College Endowments: $850B Grew, Tuition Did Too

College endowments grabbed attention for a simple reason. A student borrows $38,000 on average (Federal Reserve, Education Data Initiative) to attend a school whose endowment may top $1 million per student. The numbers sit side by side, and they look wrong.

The reality is more mixed than the outrage and more troubling than the defense. Here is what the data shows.

How big are college endowments?

NACUBO tracks several hundred institutions and finds total endowment assets near $850 billion in recent years. The distribution is steep. A handful of schools hold a large share, while most colleges have modest endowments or none worth mentioning.

Only a small fraction of American students attend those schools. Most students attend public universities and community colleges that run with endowments a tiny fraction of that size, or none.

Why don't colleges just spend the endowment on tuition?

Three reasons, and they are all real.

First, donors restrict most endowment funds. A gift for a chemistry chair cannot pay for dorm costs. Second, schools spend a set share each year, typically about 4% to 5%, so the fund keeps paying out for generations. Third, endowment payouts cover only part of the budget even at rich schools.

Those limits explain why a school cannot drain an endowment to cut tuition to zero. They do not explain why a school with returns around 10% in good years raises prices at all. Endowments grew on investment gains, and NACUBO's average return for fiscal 2024 was roughly 11%.

Did endowment growth line up with tuition growth?

Both rose, and neither slowed. Tuition and fees climbed more than 1,200% since 1980 in nominal terms (Bureau of Labor Statistics analyses). Endowments compounded through decades of strong markets. Wealthy schools gained on both lines: investment income and a pricing model that held up at every level.

That does not prove one caused the other. A school with a large endowment often has a large pool of applicants who can pay, which lets it hold prices up. Our explainer on why tuition rose so fast covers the main drivers, and state funding cuts cover the rest at public schools.

Are endowments taxed?

A federal excise tax on investment income applies to a small group of the wealthiest private colleges. Congress set it at 1.4% in 2017 and raised the rate for the richest schools in 2025. Critics on the left say the tax is too low. Critics on the right say it hits research funding. Both sides agree the schools affected are a small slice of the sector.

What do big endowments mean for you?

If you attend a well-funded school, your aid package may be generous. Several top schools meet full demonstrated need, and some cap or remove loans for lower-income families. If you attend a school without a large endowment, which is most students, you pay for more of your education directly.

That divide shapes a student's debt more than most people realize. Our guide to how to afford college and our page for students in a tight spot with college costs show where help is available at each type of school.

What should you ask your school?

Four questions work at any college that has an endowment:

1. How much does the endowment hold per student?
2. What share of the annual payout goes to need-based aid?
3. Does the school meet full financial need, or leave a gap?
4. How much did tuition rise over the last five years, and how much did the endowment grow?

Admissions and financial aid offices answer these, and the answers tell you more than the sticker price.

Where does this fit in the larger crisis?

Endowments are a symptom. The central facts of the student debt crisis are rising prices, lower public support and heavy borrowing. Endowments show that a few institutions had the resources to soften the damage while most students did not. The wider pattern of affordability slipping out of reach sits in why the American dream feels broken.

What do critics and defenders each get right?

Defenders point out that endowments fund scholarships, research labs and faculty chairs that the school could not pay for otherwise. A large share of the money exists because donors gave it for exactly those purposes, and spending it all today would leave nothing for the next class. That argument holds up on the numbers.

Critics point out that a fund growing near 10% in good years while paying out 4% to 5% builds wealth faster than it spends it. They also point out that the schools with the biggest funds often enroll small shares of low-income students. Both points have data behind them. Both fit a system where a handful of institutions hold most of the wealth.

Could the rules change?

Several proposals sit on the table. Some would raise the minimum payout for the largest funds. Some would require schools above a size threshold to report how much goes to need-based aid. Others would tie tax treatment to enrollment of low-income students. None of them reach the community colleges and regional publics where most students enroll, since those schools hold little endowment to tax or redirect.

Why does the size of the pile matter to a borrower?

A large endowment signals a school with room to lower the price, expand aid or fund tuition-free paths for lower-income students, and some have. Princeton and a few peers have removed loans from aid packages. Those choices show the money can be used for students when a school decides to. The problem is how few schools have that choice and how few students attend them. For the large majority of students, the endowment story is a story about someone else's school.

A system that lets elite schools stockpile tens of billions while a typical graduate leaves owing $38,000 has priced its public purpose below its portfolio. The fix involves transparency on what endowments spend, tighter rules on what they must pay out, and real public funding for the schools that serve most students.