<p>I’ll admit it - I’m bored, and I’ve been going through a lot of College X vs. College Y threads. Very often, I see ‘endowment per student’ popping into the discussion. Now,</p>
<li>What exactly is this ‘endowment per student’?</li>
<li>How does it make a difference?</li>
</ol>
<p>Endowment per student deals with the amount of money allocated per student for various programs. Why is it important? Because merely looking at university's total endowment can be extremely misleading.</p>
<p>For example, lets say University X and Y have a 4.0 billion endowment. They spend the same amount of money on each student right? Not necessarily. If University X has 6000 students, while Y has 3000, then in actually, Y has more resources to allocate to each student.</p>
<p>This is particularly important in this time and age when individuals are curious about the financial aid initiatives of univerisities.</p>
<p>Despite many protestations to the contrary, endowment per student is much less important than overall endowment. The reason is economies of scale. Larger endowments allow universities to have greater institutional purchasing power and better debt ratings when it comes to financing new buildings, labs, etc. On paper, endowment per student may look nice, but in reality it's meaningless out of the context of overall endowment.</p>
<p>^^ agreed. The per capita measurement says nothing of whether the college is actually spending that, or nearly that, on its students. It might be that the college with the lower endowment per capita is spending more on its students.</p>
<p>Wait, does endowment only affect financial aid?</p>
<p>^^ Endowment most definitely impacts finanacial aid (and size of the faculty and faculty salaries). </p>
<p>Endowment per capita is important because it teases out the effect of graduates students and overall size of the student body in the overall mix. </p>
<p>All colleges are required by law to pay out a certain percentage of their endowments every year to the operation of the school. The bigger the endowment the bigger the payout. How do you think Harvard affords its new FA plan?</p>
<p>BTW, tuition revenue only covers about 60% of the cost of an education at most private schools. The remaining gap is covered from the endowment.</p>
<p>Endowment per capita is very important and probably should be weighted to count graduate students as more expensive than undergrads. Large technically oriented graduate programs are very expensive to operate. The colleges are likely spending 2-3-4 or more times per student for graduate students than undergrads. (If anyone has any more detail of how to more accurately allocate costs among different student groups, then please post) From a spending for undergraduate students standpoint, the ideal would be a large endowment and low numbers of graduate students. A further consideration is the institution's willingness to actually spend its capital in support of students. This is being done now with all of these changes in financial aid and it is long overdue as these endowments have become almost embarassingly large at a time when the cost of attendance has skyrocketed.</p>
<p>OK, all this is making my head spin. Could someone please put things in a nutshell?</p>
<p>What about State Universities such as Berkeley, UT Austin, UCLA, Michigan, UVa, to name a few, don't they get funding from the government aside from the revenues generated from endowment?</p>
<p>Oh OK. So basically, large endowment=top notch facilities + good financial aid?</p>
<p>Exactly. And that makes one school better than the next.</p>
<p>Let's talk about Berkeley's funds for a while.</p>
<p>According to wikipedia, Berkeley's endowment fund is 3.4Billion. How much do you think would go to university's spending such as tuition grants, facility upgrades, etc, from that amount? </p>
<p>How much the amount would be coming from the government on a yearly term?</p>
<p>More than you probably want to know:</p>
<p>-- Endowments make it easier for a school to be a "good school" for undergraduate training, but it certainly is neither necessary nor sufficient. A school can also continue to provide its students good service by relying more heavily on tuition and fees, but one ought to expect to pay full sticker price more often at these schools.</p>
<p>-- Per student endowment is of importance, but it needs to be regarded in context. At an LAC, where all or almost all students are undergraduates, you would have a higher expectation that the school will direct more finances towards its undergraduates. At a research school, some of that stream can be expected to go to financing graduate students and rewarding faculty research.</p>
<p>-- It is also true, however, that the absolute size of the endowment is significant, too. It gives a school more clout in negotiating deals for services, salaries, and investments (and also in hiring lawyers when necessary).</p>
<p>-- Endowments are less critical for public schools because of the state funding they receive.</p>
<p>-- Published endowment numbers can be misleading as there can be other funding sources (say from research foundations) that do not show up in the endowment bucket.
Additionally some endowment bequests have restrictions which specify how a bequest is be spent by the school. Some total endowment numbers include all such funds regardless of restrictions, others do not.</p>
<p>A list of endowments as of fiscal 2006:</p>
<p>As a guideline a school will generally count on annual revenue of 5% from its endowment base. (A quick calculation will show that Harvard is probably generating far more revenue from its endowment than from undergraduate tuition, even if most of those students were paying full price.)</p>
<p>Actual expenditures per undergraduate can be retrieved, too. Here is a convenient source</p>
<p>The</a> Education Trust - Closing the Achievement Gap</p>
<p>Please remember that some parts of the country (like the northeast) are more expensive to operate in than others.</p>
<p>From what I'd read: endowment funds are misleading when you compare publics and privates. Since a school typically spends 5% of its endowment per year (by laws and such), a public actually gets the equivalent of a much larger endowment. For example, I think Berkeley gets $500-600 million from the state each year; a school would need a $10-12 billion dollar endowment to match this (as they'd typically spend only 5% of it). Not to mention the additional $3-4 billion that it has in its actual endowment. Of course, it has many more students to support than, say, Princeton, so even with this in mind, its funding still isn't quite as high.</p>
<p>Private colleges do not have to spend 5% of their endowment annually, although there has been some recent agitation to force the wealthiest ones to do so. (source</a>)</p>
<p>Re: The Education Trust statistics. I'm certain that if Yale actually spent twice as much per student as Harvard and Princeton, it would show somehow. It doesn't. Wash U's number is suspect as well.
But many fine points are made in the post above (#15).
To make the effect of endowment per student concrete, take Princeton as an extreme, which is largely an undergraduate institution. With an endowment per student of something more than $2 million, a 4.5% annual pay out means $90,000 per student per year. Add in the annual fund drive, and we're over $100,000 a year per student that must be spent. This is apart from payments by parents and students, federal and other research dollars, etc.
A formidable amount of money, indeed.</p>
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For example, I think Berkeley gets $500-600 million from the state each year; a school would need a $10-12 billion dollar endowment to match this (as they'd typically spend only 5% of it)
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<p>Well, that's ALSO a bit misleading. After all, Berkeley doesn't just get that money from the state "for free". It gets it in return for charging lower tuition to its instate students. Private schools, on the other hand, are free to charge full fare to its students. </p>
<p>Hence, what the Lord (aka Governor Schwarzenegger) giveth, the Lord also taketh away.</p>
<p>^^ true, it has much to make up for the "lost" tuition money, but the consequences in terms of endowment far outstrip that.</p>
<p>Also, remember that publics, theoretically, don't offer as much as privates; they don't usually have to spend as much on faculty in order to make classes smaller, advising tends to be less quality, etc. all of which the "extra" tuition (which a private charges) would pay for.</p>
<p>
[quote]
Endowment per capita is very important and probably should be weighted to count graduate students as more expensive than undergrads. Large technically oriented graduate programs are very expensive to operate. The colleges are likely spending 2-3-4 or more times per student for graduate students than undergrads.
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<p>Some of those "expensive" students are also paying hefty tuition with very little financial aid. Some of these other "expensive" students are well-supported by outside research dollars. That would make me question whether the flow of endowment dollars to their education (over that of undergrad education) happens at the ratios you're offering as guidelines.</p>