No, Endowments Are Not the Answer to Federal Attacks on Higher Ed

Be taught extra about how endowments assist college students and analysis: Contact Congress, learn our temporary Understanding College and University Endowments, and discover our Tax Resource webpage.

The Trump administration has launched an aggressive and unprecedented assault on larger schooling—not like something we’ve seen earlier than. Billions of {dollars} in federal assist for very important analysis on illnesses like cancer, Alzheimer’s, and HIV disappeared in a single day. The legislation and longstanding due course of protections for establishments have been disregarded.

These sweeping actions have harmed each sort of establishment—and, extra importantly, the scholars and communities they serve. As a consequence, schools and universities have been pressured to freeze hiring, lay off employees, get rid of packages, halt life-saving scientific trials, and pause graduate admissions—all inside the administration’s first 100 days.

Some conventional supporters of upper schooling, in addition to frequent critics, recommend that there’s a simple method out: schools and universities ought to merely use their endowments to plug these sudden monetary gaps. This concept has come from throughout the political spectrum—from Republican Rep. Andy Harris of Maryland and the conservative-leaning American Enterprise Institute to liberal New York Times columnist Ezra Klein and the left-leaning suppose tank New America.

These calls to “simply spend the endowment” are inclined to resurface throughout crises, as seen through the 2008 monetary disaster and the COVID-19 pandemic. If endowment spending elevated then, why can’t the identical factor occur now? It sounds easy, however it’s incorrect.

First, whereas establishments have elevated endowment spending throughout main emergencies, the billions of {dollars} in analysis funding cuts being proposed now dwarfs something confronted beforehand. In 2023, the federal authorities supplied almost $60 billion on research funding, in comparison with whole endowment spending—monetary help, analysis, pupil companies, teachers, operations, and extra—of about $35 billion, in line with IPEDS data.

Second, throughout these latest crises, establishments didn’t need to shoulder the burden alone. They acted in partnership with the federal authorities and different stakeholders to climate the storm. That shared response made a distinction. In 2025, nevertheless, the federal authorities isn’t a associate—it’s the supply of the disaster. And in contrast to previous emergencies, there isn’t any clear finish in sight, leaving open the potential of a devastatingly long-term drain on endowments.

Third, endowments usually are not like a single checking or financial savings account that may be dipped into at will. As an alternative, they encompass as much as hundreds of particular person accounts, the overwhelming majority of that are legally restricted by donors. These restrictions typically designate assist for particular functions like increasing monetary help, supporting the chair of a selected educational self-discipline, or fueling groundbreaking medical and technological analysis. Most endowment spending boosts entry for low-income college students and teachers. The 2024 NACUBO-Commonfund Study of Endowments discovered that just about about two thirds of endowment spending goes on to monetary help and teachers, and establishments with massive endowments are the most definitely to offer need-blind admissions, meet college students’ full monetary want, and supply no-loan monetary help packages. These funds can’t legally be redirected to make up for canceled authorities funding—or bail out reckless federal coverage choices.

Even the wealthiest establishments don’t have sufficient unrestricted funds to routinely take up large, sustained cuts with out irreparably draining their endowments. Endowments are managed like marathon runners: they expend power strategically, figuring out they will’t dash the entire race. There are occasions to surge—similar to through the pandemic—however that tempo can’t final. Attempt to dash the entire race, and the endowment, like a runner, collapses. Reckless monetary choices at present gained’t simply harm present college students—they’ll shortchange the following era as effectively.

Because of this, endowment spending is carefully monitored, repeatedly audited, and guided by strict insurance policies designed to make sure long-term sustainability. Faculties and universities spend what’s each prudent and legally permitted every year whereas preserving advantages for future college students. Based on the 2024 NACUBO report, establishments’ common efficient spending fee was almost 5 p.c. That determine isn’t arbitrary. It’s formed by state legal guidelines, donor intent, and sound monetary stewardship. Some states really impose authorized restrictions on the proportion of endowment spending every year. For instance, in Ohio, spending greater than 5 p.c in a given 12 months may expose an establishment to authorized legal responsibility.

Misconceptions about endowments aren’t simply deceptive—they threaten the very individuals and packages that they have been created to assist: scholarships, analysis, educational excellence, and the futures of numerous college students and school. They usually divert consideration from the true difficulty: an unprecedented assault on American larger schooling.