 
    • The strong earnings from college endowments come as Republicans aim to convert more of those funds into government revenue. “The Endowment Tax is coming,” the TIFF report noted.

    Dive Insight:

    Of the colleges that have reported their endowment earnings, the University of Wisconsin-Madison posted the highest return rate at 16.2%, followed by one of the University of California’s fund pools (15.8%) and the University of Michigan (15.5%).  

    For now, endowments have enjoyed strong returns and minimal, if any, federal taxes. The TIFF report attributed strong growth in fiscal 2025 — which ended in the summer for universities that recently reported — to outperforming private investments, such as in private equity and venture capital. Within private equity, investments in growth and pre-IPO companies in particular helped boost earnings. 

    For example, the Massachusetts Institute of Technology’s endowment — the top-performing among a group of elite colleges that also includes the Ivy League and Stanford University, with a return rate of 14.8% — had a little over a third of its assets in private equity, according to TIFF. University of Michigan had 9% in private equity and 28% in venture capital. 

    Endowment returns were also helped along by strong performances in both equities and bonds in what TIFF described as “an unusual year,” with both safer and higher-risk securities yielding returns amid broad economic concerns. International equities, artificial intelligence-related stocks, like Nvidia, and other diversifying investments such as gold also gave endowments a lift, TIFF said. 

    Endowment returns will face new pressure in 2026. The massive spending bill signed by President Donald Trump this summer is set to raise taxes next year on the richest private university endowments by multiple percentage points. 

    The current endowment tax — a flat rate of 1.4% enacted in 2017 — only applies to the wealthiest few dozen endowments in the country. 

    The spending bill creates a tiered tax system for colleges with 3,000 or more tuition-paying students that starts at 1.4% on returns for endowments valued at $500,000 to $749,999 per student. It then jumps to 4% and 8% based on endowment assets per student. 

    For the largest endowments, that translates into a tax bill of many millions of dollars per year. Harvard University, for example, anticipates it will pay $300 million a year to the government, CFO Ritu Kalra said in October. That compares to $44 million in taxes and other fees in fiscal 2024.

    “That means hundreds of millions of dollars that will not be available to support financial aid, research, and teaching,” Kalra said in an official Q&A following the release of the university’s annual financials. 

    Yale University President Maurie McInnis said in July the tax will cost the institution around $280 million in its first year and likely more after that. 

    Even universities with smaller tax bills are also anticipating financial pain. 

    In July, Washington University in St. Louis’ leader cited in part an estimated $37 million in additional costs from the new taxes in explaining the need for budget measures. WashU has laid off 316 staffers and eliminated another 198 unfilled positions since March.

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  • The Largest American University Endowments (Adjunct Noise)

    The Largest American University Endowments (Adjunct Noise)

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  • No, Endowments Are Not the Answer to Federal Attacks on Higher Ed

    No, Endowments Are Not the Answer to Federal Attacks on Higher Ed

    Learn more about how endowments support students and research: Contact Congress, read our brief Understanding College and University Endowments, and explore our Tax Resource webpage.

    The Trump administration has launched an aggressive and unprecedented attack on higher education—unlike anything we’ve seen before. Billions of dollars in federal support for vital research on diseases like cancer, Alzheimer’s, and HIV disappeared overnight. The law and longstanding due process protections for institutions have been disregarded.

    These sweeping actions have harmed every type of institution—and, more importantly, the students and communities they serve. As a consequence, colleges and universities have been forced to freeze hiring, lay off staff, eliminate programs, halt life-saving clinical trials, and pause graduate admissions—all within the administration’s first 100 days.

    Some traditional supporters of higher education, as well as frequent critics, suggest that there is an easy way out: colleges and universities should simply use their endowments to plug these sudden financial gaps. This idea has come from across the political spectrum—from Republican Rep. Andy Harris of Maryland and the conservative-leaning American Enterprise Institute to liberal New York Times columnist Ezra Klein and the left-leaning think tank New America.

    These calls to “just spend the endowment” tend to resurface during crises, as seen during the 2008 financial crisis and the COVID-19 pandemic. If endowment spending increased then, why can’t the same thing happen now? It sounds simple, but it’s wrong.

    First, while institutions have increased endowment spending during major emergencies, the billions of dollars in research funding cuts being proposed now dwarfs anything confronted previously. In 2023, the federal government provided nearly $60 billion on research funding, compared to total endowment spending—financial aid, research, student services, academics, operations, and more—of about $35 billion, according to IPEDS data.

    Second, during these recent crises, institutions didn’t have to shoulder the burden alone. They acted in partnership with the federal government and other stakeholders to weather the storm. That shared response made a difference. In 2025, however, the federal government isn’t a partner—it’s the source of the crisis. And unlike past emergencies, there is no clear end in sight, leaving open the potential of a devastatingly long-term drain on endowments.

