Several colleges have seen their lot rise through endowments. The advantages of these benefits to faculty and students are many, especially through scholarships. The biggest drawback with these endowments is that they cannot fund shortfalls in the budget during a crisis. But should endowments influence student’s decision making?
What is College Endowment?
Donors have two options when they donate money to a college. The donor could either create an endowment or make a gift that can be spent immediately. An endowment has some resemblance to a retirement account. The principal generates profit, which has to be spent based on the wishes of the donor. The principal must not get touched ever.
There is also the option of a regular endowment. This gives the college the right to spend the funds at a given time. Most schools do not have a single endowment that gets established by the donors with a fixed aim. They are designated for purposes such as faculty programs, scholarships, and sports.
The Harvard Endowment Story
Endowments date back to 176 A.D, with the first one established by Roman emperor Marcus Aurelius. Harvard College had the first endowment in the United States, having amassed the most significant Academic endowment globally with figures nearing $40 billion.
The Harvard endowment funds are from over 13,000 funds. Most of these funds are used for undergraduate financial aid, professorships, and other activities. Of the lot, unrestricted funds account for below 20% of the sum.
Harvard’s budget has about 35% of the operating budget of the university.
How do College Students Benefit from Endowments?
Endowments get used to sponsor anything the school spends money on. Some of these expenses include student life initiatives, student aid, faculty support, academic support, athletics, and speaker series. Endowment chairs are a popular way academic and faculty programs get supported. These endowments help generate money to complement faculty salaries, underwrite research projects, and give undergraduates financial help.
Data shows that about half of the student endowment spending is focused on student financial aid. About 16% of the endowment fund gets used for underwriting academic tutoring and related matters. Students always look for schools that have provisions for financial assistance.
Endowment Support in the COVID-19 Era
The damaging effect of the COVID-19 pandemic has been unprecedented. This plague has affected the budgets of schools that depend on tuition fees and board revenue. Families also feel hardship due to the loss of jobs and income. This makes one wonder if the schools can leverage the available endowment funds.
Endowment funds must be spent based on the wishes of the donor of the funds. Colleges have adopted temporary measures to increase their spending rate. These rates get determined by the college and can be modified based on needs.
Choosing a College: The Endowment Fund Effect
Do endowment funds have a telling effect on students? The answer isn’t a straight-line relationship. But increased endowments mean more money to spend by the school. Also, the benefits of such funds vary from school to school. This means that the benefits may not be significant.
Students should select a college that best fits their needs and seems perfect for their aspirations.
Endowment funds should not be the only criteria for choosing a college. Ensure you check other indices before committing.