Elite American colleges and universities are not using increases in their large endowments to facilitate access to these schools by the nation’s poorest or students of colour, says a just-released study, a finding that contradicts what these universities and colleges self-reported on questionnaires completed for the National Association of College and University Business Officers.
In 2018, elite schools self-reported that they allocated 49% of income from the growth of their endowments to financial aid – when the actual figure is closer to 10%, says a new study by University of California, Santa Cruz economics professor George Bulman, conducted for the non-partisan, Cambridge, Massachusetts-based National Bureau of Economic Research.
Colleges and universities “with larger endowments do not increase enrolment overall to expand access to elite education and do not increase the fraction of low-income students or students of colour they serve”.
“Specifically, colleges and universities whose endowments grew relative to their peer institutions due to high investment returns over the last 20 years enrolled fewer students who were eligible for federal Pell Grants [made to the nation’s poorest students] and a smaller percentage of black and Hispanic students,” writes Bulman, the author of The Effect of College and University Endowments on Financial Aid, Admissions, and Student Composition.
Study sample
Bulman studied 140 elite liberal arts colleges and 60 private research universities, 70% and 30%, respectively, of the wealthiest schools in each of these categories as defined by US News and World Report’s rankings.
Together, these institutions educate 1.1 million students, approximately 5.5% of the total number of students in America’s four-year colleges and universities. One quarter of these institutions accepted fewer than 20% of applicants. Yale University in New Haven, in 2022, for example, accepted 4.46% of applicants, its lowest rate ever.
Twenty-five percent of the students in these elite schools received Pell Grants (US$6,500 per year). Hispanics make up some 11% of these schools’ student bodies, while 8% are black. Nationwide, 21.7% of college and university students are Hispanic and 12% are black.
Each of the institutions Bulman studied has an endowment of at least US$20,000 per student. Today, the nation’s largest endowment, of US$53 billion, is held by Harvard University, while a small college such as Haverford College (outside Philadelphia, Pennsylvania) had an endowment of US$641 million.
From 2003-18, the period Bulman studied, the average annual investment returns of endowments for the top 10 liberal arts colleges varied between 5.2% and 10.2%, and between 7.2% and 10.8% for the top 10 research universities. Typically, these schools will spend between 4% and 5% of the growth of their endowment portfolios each year (calculated on either a three- or five-year rolling average).
Spending investment income did not, however, increase access to these campuses.
One way to increase access, Bulman told University World News, would be to use the monies provided by the increased endowment revenue to increase the absolute number of students enrolled in the school.
“We used to have 2,000 students,” he says, “now we are going to have 2,500 students because we can afford to hire more faculty and staff, and build more buildings, and offer more financial aid. We can maintain our quality while expanding.”
Not only does his detailed statistical analysis find no evidence for this, “if anything, there is a small downward pressure on overall enrolment”. While the “figure is a statistically insignificant negative number, it tells us that basically there is no overall growth in enrolment in these elite schools,” Bulman says.
Bulman found that on average these colleges and universities do increase financial aid awards by approximately US$3,000 when their endowments double, a small percentage of the sticker price (tuition, room and board) of US$74,000 at Harvard or US$60,952 at Bowdoin College, in the picturesque town of Brunswick, Maine.
The increase in per-student aid also represents only 10% of the overall increase in institutional spending with respect to endowment growth. The universities and colleges did not, however, reduce their sticker prices. The modest increase in financial aid does not result, Bulman writes, in a statistically significant reduction in estimated net cost per student.
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