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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 2023 NACUBO-Commonfund Study of Endowments.


1. How large is my college’s endowment?

You can find the market values of the 688 college and university endowments that participated in the 2023 NACUBO-Commonfund Study of Endowments (NCSE).

While colleges and universities with the largest endowments often garner attention, in our study, the median endowment was $209.1 million, and nearly one-third of participating schools had endowments less than $100 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. While endowments saw negative returns in FY22 (-8.0 percent), between July 1, 2022, and June 30, 2023, college and university endowments had an average investment return of 7.7 percent, according to the 2023 NCSE.


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

Yes. Among the schools that participated in the 2023 NCSE, withdrawals increased to $28.4 billion in FY23 compared to $25.85 billion FY22.

Colleges and universities typically use a spending formula with a moving average that softens the impact of market fluctuations. For example, a formula may apply a spending rate to an average of prior-year endowment balances, such as the past three years, five years, or 12 quarters. This approach provides a steady, reliable, and in most cases, growing source of revenue year over year that helps institutions withstand inflationary pressures.


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 2023 NACUBO-Commonfund Study of Endowments, on average, 47.7 percent of endowment spending went to financial aid for students. Other spending supported faculty positions, research, and operation and maintenance of the campus.


 5. What is the difference between a spending rate and a spending policy?

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. Most endowment spending policies are based on a formula designed to enable spending to keep up with budget needs and inflationary pressure. While some formulas are more complex, a simple example might be: 4 percent of the average market value of the prior four quarters. In this case, 4 percent would be applied to an average endowment amount based on prior years, quarters, or something else.

The spending rate is a part of the formula, established as a percentage which is then applied to the average value of the endowment. In the spending formula example provided above, the spending rate is 4 percent.

While the spending rate is important, the long-term returns and endowment value are even more important when thinking about the actual annual withdrawal, or spending.

Spending is important because no matter the circumstances of the budget 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 spending policy to help to provide scholarships, meet payroll, pay bills, and more– 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 most colleges and universities manage 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 these are the only type of endowment funding that may be spent down rather than managed to last in perpetuity.


7. Are students involved in endowment management decisions?

Yes, students manage a portion of endowment funds at 34.8 percent of the institutions that responded to the 2023 NACUBO-Commonfund Study of Endowments. In FY23, student-managed funds had a total market value of over $539 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?

True endowments belong to the institution in perpetuity for the purpose to which they were entrusted. This 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 our 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 other 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 spending, as well as charitable giving, government support, grants and contracts, and fees for services (such as housing, dining, and parking).

Similar to previous years, the 2023 NACUBO-Commonfund Study of Endowments shows that, 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.

For most institutions, significantly increasing spending from an endowment would be financially irresponsible and a move away from meeting long-term goals to provide stability over time.

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