Because it’s only a $10 billion endowment. Seriously. On a per-student basis that works out to $223,000 per student, which is good, but nowhere near Princeton’s $2.6 million per student, or Yale’s $2.0 million per student, or Harvard’s $1.7 million per student, or Stanford’s $1.4 million per student. Very few colleges and universities meet 100% of need for 100% of their students with demonstrated need; and all or almost all that do have higher endowments-per-student than Michigan. That’s why the university is now in the midst of a $4 billion capital campaign to try to raise additional endowment to support need-based FA for all students, OOS as well as in-state.
A standard rate of payout from endowment is 5% per year. A straight 5% of $223,000 per student would be $11,150 per student per year. Of course, some students are full-pays and don’t need any need-based aid, though once the university starts meeting 100% of need for everyone, the composition of the OOS students will likely shift a bit, and more OOS students with need will end up in the mix. That will mean not only a higher FA payout, but less tuition revenue. And meeting full need for an OOS student is more expensive than meeting full need for an in-state student of a comparable income level, simply because OOS tuition is higher. But also keep in mind two other factors. First, Michigan takes out 5% of the rolling average of the past 5 years of endowment. That way its endowment payout is always lagging somewhat behind endowment growth. But it also meant that when the markets went sour in 2008-09, Michigan didn’t suffer the same kind of sudden loss of endowment payout that shook many other institutions. So the actual payout is less than $11,150 per student. And second, endowment supports more than just FA; some goes to support other strategic initiatives around the university.
At present only two public universities, UVA and UNC Chapel Hill, meet 100% of need for OOS students. Michigan will shortly become the third; that’s the plan if the capital campaign is fully successful. But keep in mind that OOS enrollment at UNC is capped at around 18 or 20% of the student body, and at UVA at 35%. Michigan is already around 40% OOS and likely will edge closer to 50% in coming years. So this is a huge financial commitment the university is taking on. It’s a noble and ambitious goal. I hope they succeed.