One of the most-discussed higher education policy proposals from President Donald Trump has been a proposal to tax the endowments of wealthy colleges that are seen as not using enough money on financial aid. Key Trump supporter Rep. Tom Reed (R-NY) has introduced legislation requiring colleges with endowments over $1 billion to spend at least 25% of all investment returns on financial aid, much to the chagrin of wealthy colleges.

This proposal does not take into account the size of a college—which means that colleges with similar endowment levels can have vastly different levels of resources. For example, Vassar College and North Carolina State University had endowments just under $1 billion as of June 2015, but the sizes of the institutions are far different. Vassar has about 2,500 undergraduate students, while NC State has nearly ten times as many.

Another important factor is the financial need of students. Colleges can have similar sizes and similar endowment levels, but differ substantially in their number of Pell recipients (a proxy for low-income status). Washington State University and the University of Missouri-Columbia both have endowments around $900 million, but Washington State enrolled 3,000 more Pell recipients than Mizzou in spite of enrolling 4,000 fewer undergraduates. This means that Mizzou has the ability to target more aid to their Pell recipients should they choose to do so.

To explore this point in more detail (and thanks to Sara Goldrick-Rab for the idea), I dove into newly available finance data from the Integrated Postsecondary Education Data System (IPEDS) for the 2014-15 academic year and merged it with data on the number of Pell recipients for the same year from Federal Student Aid’s Title IV volume report datasets. After eliminating colleges that did not report endowment values or reported endowment or Pell recipient data in conjunction with other campuses, my sample consisted of 479 public four-year colleges and 909 private nonprofit colleges. You can download the spreadsheet here to see the ratios for each college with data.

Most colleges have quite small endowments per Pell recipient, as shown in the graph below. The median public college had an endowment of $12,761 per Pell recipient in 2014-15, while the median private college had an endowment of $64,844. Given typical endowment spending rates of about 5% per year, this means that public colleges can spend about $640 per Pell recipient on financial aid and private colleges could spend about $3,200 per recipient. But this assumes that (1) colleges will only spend their endowment proceeds on need-based aid and (2) colleges can actually use their endowments on whatever they want instead of what donors say. This means that most colleges do not have much ability to significantly improve financial aid packages based on endowment proceeds alone.

The other thing that stands out in the graph is the number of colleges with endowments of over $1 million per Pell recipient. In 2014-15, 90 colleges were in the millionaires’ club, including 86 private nonprofit colleges and four public colleges (William and Mary, Michigan, Virginia, and Virginia Military Institute—an unusual institution). Below are the institutions with the 25 highest endowment to Pell ratios. All of these colleges have more than $4.2 million per Pell recipient—an enviable position should any of these colleges seek to increase low-income student enrollment.

NameUndergrad enrollmentPell enrollmentEndowment ($bil)Endowment per Pell recipient ($mil)
Johns Hopkins University63577873.334.23
Grinnell College17343931.794.55
Claremont McKenna College13011520.734.83
Amherst College17924422.194.96
Bowdoin College18052781.395.01
Columbia University in the City of New York810019129.645.04
Williams College20724032.275.62
Northwestern University904812567.596.04
University of Pennsylvania11548164310.106.17
Pomona College16503262.106.44
Swarthmore College15422371.857.79
Dartmouth College42895964.667.82
Duke University66269257.307.89
Washington and Lee University18901811.478.13
Rice University39266205.578.99
University of Notre Dame84489028.789.74
Soka University of America4111231.229.93
University of Chicago57386396.5510.30
Washington University in St Louis74015716.8912.10
California Institute of Technology9831272.0816.40
Massachusetts Institute of Technology451280613.5016.70
Stanford University7019110622.2020.10
Princeton University539179022.3028.20
Harvard University10338123837.6030.40
Yale University547772425.5035.30

[Cross-posted at Kelchen on Education]

Robert Kelchen

Robert Kelchen, a professor of education at the University of Tennessee, Knoxville, is data manager of the Washington Monthly College Guide.