Endowments and the future of higher education

          Endowments and the future of higher education

By Steven R. Leigh

Prominent universities rely heavily on endowments to support their many academic missions. Yale University, often cited as an exemplar in terms of success in endowments, operates with an endowment of approximately $20 billion, which probably produces enough annual income to pay tuition for every enrolled student. Income from Yale’s endowment funds a huge spectrum of academic pursuits, ranging from funding for women students in science, to professorships, to outreach programs for local teachers. A significant endowment makes the university better, allowing the institution to recruit top faculty and students, while funding research and outreach more generally.

Endowments help reduce the costs of education in many ways. Most importantly, endowments allow universities to support professors, graduate students and undergraduate students in undertaking visionary, high-risk, high-reward research. Endowed professorships are reserved for only the most talented professors, and income from endowments helps the university support faculty, students and direct costs of research. Endowments also support student scholarships and programming. In general, endowments help universities offset educational costs while placing the university on the cutting edge of scholarly discovery, research and creative work.

There is a new urgency in seeking better endowment funding across the United States. In 2013, student loan debt for current students and graduates topped $1.08 trillion (https://rt.com/usa/student-loan-debts-top-trillion-957/). This number has been driven by declines in state funding for universities and resultant increases in tuition across the United States since 2002. CU-Boulder’s story is among the most stark: Colorado decreased state funding from 2002 to 2012 by 48 percent, a larger percentage decline than any other state (https://www.nsf.gov/news/news_summ.jsp?cntn_id=125542). Almost all public universities have raised tuition steadily in the last dozen years, and many premiere public institutions have reached the $18,000-$20,000 range in tuition per year for in-state students (CU’s in-state tuition remains relatively low, about $8,700 per year). The three main sources of tuition revenue are student wages, loans and family savings: All are hard-earned, requiring sacrifices and trade-offs. One of the most important and difficult trade-offs is time. Students who work, like many at CU-Boulder, must balance careful attention to school work with competing commitments to employers and businesses.

These broad trends point directly to the need for CU-Boulder’s College of Arts and Sciences to increase endowment funding across the college. Endowments drive improvements in the quality of an institution and reflect alums, donors and supporters who recognize the importance of research universities in the 21st century. Endowed professorships are the first and most important component of increasing our academic quality. Named chairs recognize significant faculty achievements and help the university support faculty salary and research. CU-Boulder professors are among the most productive in the nation and are heavily recruited by competitors, including Harvard, Yale, Stanford, Cornell, Berkeley, Illinois, UC Irvine and many others. Often, these competitors offer our faculty endowed professorships, conferring prestige and research support. CU must provide its faculty with comparable support to be competitive.

A second major area for endowments is student scholarships and, for graduate students, fellowships. A stable source of income that helps pay tuition is the most direct and effective way to offset the costs of education. Endowed scholarships are also effective recruiting tools for admitting the nation’s best to CU. Our dynamic programs, departments and majors are attracting more and more applicants, including the best in the nation. Like faculty support, endowed scholarships and fellowships confer prestige and, most importantly, allow students to focus entirely on academics without balancing jobs and worrying about future loan repayments.

Finally, endowment funding for programs greatly enriches the institution, providing capabilities that are difficult to attain when tuition revenue provides the majority of funding. Institutions funded mainly by tuition must make sure that expenditures directly benefit students, which sometimes limits options for innovation and risk-taking. Programmatic funding enables faculty and students to take risks in their research and creative work. For example, in my own field, this might involve traveling to an unexplored region to prospect for human fossils or archaeological sites. Support for high-risk projects allows our faculty and students to develop new areas of knowledge, benefitting society by broadening the capacity of the institution to innovate.

The future of higher education, including CU’s future, depends to a large degree on how successfully we can build major endowments. Ultimately, U.S. competitiveness and leadership in the global knowledge economy depends on this as well. For alums, donors and supporters, endowments indelibly affirm the importance of higher education and enduringly preserve its viability and vitality.

March 4, 2014