How important is endowment?

I’ve been looking at endowments for the schools on D21’s list and that got me poking around at that information for all kinds of schools. What would a large endowment per student mean to the student exactly? I assume it means that school has a lot of alumni support and also has had a strong community for many, many years. On the flip side, a low endowment seems to point to a school that is either up and coming or just has not had a lot of support from its alumni (which I take as not a good thing).

Just as an example, University of Richmond had an endowment of $2.5 billion. Elon has an endowment around $200 million. Wow what a difference. Bowdoin has a $1.5 billion endowment and Bates has more like $300 million. Again, why the huge difference and what does it mean?

I’m guessing endowment makes a difference in everything from more staff per student and nicer facilities and more alumni support for the students. And, if the endowment is too low and the school doesn’t “make its numbers” when it comes to incoming tuition payments, then maybe programs get cut from the budget?

Thoughts?

This has come around a couple of times.
http://talk.qa.collegeconfidential.com/college-search-selection/1854668-does-amount-of-endowment-matter-p1.html

Thanks @“Erin’s Dad”

Still looking for people’s opinions though. I looked through that thread above and it didn’t say much. Anyone have any opinions on how endowment makes a difference for students and how much a family should be considering it? Is Elon’s meager $200 million endowment as issue? Why would Bowdoin’s endowment be five times bigger than Bates’ and how does that make life for students at Bowdoin different than at Bates?

For students and families, endowment isn’t very important. First, few people realize that the average private college endowment is around 22 million. The average public university endowment is around 7 million. Beloit College has an endowment of $160 million. Illinois State University, which has 12-15 times the number of undergraduates, has an endowment of $130 million. Both are fine. Both are, in fact, in strong shape.

Where endowment does play a role for students/families is when one can complete for entry into one of the tippy-top schools. For instance, Colby College has a new FA policy where any family earning 150K or lower will have costs capped at 15K. That’s largely a function of Colby’s $830 million endowment.

Thus, Elon’s $200 million endowment is not “meager,” and schools mostly seek to grow their endowment, not actually use it. Bates is also fine with its $315 million endowment, and when it comes to education, there’s no difference between Bates and Bowdoin. This is yet another example of how people obsess over the signifiers of prestige rather than what’s important–you know, the learning that goes on in the classroom and not the school’s ability to buy rock-climbing walls and luxury dorms.

Endowment was a factor in our decision, mainly because, we felt that if a university has more money to spend, then they’ll provide more resources to students, teachers, classrooms, maintenance, etc.

Examples would be free academic tutoring, more academic advisors, departments devoted to student internships or other opportunities, reduced student-to-faculty ratio, higher quality and newer facilities, more alumni support, etc.

Lastly, when you enter college buildings, use and check out the bathrooms. Are they clean, stocked and updated? That’s an important selling point to me. :smile:

Thanks @sushiritto that is a good list of important traits to check out. Bathrooms included!

Speaking specifically of Richmond and Elon …

For most of its existence, Elon was more or less a trade college, educating the children of working-class parents, training teachers, business admins, and the like. Graduates settled into stable, modest salaried positions, and worked till retirement. The alumni base didn’t have a lot of extra money to give generously to their alma mater. It has only been the last generation or two that Elon has recreated itself into a university with a grander vision.

The U of Richmond had similarly modest beginnings in the 1800s, but received a $50M gift in 1969 from a wealthy alumnus which kickstarted both UR’s turnaround and transformation into a top flight business school. At the time, that was the largest gift to any American college ever – Adjusted for inflation, it remains the largest donation to an American university in history. That inspired other donations which created one of the largest endowments in the country at that time. U or R has been unusually fortunate in this regard, picking up other large donations in the 70s and 80s.

U of R is rightfully a more respected institituion., but there is no ignominy (not that you implied such) that other universities weren’t able to match UofR’s good luck. However, as it stands, Elon has been very successful in its own right in growing its endowment.

I put some stock in the size of a school’s endowment, but I think I put the line fairly “low” at deeming an amount respectable. I don’t necessarily give extra clout for one school having $1.5B and another having $400M. But I do apply extra scrutiny when a private school my son mentions has an endowment of, say, $60M.

