Effect of endowment on prestige and peer schools

College Search & Selection
1

<p>It's interesting that a list of schools by endowment somewhat resembles a list of schools by prestige. Universities vary in their spending priorities and research money is largely from external sources. However, having a higher endowment helps universities lure faculty and students by paying higher salaries and giving more aid. </p>

<p>People often compare schools with rankings such as - US News, Times World Rankings, etc. These magically vary from year to year depending on how much weight is placed on a particular measured category. However, total endowment and endowment per student are simple indicators of overall strength. </p>

<p>Here's a way to identify "peer" schools. Seperate liberal arts schools from universities and seperate public and private. Identify a school and then identify a few schools immediately wealthier and a few schools immediately poorer. Tada! A peer list is born. Please see link below.</p>

<p><a href="http://en.wikipedia.org/wiki/List_of_US_colleges_and_universities_by_endowment%5B/url%5D"&gt;http://en.wikipedia.org/wiki/List_of_US_colleges_and_universities_by_endowment&lt;/a&gt;&lt;/p>

2

<p>It's not all that simple.</p>

<p>Obviously you can't count the University of Texas system. It's a system. Going by the total endowment list would screw Caltech because of its low enrollment. Going by the endowment per student list overrates many small schools that don't deserve to be there (*** Bryn Athyn College??).</p>

3

<p>Per student endowment list from the QuestBridge folk:</p>

<p><a href="http://www.questbridge.org/resources/applying/endowment1.html%5B/url%5D"&gt;http://www.questbridge.org/resources/applying/endowment1.html&lt;/a&gt;&lt;/p>

<p>Total endowment list from NACUBO:</p>

<p><a href="http://www.nacubo.org/documents/research/2006NES_Listing.pdf%5B/url%5D"&gt;http://www.nacubo.org/documents/research/2006NES_Listing.pdf&lt;/a&gt;&lt;/p>

4

<p>chronicidal, that's why total endowment per student is more accurate.</p>

5

<p>
[quote]
chronicidal, that's why total endowment per student is more accurate.

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<p>While total endowment may be misleading, total endowment per student is an even worse/meaningless metric. As has been stated many times previously, it does not account for economies of scale and overall institutional strength. It's the same way the economic strength of a country like the US is judged by GDP. There are many more things where just the total endowment strength itself is much more important. Financial ratings, ability to secure top faculty, build state of the art buildings, etc. Another potentially misleading aspect of endowment per student is that it can completely mask institutional inefficiences.</p>

6

<p>^^ can you elaborate on that? I am very inclined to agree with you, but what do you mean more specifically?</p>

7

<p>
[quote]
Obviously you can't count the University of Texas system. It's a system. Going by the total endowment list would screw Caltech because of its low enrollment. Going by the endowment per student list overrates many small schools that don't deserve to be there (*** Bryn Athyn College??).

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<p>No, actually, in the case of UT, total endowment is a perfectly accurate measure. For years until the early-mid 90's, UT was the second wealthiest university in the world after Harvard. (At some points in the 60's and 70s when all the system money went to UT, it was probably even wealthier Harvard.) Then Yale passed in the late 90s and more recently some others. Sometime in the past 30 years or so, the legislature included the entire UT system under the endowment while continuing to add institutions, somewhat diluting the effect. Nevertheless, there are certain things that having a gross endowment of that magnitude allowed UT to do. Having been founded only in 1883, UT is now ranked one of the top Universities in the world per the London Times, and one of the strongest in the US according to the National Research Council, as well as a composite of the USNWR graduate program rankings. Very few universities have as many highly ranked programs across as many diverse fields (basically every academic program from the liberal arts, sciences, professional schools, engineering, and fine arts rank at least among the top 25 - and mostly higher - in the country) - especially as young as UT. Not to mention, possessing resources that most schools can only dream about - the largest university art museum in the country, the fifth largest academic library collections, one of the largest performing arts complexes on any American campus, and a rare book/humanities library that only Harvard and Yale come close to matching (Ransom). Schools like Princeton and Columbia join the chorus from foreign press like the London Independent admiring yet also intensely jealous of not being able to compete in the same league for such resources. Many articles and books (and even plays!) have been written about UT's dominance in the arena of priceless books, manuscripts, and cultural archives. And outside of the humanities, UT is of course even stronger in the sciences and engineering fields, with such resources as one of the fastest (and soon the be THE fastest) academic supercomputers in the world. Finally, contrary to popular belief, as a state university in Texas, the athletic program at UT must be entirely self-supporting, unlike private schools that can fund athletic programs with tuition dollars. Returns from the endowment can never go to athletic programs, which are very expensive to maintain, and other schools have no other choice. So it makes sense the football program is so commercialized. However, the endowment did allow UT to build collections like the Ransom Center, Blanton Museum, Benson Collection, etc that are respected and literally envied around the world. This is also why endowment per student doesn't matter. A university doesn't need priceless or one-of-a-kind resources for every student - that's absurd. The ability to acquire such things in the first place is what matters.</p>

8

<p>^^ yeah but since the UT system includes multiple campuses, like you said, it "dilutes" the effect because students on one campus can't access resources that are on the other; endowment really needs to be contained to one campus.</p>

9

<p>There is a difference between prestige and quality. Total endowment is more linked to prestige and endowment per student is more linked to quality. </p>

<p>Schools with large total endowments but small endowment to student ratios are able to hire prominent professors (that make headlines, etc.) even though only a small percentage of students are able to interact with them.</p>

<p>Schools with small total endowments but large endowment to student ratios are able to spend a lot on each student to improve their educational experience.</p>

<p>Schools that have both high total endowments and high endowment to student ratios like HYPSM (and especially HYP) are able to do all of the above. This is why fund raising for universities has become such an arms race.</p>

<p>Again, I think it is prudent to seperate liberal arts college from universities and public from private to avoid comparing apples to oranges.</p>

10

<p>
[quote]
^^ can you elaborate on that? I am very inclined to agree with you, but what do you mean more specifically?

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<p>Basically some of what I mentioned in the second post. A university may have a great endowment/student ratio, but still not have the overall purchasing power to fund the most state-of-the art labs and research buildings, recruit top faculty, acquire a priceless manuscipt, and literally outbid other institutions when it comes to things like this. In the case of UT, it was the first public institution (and one of the first overall) to have its bonds rated 'AAA,' mainly on the strength and scale of the endowment/permanent unversity fund.</p>

11

<p>
[quote]
^^ yeah but since the UT system includes multiple campuses, like you said, it "dilutes" the effect because students on one campus can't access resources that are on the other; endowment really needs to be contained to one campus.

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<p>That's probably true... but I was responding more to the point that the endowment position for UT was misleading. My point was that it allowed UT-Austin itself to acquire vast resources in a relatively short timespan. The Ransom Center collection, is "valued" (appraised, but much is technically priceless) at over $1 billion, yet was mainly built in less than a 20 year time span starting in the 60s.</p>

<p>At the same time, it's not like resources can't be shared by other institutions - computing resources are a prime example. Supercomputers on any university campus are shared by researchers around the world. But few universities can provide such resources in the first place...</p>

<p>I do agree that neither measure (endowment vs. per student) is ideal and the handful of universities that have both are the most powerful. I just think that between the two, the total number wins out because it gives institutional muscle to acquire things in the first place that might be out of the reach of schools without such resources, but that are "wealthier" on a per capita level.</p>

12

<p>mmm, another idea to consider is the case of schools such as barnard university, which have direct access not only to the resources allowed by their own endowment, but also the endowment of columbia university.</p>

13

<p>
[quote]
As has been stated many times previously, it does not account for economies of scale...

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<p>Yeah, economies of scale like 100 person lecture classes, using TAs instead of professors for many teaching functions, etc.</p>

<p>Per student endowment is the #1 indicator that people in higher education fianance look at. Why? Because it is what allows schools to spend $10k, $20k, $30k, or even $40k more per student than they take in from net tuition revenue. Show me a single ultra-highly ranked college or university with a low per student endowment. You can't find one.</p>

<p>Prestige comes from having a long line of customers over a long period of time. That comes from offering more than you charge. For example, spending $70,000 per student per year and taking in, on average, $28,000 in net tution, fees, and board. That's how you build customer demand and prestige.</p>

<p>One flaw with per student endowment is that, from an undergrad standpoint, it is difficult to separate out endowment contributing to undergrad education and endowment contributing to med schools, law schools, grad schools, hospital chains, etc. Universities typically spend 1.5 to 2 times as much per grad student than they do per undergrad, so you need to discount the per student endowments of universities by some factor. Another is that it is probably not a great measure for public universities, where legislative appropriations serve the same function and endowment return spending.</p>

14

<p>
[quote]
Show me a single ultra-highly ranked college or university with a low per student endowment. You can't find one.

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</p>

<p>yeah but could you find a school with high endowment and low per-student endowment?</p>

<p>i think this is really an interesting discussion.. what is more important.. total endowment or per-student</p>

<p>
[quote]
The only real flaw with per student endowment is that, from an undergrad standpoint, it is difficult to separate out endowment contributing to undergrad education and endowment contributing to med schools, law schools, grad schools, hospital chains, etc. Universities typically spend 1.5 to 2 times as much per grad student than they do per undergrad, so you need to discount the per student endowments of universities by some factor.

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<p>so basically what you're saying.. maybe no real surprise here... is that prestigious graduate schools directly effect undergraduate quality/prestige/ranking.</p>

<p>what then, about schools such as princeton or dartmouth that don't really have strong (or any) graduate schools in many areas? how is their endowment/undergraduate experience/prestige affected in this way?</p>

<p>are strong graduate programs the reason northwestern's endowment is so high and undergraduate program so prestigious/highly ranked? is it the same phenomenon for other schools with very strong graduate offerings such as duke, stanford, and uchicago? are the graduate programs at these schools the only way they can compete for undergraduate ranking with some of the other schools lacking these programs such as princeton or dartmouth?</p>

15

<p>Here's a short 12-page white paper, "Grow" the College? Why Bigger May Be Far From Better, that sheds some light on the overwhelming importance of per student endowment. </p>

<p><a href="http://www.williams.edu/wpehe/DPs/DP-60.pdf%5B/url%5D"&gt;http://www.williams.edu/wpehe/DPs/DP-60.pdf&lt;/a&gt;&lt;/p>

16

<p>^^ Penn and Columbia are prestigious universities with high total endowments but low endowments per student. Caltech and Rice have the opposite situation. The first 2 have 20 thousand plus students and the latter 2 have less than 5 thousand.</p>

<p>^^ Johns Hopkins is an example of a medical school elevating the status of the undergrad. Johns Hopkins total endowment is 2.4 billion, but the medical school represents 1.9 billion or 80% of that total. That leaves 500 million for everybody else.</p>

17

<p>
[quote]
what then, about schools such as princeton or dartmouth that don't really have strong (or any) graduate schools in many areas? how is their endowment/undergraduate experience/prestige affected in this way?

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</p>

<p>Princeton has the highest per student endowment of any school in the country. That is why they are one of the colleges growing their enrollment in the article above.</p>

<p>Dartmouth's per student endowment ($486k) is high, but not stratospheric. It's only good for about 15th place overall.</p>

<p>Northwestern is in a much lower tier of per student endowment, 37th largest in the country at $251k per student. That would be further diluted if you were looking at undergrad only and comparing to some of the top LACs with per student endowments of $750k per student or more.</p>

18

<p>Here's the reference list from Questbridge. It's got a few minor errors. Their figure for Williams is about $50k higher than the figure Williams reports (a descrepancy in what is included in the total endowment). Also, this list leaves out some non-undergrad schools and conservatories. But, it's a good starting point.</p>

<p>


**Endowment per Student for 2004**     </p>

<p>1   $1,678,406  Princeton University
2   $1,328,552  Yale University
3   $1,278,283  Harvard University
4   $893,666    Grinnell College
5   $837,825    Pomona College
6   $789,735    Swarthmore College
7   $748,146    Williams College
8   $723,909    Rice University
9   $714,622    Stanford University
10  $701,004    Caltech
11  $698,469    Amherst College
12  $650,426    MIT
13  $557,347    Wellesley College
14  $553,778    Berea College
15  $486,734    Dartmouth College
16  $415,412    Wabash College
17  $361,572    Smith College
18  $358,322    Emory University
19  $344,786    Bowdoin College
20  $336,788    Haverford College
21  $327,601    Washington University
22  $317,991    University of Notre Dame
23  $315,208    Claremont McKenna College
24  $309,135    Earlham College
25  $306,253    Middlebury College
26  $293,211    University of Chicago
27  $287,572    Hamilton College
28  $284,891    Macalester College
29  $280,279    Bryn Mawr College
30  $277,207    Harvey Mudd College
31  $274,779    Carleton College
32  $271,254    Vassar College
33  $269,780    Trinity University
34  $268,827    University of Richmond
35  $262,341    Univ of California, San Francisco
36  $255,066    Lafayette College
37  $250,785    Northwestern University
38  $245,384    Washington and Lee University
39  $242,171    Scripps College
40  $239,584    Brown University
41  $232,952    Colby College
42  $232,650    Duke University
43  $230,054    Vanderbilt University
44  $223,404    Columbia University
45  $222,963    Davidson College
46  $218,710    Southwestern University
47  $218,498    Oberlin College
48  $214,832    Mount Holyoke College
49  $214,666    Denison University
50  $206,231    Whitman College

</p>

19

<p>That Endowment per Student list is outdated. Comparing Stanford's current per-student endowment and Pomona's current per-student endowment, for instance, shows that Stanford pulls ahead.</p>

20

<p>
[quote]
so basically what you're saying.. maybe no real surprise here... is that prestigious graduate schools directly effect undergraduate quality/prestige/ranking.

[/quote]
</p>

<p>Sure, the grad schools definitely boost the prestige and ranking. Doubtful that they do much to improve the undergrad "quality". I doubt most Harvard undergrads even know where the Medical School is located, let alone benefit from it. I suppose it could be argued that undergrads benefit from having low-cost grad student TAs assist with the teaching chores. That's probably not an argument I would make.</p>