College students, especially those from underrepresented populations, have been one of the most economically affected groups of the COVID-19 pandemic. Rising housing costs and inflation have made it harder for students to support themselves while attending school, even if they receive significant financial aid. Meanwhile, colleges and universities across the nation saw record gains in their endowments — and they’re using a portion of these earnings to help underserved students in need.
With the U.S. stock market and venture capital investments making a strong recovery following the start of the pandemic, many higher education institutions’ endowments had their best annual performance since 1986, Bloomberg News reports. The median return for the 2021 fiscal year, which ended in June, was 27 percent, according to data published by Wilshire Trust Universe Comparison Service. The largest endowments, or those with assets over $500 million, had an average gain of 35 percent.
The Massachusetts Institute of Technology, which saw a 55.5 percent return on its investments, is just one institution that has pledged to use some of its endowment funds to support struggling students. Specifically, the school plans to increase financial assistance for graduate students to offset rising housing costs and improve campus facilities and digital learning experiences, according to a news release.
With the U.S. stock market and venture capital investments making a strong recovery following the start of the pandemic, many higher education institutions’ endowments had their best annual performance since 1986, Bloomberg News reports.
“Even in this challenging year, higher education institutions reinforced their commitment to students and used their endowments exactly as designed: to provide ongoing, predictable — and even increased — support for their educational missions, a commitment that endowment leaders work to ensure will extend to future generations,” said Susan Wheallar Johnston, president and chief executive officer of the National Association of College and University Business Officers (NACUBO), in a February 2021 news release.
NACUBO and the Teachers Insurance and Annuity Association of America release an annual study on the endowments of more than 700 higher education institutions. The most recent report, published in February 2021, measured responses from 2020. Overall, surveyed institutions increased endowment spending by 4 percent from 2019 to 2020, totaling about $23.3 billion, with nearly half of the additional dollars being used for financial aid. Furthermore, the majority, or 70 percent, of the schools increased their endowment spending. On average, individual institutions allocated close to $3.3 million more in the 2020 fiscal year than in 2019.
“This increase in spending reflects the success of governance policies focused on intergenerational equity,” Johnston said. “With solid fiscal management, endowments can consistently support institutions with more revenue each year than the previous year. Endowments, year in and out, are an essential tool for enabling enrollment and encouraging student success. They also are key instruments in college and university long-term planning goals.”
The NACUBO release states that the findings “suggest higher education institutions could be facing a long-term era of muted returns that will encourage a fresh look at financial and investment strategies if they are to continue to meet critical return targets … .” This reconfiguring of strategies is also essential for colleges to be able to provide “urgently needed support” for underserved students, according to the association.
Experts have pointed out that despite any profits made in recent months, endowment gains do not always translate to universities spending more money, as the funds are often allocated for specific purposes. The average endowment spending rate was 4.6 percent from 2011 to 2020, according to an American Council on Education study. Even universities with large endowments valued at more than $1 billion spent only 4.5 percent on average in 2020.●
Erik Cliburn is a senior staff writer for INSIGHT Into Diversity.
This article was published in our December 2021 issue.