    Third, endowments are not like a single checking or savings account that can be dipped into at will. Instead, they consist of up to thousands of individual accounts, the vast majority of which are legally restricted by donors. These restrictions often designate support for specific purposes like expanding financial aid, supporting the chair of a particular academic discipline, or fueling groundbreaking medical and technological research. Most endowment spending boosts access for low-income students and academics. The 2024 NACUBO-Commonfund Study of Endowments found that almost about two thirds of endowment spending goes directly to financial aid and academics, and institutions with large endowments are the most likely to provide need-blind admissions, meet students’ full financial need, and offer no-loan financial aid packages. These funds cannot legally be redirected to make up for canceled government funding—or bail out reckless federal policy decisions.

    Even the wealthiest institutions don’t have enough unrestricted funds to routinely absorb massive, sustained cuts without irreparably draining their endowments. Endowments are managed like marathon runners: they expend energy strategically, knowing they can’t sprint the whole race. There are times to surge—such as during the pandemic—but that pace can’t last. Try to sprint the whole race, and the endowment, like a runner, collapses. Reckless financial decisions today won’t just hurt current students—they’ll shortchange the next generation as well.

    For this reason, endowment spending is closely monitored, regularly audited, and guided by strict policies designed to ensure long-term sustainability. Colleges and universities spend what is both prudent and legally permitted each year while preserving benefits for future students. According to the 2024 NACUBO report, institutions’ average effective spending rate was nearly 5 percent. That figure isn’t arbitrary. It’s shaped by state laws, donor intent, and sound financial stewardship. Some states actually impose legal restrictions on the percentage of endowment spending each year. For example, in Ohio, spending more than 5 percent in a given year could expose an institution to legal liability.

    Misconceptions about endowments aren’t just misleading—they threaten the very people and programs that they were created to support: scholarships, research, academic excellence, and the futures of countless students and faculty. And they divert attention from the real issue: an unprecedented assault on American higher education.

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  • Endowments grew 4% in FY2024 on investment returns, donations

    Endowments grew 4% in FY2024 on investment returns, donations

    Dive Brief:

    • The value of college endowments collectively grew 4% in fiscal 2024 thanks to a combination of strong investment returns and a rise in donations, according to the latest data from the National Association of College and University Business Officers and asset management firm Commonfund.
    • The total value of the endowments of the 658 institutions that participated in the study reached $873.7 billion for the year, with a median endowment value of $243 million. Of the survey respondents, 144 had endowments of $1 billion or more, comprising roughly 86% of the total value reported.
    • Gifts to endowments rose to $15.2 billion from $12.7 billion last year, according to the study. Draws on funds rose as well, by 6.4% year over year to $30.1 billion in spending at institutions. 

    Dive Insight:

    Investment returns remained strong through 2024, supporting institutions’ spending from their endowments. Ten-year average annual returns stood at 6.8% for fiscal 2024, down slightly from last year but still robust enough to make spending with endowment money “possible and prudent,” NACUBO and Commonfund said in a press release. The average one-year return hit 11.2%, a 3.5 percentage point increase over 2023.

    On average, endowments funded 14% of institutions’ operating budget, up from 10.9% in fiscal 2023, according to the NACUBO-Commonfund study. 

    Student aid represented the largest share by far of endowment spending, at 48.1%, followed by academic programs and research at 17.7%. 

    Colleges spend the largest share of endowment funds on student financial aid

    Endowment spending distribution by function in fiscal 2024

    “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,” NACUBO President and CEO Kara Freeman said in a statement.

    The list of the largest endowments looks very similar to that of years past. In the No. 1 spot, once again, is Harvard University, with a value of about $52 billion, up 5% from last year. Harvard is followed by the University of Texas System ($47.5 billion) and Yale University ($41.4 billion). 

    Harvard University has the largest endowment — again

    Endowment sizes in fiscal 2024 by total market value and value per student

    Those wealthy endowments are once again in the spotlight as President Donald Trump and Republicans eye higher tax rates on colleges’ investment funds.

    During Trump’s first term, he signed a tax bill containing a 1.4% levy against the investment income of private colleges whose endowments are valued at $500,000 or more per student. House Republicans this year floated a plan to jack that rate up to 14%. Others have proposed yet higher rates, including 21%, to be in line with the same rates paid by for-profit corporations. 

    NACUBO addressed the politics around endowments in its release of the latest data. 

    Pointing to how institutions use their endowments on student aid and other core functions, Freeman said, “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.” 

    Mark Anson, Commonfund CEO and chief investment officer, said at a Tuesday media briefing that institutions would have to take a close look at post-tax investment returns should higher rates become law. That could in turn push many to look at more aggressive investing strategies, while others would likely see the share of their operations financed by endowments fall, Anson added.

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