Most schools take a 4% or 5% payout on endowment, typically based on a 3-year rolling average of endowment assets (in some cases longer) so as to even out the sharp ups and downs based on market volatility.
The thing you need to keep in mind, though, is that the endowment isn’t a giant slush fund of free money. At most universities, “the endowment” is actually a collection of separate endowments–one for the medical school, one for the law school, one for the business school, etc. And within each endowment, many of the funds are restricted, so some can only go to medical research, some only to support named faculty chairs, etc. So you can’t just assume all that money is available to replace undergraduate tuition; most of it isn’t. And you can’t just assume the university could pay for all its operations on tuition revenue alone, or on endowment payouts in lieu of tuition; large parts of the university’s expenditures aren’t supported by tuition revenue at all, in fact, much of it is already supported by payouts from endowment. Take my alma mater, the University of Michigan. It’s got a hefty $10 billion endowment, tenth largest among all colleges and universities, public and private. At a 5% payout per year, that should produce about $500 million annually, a handsome sum (though in fact it’s a bit less because Michigan uses a conservative 6-year rolling average of endowment assets, so in rising markets its endowment payout lags endowment growth, and in falling markets it doesn’t face wrenching cutbacks in endowment payout which would force deep cuts in current spending). But the university’s total budget is now around $6 billion annually. Obviously, endowment payout is important. Just as obviously, the university can’t pay for everything with endowment payout alone.