Endowments Bounce Back

At long last, American college endowments are finally paying out again. But this isn’t going to help students immediately. After suffering losses, in many cases severe ones, due to the Great Recession, the Wall Street Journal reports that the money is coming in again.

According to an article by Annamaria Andriotis:

New figures show university endowments averaged total returns of more than 19% for the fiscal year ended last June, the second consecutive year of gains, according to the National Association of College and University Business Officers and Commonfund, a nonprofit asset manager.

Yet schools say they can’t cut tuition until their endowments have had more years of strong growth. The average annual cost of tuition and fees at a four-year private university this year is $28,500—a 15% increase from five years ago, according to the College Board. The cost at a four-year public college for in-state residents has risen 28% to $8,244.

The reason for this is that endowments are often devoted to very specific things; all university money doesn’t go into some general fund for institutions to delve out as they see fit.

There’s perhaps something a little disturbing about correcting high tuition last—since colleges trying to build up their wealth after suffering deep financial setbacks are, after all, taking money from families trying to do the same thing—but endowment returns might eventually impact tuition prices.

According to the article revenue increases from endowment investments could eventually result in decreased cost and increased financial aid. When even targeted endowment money increases that “places less pressure on other college costs,” Andriotis writes.

The University of Oregon, University of Illinois, and Princeton, for instance, aren’t actually cutting tuition, but all three colleges have also all seen endowment increases this past year. These institutions have announced plans to offer more generous financial aid.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer