With almost $3 million in endowment per student, Princeton is the wealthiest university in America. How does this astounding wealth affect students? How does this endowment translate into opportunities for the students? What is all the money spent on? Columbia, in contrast, has an endowment per student of a little over $300.000. What do you get at Princeton that you can’t at Columbia? It is weird, as Columbia and Princeton are generally considered about equal in quality, that one is almost ten times richer than the other.
All things being equal, a much larger EPS should tend to make many opportunities possible, including better financial aid, higher faculty salaries, and more ambitious building programs. The difficulty is, all things are almost never equal. No two universities are likely to be equally adept at managing their endowments, nor are they likely to face identical local costs or incur sudden major expenditures at the same time. Some endowments are so huge that they must be generating surplus revenue that is simply plowed back into the endowment, thereby resulting in little or no noticeable improvements to student life (compared to schools with endowments that are a little less huge.)
I think one would need to dig deep into comparative costs and expenditure data to even begin to get a handle on how endowments affect student opportunities. Nevertheless, in general, schools with the highest EPS numbers tend also to be among the highest-ranked, most selective in America. More money tends to buy more stuff, and better stuff. On the other hand, some colleges will be better than others at making a little go a long way.
Thank you for the response! When it comes to Princeton and Columbia specifically, do you know if the difference is noticeable? Are you likely to get a richer experience at Princeton because of its resources or is the Columbia endowment more than big enough?
Inviting the top EPS school into a comparison could be problematic for most colleges. When Columbia is considered in a broader context, it appears in the vicinity of other elite, financially strong colleges. Columbia might not be the richest school on this basis, but it nonetheless places above or around some other colleges that seem visibly well-resourced:
This year, for the first time in history, the twenty or so colleges (many of which are LACs) with the highest EPS will be required to pay a 1.4% tax on their investment returns. You can bet that the ones that did not make the cut are busy making sure they spend as much of their endowment income as they possibly can in order to continue outside the new tax law’s purview. The most likely beneficiary of all that largesse? Financial aid.
https://www.businessinsider.com/gop-tax-plan-college-endowments-2017-11
I would not expect FA to change to the positive. Only for a very few schools right at the margin will the tax be a decision factor. It will be much easier to manage it buy moving around capital expenditures. For the colleges well above the threshold, they will have a decrease in their income that they will have to offset somewhere.