What do elite colleges do with all that endowment money?

Organizations like the Institute for Higher Education Policy have been advocating for private colleges to spend more of their endowment money. A 2017 report from IHEP says that “colleges with large endowments should be required to spend at least the 5% that private foundations are required to spend on charitable donations each year, and invest those dollars in making their colleges more affordable and accessible for low-income students.”

The average spending rate for the 2022 fiscal year stood at 4.17%, a decrease from 4.79% the previous year, according to a study from the National Association of College and University Business Officers and financial services organization TIAA. But the study noted that total endowment withdrawals increased.

IHEP’s president and CEO, Mamie Voight, told Marketplace over email: “Colleges with large endowments should use the funds to reduce the high cost of college on the front-end, especially for students from low-income backgrounds, so they do not leave college with high debt loads.”

“All colleges, whether private or public, should implement policies that 1) are need-based and, thus, equity-centered; and 2) recognize that the cost to attend college is far more than simply the cost of tuition,” Voight continued.