Report: Small Number of Schools Hold Majority of Endowment

(Photo: Pexels, Creative Commons)

(Photo: Pexels, Creative Commons)

A new report from the Education Trust has uncovered extreme wealth stratification occurring not only on an individual level, but also among institutions of higher education.

Research from the report, “A Glimpse Inside the Coffers,” results show close to 3.6% of colleges and universities across the United States, making a total of 138 all together, held 75% of all postsecondary endowment wealth in 2013.  Despite this, a very low number of these institutions are making it a priority to invest in low-income students.

The 138 schools, referred to the by Ed Trust as the “$500 million club,” held at least half a billion dollars in endowment assets in 2013, if not more.  As there is no required spending threshold for the tax-exempt dollars, the report states that the institutions benefit greatly from these funds.

Despite this, almost half of these schools have been found to be in the bottom 5% across the nation for their enrollment of first-time, full-time Pell Grant recipients.  In addition, four out of five of these schools do not make an effort to make it affordable enough for low-income students to enroll, as the annual net price for low-income students were found to be higher than 60% of their total annual family income.

“Leaders of wealthy institutions have real opportunity and power to use their wealth to extend the American dream of higher education to more low-income students,” said José Luis Santos, Ph.D., vice president of higher education policy and practice and co-author of the report. “But instead of jumping on this opportunity and prioritizing educating Americans from all walks of life, too many of these leaders have allowed their institutions to become playgrounds for the wealthiest in our country and the world.”

Findings show that the institutions observed for the study earned more money in recent years.  In 2010, the institutions made as a whole $149.5 billion.  Four years later, that amount had increased to $202.3 billion.  The report also found the average rate of return on their endowment was found to be 11.1%.  Despite this, it was discovered that only a little more than half, 35 institutions in all, were not using their endowment assets at the 5% rate that is required of private foundations.

Researchers suggest that if the 35 institutions involved in the study increased their spending rates to reach the 5% required of them, an extra $418 million would be generated as a result.  They go on to say that if these funds were unrestricted and used solely for financial aid, an additional 2,376 low-income students could be enrolled at the current net price for the next four years, which would equal close to a 67% increase in enrollment of first-time, full-time low-income students at these schools.  Or, they say the same $418 million could be used to reduce the net price for low-income students by a total of $8,000 per year for the next four years.

The report looked at available federal tax information and other data to investigate endowment contributions and spending at 67 of the wealthiest nonprofit, private institutions across the country.