The Coming Showdown Over University Endowments: Enlisting the Donors

This Essay focuses on the discordance between universities with particularly large endowments and what is occurring in the rest of higher education, particularly with respect to skyrocketing tuition and a growing institutional wealth gap. The Essay considers absolute endowment values, the amount of endowment per student, and expense-endowment ratios at sixty private universities. It concludes that a small number of schools have an excess endowment, and then provides a convenient proxy for determining when an endowment is so large that it should receive less preferential tax treatment. The Essay then considers the effects that large endowments have at their home institutions and throughout higher education, the arguments in defense of large endowments, and some frequently proposed modifications to the tax code. The Essay recommends that policymakers modify the charitable deduction for gifts to universities with mega-endowments, as part of a multifaceted effort to spur endowment spending and control tuition.