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Explore answers to 10 common questions on what college endowments are used for and how they’re managed, with data from the 2021 NACUBO-TIAA Study of Endowments.


1. How large is my college’s endowment?

You can find the market values of the 720 college and university endowments that participated in the 2021 NACUBO-TIAA study here.

While colleges and universities with the largest endowments often garner attention, in our study, the median endowment was about $200 million, and more than half of participating schools had endowments less than $250 million. Not all colleges and universities participate in our study; additional information on other endowments can be found on the Department of Education’s website.


2. Did college and university endowments get bigger last year?

Yes. Between July 1, 2020, and June 30, 2021, college and university endowments had an average investment return (net of external fees) of 30.6 percent, according to the 2021 NACUBO-TIAA Study of Endowments.


3. Did institutions spend more from their endowments last year?

In our study, the average spending rate stayed flat at 4.5 percent, consistent with FY20. But the actual dollars withdrawn and put to use by individual institutions likely did increase, even if the spending rate remained the same. That is because even if the spending rate does not change over time (or changes only slightly), the value of the endowment does.

Not every school in our study reported spending data, but among those that did, they spent an average of $29.8 million from their endowments in FY21. Schools with the largest endowments spent an average of $133.8 million. Each institution has its own spending policy, and sometimes, special withdrawals are permitted.


4. What does endowment spending fund?

Endowment withdrawals make a tangible impact on students, faculty, and campuses in myriad ways and support the mission of the institution (which usually includes education, research, and public service). Often, endowment funds are designated by their donors to serve a specific purpose, such as scholarships or an endowed faculty position.

In the 2021 NACUBO-TIAA Study of Endowments, on average, 46 percent of endowment spending went to financial aid for students. Other spending supported faculty positions, research, and operation and maintenance of the campus.


5. Why do spending rates tend to stay the same, even when rates of return and endowment values go up?

Most endowment spending policies, or spending rates, are designed to enable spending to keep up with budget needs and inflationary pressure. The spending rate is established as a percentage of the average value of the endowment, typically calculated over several years. So, while a one-year return rate may be interesting to see, long-term returns are more important when thinking about spending.

Most institutions apply their spending rates to an average of prior-year endowment balances over the past three years (or 12 quarters). In order to keep endowment withdrawals steady year after year, investment committees set spending policies that can withstand market fluctuations—and also grow over the long term. For most institutions, this is a spending rate of about 4.5 percent.

The spending rate typically remains about the same in years when the endowment value goes down, too – which it sometimes does. In these years, colleges and universities may need to rely even more on their endowment withdrawal, because other sources of revenue from tuition, gifts, or government funding might be lower, too.

No matter the circumstances of the year, students need to be supported, faculty need to be compensated, and the institution needs to operate. Even if the endowment suffers a downturn, college and university administrators need to know they can rely on an endowment payout to help to provide scholarships, meet payroll, pay bills, and more. This stability is designed to follow students from the beginning of their education to graduation – year after year, class after class.


6. How is an endowment managed?

Most endowments are built to be long-term funds. They’re somewhat akin to retirement savings, but on a much longer timeframe. Most people hope their retirement savings will last 20 or 30 years, but colleges and universities have to manage most endowment funds to serve present day needs while preserving funds for many future generations as well.

Most donors want their gifts to last forever—in perpetuity—and, by law, college and university investment managers must meet those expectations. The Uniform Prudent Management of Institutional Funds Act governs endowment funding, investing, and spending.

On rare occasions, donors define the duration of time over which their endowment can be spent. Such endowment gifts are known as term endowments, and this is the only type of endowment funding that will be spent down rather than retained in perpetuity.


7. Are students involved in endowment management decisions?

Yes, students manage a portion of endowment funds at 33 percent of the institutions that responded to the 2021 NACUBO-TIAA Study of Endowments. The average market value of student-managed funds was $2.3 million. Learn more about student-run endowments here.

At some colleges and universities, a student representative serves on the board of trustees. This board governs endowment management, so students may have a voice through this representation as well.


8. Who does the endowment belong to?

Endowments belong to the purpose for which they were established, under the care and management of the institution to which they were entrusted. The means that the endowment is held for mission-related activities defined in the donor’s agreement with the institution. The board of trustees is responsible for ensuring the endowment is managed to meet those demands.

Endowments don’t belong to students, faculty, or administrators—but students are the main beneficiaries. In the past three fiscal years, student financial aid has received nearly half of all endowment spending by institutions in the NACUBO-TIAA studies.


9. Are endowments unique to colleges and universities?

No, nonprofit organizations of all types and sizes may have endowments. This includes K-12 schools, museums, hospitals, churches, libraries, orchestras, zoos, and many other types of not-for-profit organizations.


10. Since my school has an endowment, why do I need to pay tuition?

Colleges and universities assume many expenses in order to offer a high-quality postsecondary education to students, which are covered in part by tuition and endowment withdrawals, among other sources. The biggest expenses for colleges and universities are salaries and benefits for faculty and staff, and there are others costs: the built environment (classrooms, laboratories, libraries, housing, dining, athletic facilities, performing art spaces, etc.); computer supplies and equipment (hardware, software, ongoing services); and more. Faculty and staff need access to continuing education and professional development, and facilities maintenance needs are ongoing.

Each institution finds their own mix of sources to pay those bills, but most rely on both tuition and endowment withdrawals, as well as charitable giving, government support, grants and contracts, and fees for services (such as housing, dining, and parking). The 2021 NACUBO-TIAA Study of Endowments shows that this year, on average, endowments funded 11 percent of an institution’s operating budget. Based on the NACUBO Tuition Discounting Study and the College Board Trends in Higher Education series, we know that on average for many institutions, tuition revenue often covers less than half of a college or university’s expenses.

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