Over the course of its nearly 400 years, Harvard has amassed the world's largest academic endowment, at times cresting $40 billion. In the U.S., endowments began with Harvard College, the country's oldest institution of higher education. Harvard: An Extreme Case Study in University EndowmentsĮndowments trace their history as far back as 176 A.D., when the Roman emperor Marcus Aurelius established the first recorded endowed professorship in Athens. Some endowments are unrestricted, meaning the institution has full discretion over expenditures, but these constitute a small fraction of the overall endowment total. These funds are restricted for purposes such as scholarship aid, faculty and academic programs, and athletics. The takeaway here is that universities don't have a single endowment but rather thousands of endowments established by donors with specific aims in mind. Universities can also have quasi endowments, which function as regular endowments while giving the institution the option to spend the corpus at some point. By contrast, an endowment would live on forever and uphold the memory of Elizabeth Miller and the Miller family's generosity. But in that scenario, the corpus would be depleted in just five years. The donor thinks it'll be more immediately impactful to award $20,000 per year to one or more deserving students than to award the roughly $5,000 annually an endowment would generate. Let's assume they create a scholarship in their mother's honor and name it the Elizabeth Miller Memorial Scholarship for students studying nursing. Instead of establishing an endowment, the donor could choose to make the gift expendable. The principal, or corpus, generates interest that must be spent according to the donor’s wishes. Think of a university endowment as a savings or retirement account. Excess funds are added to the corpus so it continues to grow over time and keep pace with inflation otherwise, that $100,000 endowment will have far less impact on future generations. Using a 5% spending rate (college rates typically range from 4-6%), the endowment will pay out $5,000 that must be used according to the donor's wishes - as a scholarship, for instance.Ĭolleges invest these endowed funds, generating returns that often exceed the 5% expenditure. That principal remains untouched in perpetuity, meaning forever.Īs an example, say a donor establishes a $100,000 endowment. The principal, or corpus, generates interest that must be spent according to the donor's wishes. When donors contribute money to a university, they have two main options: (1) make the gift expendable, which means that the money can be spent right away, or (2) create an endowment. University of North Carolina - Chapel Hill.University of Illinois - Urbana-Champaign.The Public Ivies, Little Ivies, and Other Ivy League Equivalents.
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