Study Finds U.S. College Endowments Could Afford to Spend More

  • Funds don’t provide details on spending, Education Trust says
  • Two congressional committees are also scrutinizing endowments

The richest U.S. colleges could pay more out of their endowments to help low-income students, according to a study that comes as some funds facing losses may reduce spending.

The report released Thursday from the Education Trust, a Washington nonprofit group, also criticizes the opacity of endowments, which don’t offer much detail about how their funds are spent and often make their tax returns “difficult to find.”

Nearly half of 138 endowments in 2013 with at least $500 million in assets are in the bottom 5 percent nationally for their enrollment of low-income students who receive Pell Grant aid, according to the study. Among 67 wealthy, private universities, the median spending rate was 4.6 percent in fiscal 2012 and 4.9 percent in 2013.

Endowments are already under scrutiny. Two congressional committees asked the richest 56 schools to provide details including how much they spend on financial aid and how much they pay their investment managers. Because of their educational contributions, school endowments don’t pay taxes on investments and donors receive deductions. Endowments also aren’t required by law to spend 5 percent like foundations. The report suggests more information should be provided.

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“They get a significant, significant bonus by not having to pay taxes and by not having a minimum threshold, and the least they can do is provide additional information on their endowment holdings and how their money is spent who it goes to,” Andrew Howard Nichols, a co-author of the report, said in an interview. “More transparency around endowment assets would be helpful.”

The study looks at data between 2010 and 2013, when endowments at 67 wealthy, private universities generated average annual returns of 11.1 percent. Since 2013, growth has varied among schools with more than $500 million: median returns of 17.6 percent in fiscal 2014, 3.6 percent the following year and an expected loss of 0.73 percent for the year that ended in June, according to the Wilshire Trust Universe Comparison Service.

With many schools expecting losses, some that already pay more than 5 percent annually have said they will cut their spending rates.

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