My, What a BIG Endowment You Have…

Until very recently, I was not very interested in money when it came to college. After all, I was already gone and graduated with my degree. So the only way that college and college money impacted me was the student loans that I now have to come up with each month. The reality is that college costs are rising and like any other cost that you need to figure out, comparison shopping is the only way to go. However, one thing that should be considered in addition to some of the other considerations like location, availability of majors, and proximity to other important resources related to one’s field of study, I would also say that it is important to consider how big the school’s endowment is.

Size Matters

This morning, I read a copy of my college’s alumni newsletter. Normally, I don’t read it but for some reason, today I felt differently and I was soon engrossed in a fascinating article that detailed the history and the management of my alma mater’s endowment. I am truly excited about the growth of the endowment recently to a significant size. Let’s face it, a large endowment is a powerful tool for reshaping any university setting. By defraying costs, expanding programs, improving infrastructure, and attracting the greatest, most talented professors, a college or university can really put its large endowment to good use.

The Power of a Large Endowment

If the university is really concerned with affordability for its students, a large endowment can provide for scholarship monies, tuition reductions, and other defrayed costs that can truly make a difference for students whose families cannot otherwise afford it.

Handling An Endowment: A Matter of Trust

Much of the money that goes toward large contributions and endowments at universities is left as part of a will or trust. These documents provide a means for a person to transfer their assets after death. Indeed, the newsletter even provided a special section of the article to encourage donations of this nature. Those who belong to this group are able to wear a special pin that indicates this status. There are much worse things that could be done with your money than give it to a college or university, in my opinion.

Opening Doors

Once you have a large endowment, there are many more options available to you. We see this in the real world. A regular investor like me cannot ever really hope to get into a hedge fund with my measly 250 dollars to invest. Similarly, some of the most sophisticated investment opportunities are really only available for universities and trusts that surpass a billion dollars. To this end, many small universities must focus not just on using the endowment, but growing it strong and fast, like one’s 401k or IRA

Continued Contributions - Keeping Your Endowment Safe

In order for the college to continue to run for years on end, money must inevitably be drawn off of the endowment. In the most recent period reported for my university, over 10% of the budget was drawn from the endowment. This could mean that there is a large sum in the endowment (There is.) or it may mean that the expenses of the university have been kept to a reasonable level. (They have been.) However, this trend of strong growth could not continue were it not for continued contributions year in and out from generous contributions from businesses, philanthropists, and alumni. These donations are really the mainstay and shield for keeping the endowment sheltered so that it can grow.

Considering College

So, before you rush off to your favorite party school for a tour, consider the perspective school’s endowment; it may be that you might want to reconsider whether or not that school has the resources you require to get a good education for yourself.