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@EconPop Thanks for the detail. I had a feeling those were the stories of Elon and Richmond but did not know the exact history. It does make me wonder, then, what kids at Richmond experience that kids at Elon do not. But that’s why we dig deep into schools’ websites and visit I guess!

Good question.

Princeton has a $25 billion endowment, from which they spend $148k per student… but still collects $44k from each student.

For what?

@OhiBro Ha. I think a lot of private schools spend more per student than the tuition. I know Bowdoin does as well so we’ve somehow convinced ourselves that it’s still a value when we pay full freight. :wink:

I took endowment size into consideration when helping my kids put together an initial list of schools to consider. A lot of the schools with high endowments not only are very generous with financial aid, but do not include loans in their financial aid packages (either for all students or those under a certain threshold).

@TigerInWinter true. We are full pay so that doesn’t come into consideration for us but I know it would for a lot of families.

R&D budgets is another biggee.

I would be particularly worried about low endowments at small LACs for solvency reasons. Hampshire college was a bit unique but behind the scenes many LACs are well aware of the enrollment cliff that’s coming and that some won’t be around in 10 years.

To me, the biggest difference a student will see is in class composition. Schools that get 50+% of operating expenses from endowment income can afford to enroll an economically diverse, academically strong and robust class. Schools that are relying heavily on tuition to fund operations don’t have that luxury. The article in the NYTimes (?) recently covering Trinity’s admissions trade-offs was pretty telling. A school like that is going to tilt toward full-ish pay, less academically inclined. That’ll affect both academics and the culture.

Obviously there’ll be other differences in areas of student support (writing centers, tutoring, career services, internship and research funding, and various other student life elements that require staff and funds), faculty strength (and ability to plug holes caused by sabbatical or faculty attrition), and facilities. Surprisingly, the dorms aren’t necessarily better at richer schools. Plenty of state schools with far better dorms than what I’ve seen at Ivies. No one seems to care though.

We did look at endowment as well as the school’s budget, Moody investor ratings, building projects on campus, R&D, etc…

There was a school that really looked great academically but was having financial issues partially tied to state budget cuts. As an OOS applicant, we took them off the list.

Endowment affects college spending, but it is an indirect measure from the student point of view (as opposed to direct measures in terms of money spent on things that directly affect the student, like financial aid, sufficient facilities, etc.).

One exception is that low and shrinking endowment can cause a college to be in danger of closing or similar changes, which obviously would affect the student.

Specifically regarding Elon, the endowment can in part be explained by history given above, and it fits the “up and coming” that you mention (reading some admission decisions, it looks like the bar has raised even just from last year). How to find out what large endowment directly correlates to sounds pretty difficult or impossible! Plus, I was also wondering, in terms of using enrollment as a criteria, about a large gift, that would compound over time, that doesn’t really correlate to anything besides one very wealthy, very satisfied graduate LOL!

My son is a freshman at Elon and it impressed from the beginning and has all of the things @sushiritto mentions. Was the campus as stately and picture-perfect as UR, no. UR seriously looked to me like they rebuild and relandscape on an annual basis with beautiful traditional brick…it almost didn’t look real. But there is clearly a lot of money and attention put into their physical campus. Was Elon beautiful and new-yet-old looking buildings, well maintained, looked like there was money and attention in the physical campus? Absolutely. Are they building new dorms, facilities, etc? Yes. Does Elon have the academic cachet of UR? No. Are either of these related to endowment levels? Who knows. UR looks quite rich, but I don’t think any of us are basing college decisions on which college campus looks the richest LOL.

Keep diving! UR has the Richmond Guarantee. Elon doesn’t have a direct counterpart but their core value is Engaged Learning and this does come through in practice from what we have seen so far.

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Oh yes endowment matters. A school with deep pockets and a smart admin can invest in everything from buildings to programs to their students. It isn’t the most important factor but can make a real difference in your/your childs experience.

You’d probably want to look at endowment per student, not just the total endowment figure. Also consider that in the case of public institutions, state appropriations may be a significant part of the funding picture.

At any rate there does seem to be a fairly strong correlation between endowments (or E.P.S), selectivity, prestige, and rankings. Whether that consistently correlates with academic quality, or post-graduation outcomes, is another question. More money presumably does tend to buy more distinguished faculty, better facilities, smaller classes, more generous FA, etc. etc. etc. Do you need or want all that? Maybe, maybe not.