Do Universities Spend Endowments?

The concept of endowment originated in England in the 15th and 16th centuries. However, it was greatly developed by the United States of America (USA), where many social institutions keyed into this concept. However, this article would be limited to the educational system of Higher Education. In this article we shall see if Universities Spend Endowments?

Universities spend endowments on purposes specifically designed by the donors. However, if the universities go bankrupt, or are getting close to it, they can, through the doctrine of Cy Pres, use the endowments for urgent matters, and at the same time, heed the donor’s original request.

Do Universities Spend Endowments?

What Universities Endowment Funds are used for?

An endowment is regarded as the money or financial assets, that are donated for charitable or educational purposes, to provide a constant and stable source of income over a long period. University endowment funds comprise the money and other financial assets donated to the university by various donors. These endowment funds often create a pact between the donor and the university.  They are mostly invested and generate a yearly return as interests. Many universities leave the principal endowment funds invested, and use a percentage of the interest to cater for faculty and students’ innovative research, exploration of new academic fields, integration of new technologies, and developing new teaching methods. The greater a school’s endowments funds, the better, as there are so many financial crosses the school takes up to reduce the burdens of finance on its students while striving to give them a quality education. The following, are some of what universities use their endowment funds for:

  • Student financial aid and scholarship 
  • Creating a stable stream of income
  • Funding research and innovation
  • Establishing well-equipped libraries
  • An affordable and conducive residence

Student Financial Aid And Scholarship 

Universities that have a lot of endowment funds can decide to assist its student in their tuition. This way, they help students who can’t afford their tuition. One way to achieve this is by giving out Need-Based and Merit-Based Scholarships. These scholarships work differently. While the Need-Based Scholarship is based on the need of a student, not necessarily on his academic performance and qualities, a Merit-Based Scholarship is based on the academic performance of students and the positive qualities they possess. Many universities channel a good percentage of their endowment funds interest to students’ financial aid and scholarship because it seems to be very important. There is no university if there are no students, so, their interests must be made a priority.

Creating A Stable Stream Of Income 

With enough well-invested endowment funds, universities don’t have to worry about where to get money from. Even when the economy fluctuates, the probability that they will be affected would be low. Although fluctuations in the economy resulting in changes in financial markets and investment strategies sometimes affect the donor’s ability to donate, universities follow guidelines that help in preventing economic instability from affecting them negatively. Since the endowment principal is not spent, the interests generated yearly are used for institutional priorities. This investment in a way, saves universities from the adverse effect of a failing economy, as the principal endowment funds mostly remain untouched. 

Funding Research And Innovation

As academic institutions, universities must keep growing and expanding in knowledge. What reflects the academic progress of universities is how much research they do, and the innovations they make. These go a long way in increasing the academic prestige of universities. This is why many universities empower their faculty and students to go into diverse field research and make some ground-breaking discoveries, which leads to innovation. Students and faculty are sponsored to great research institutes and given the privileges to go anywhere they want in relation to their research. Universities also ensure that they establish great research institutes in their schools, this way, every research can be done from the comfort zone of the student and faculty. 

Establishing Well-Equipped Libraries 

Sometimes, the quality of a school is measured by how much it invests in its libraries. So, one of the things a university channel the interests of its endowment funds to is a well-equipped library. Through this medium, students do not need to struggle for course materials, as they will all come in handy in the university library. Even students who are not opportuned to own a smartphone will not be left out since the university library will have an ICT section. A good library goes a long way in promoting the academic progress of students, and by implication ensuring that they make good grades. Establishing a good library in the university not only makes the school standard, but it also shows that the university is intentional about the academic progress of its students.

An Affordable And Conducive Residence

Living on campus affords students so many opportunities. Some of these includes: Easy access to the school library and other school system, reduction in transportation cost, having a social life, fully participating in extracurricular activities, a healthy transition into adulthood, etc. Besides, students who live on campus have shown more academic excellence than students who live off campus. This is why universities try to build affordable residences for its students. It channels some of its funds to this regard, ensuring that the residences are well built, and properly furnished. Also, the residences have utility services which would save the students a good sum of money. 

It must be noted that the university endowment funds must be channeled to the specific institutional priority of the donor. This is a way of showing respect to whomever donated to the university. A Cy Pres is invoked only when the university is in a dire need of something outside the donor’s wish list or when the university is going bankrupt. Even in this case, the university must still fulfil the the expectations of the donors.


Endowment funds are of different types. But majorly, there is the restricted and the unrestricted endowment funds. The unrestricted endowment funds are spent and invested at the discretion of the receiving party. On the other hand, the restricted endowment funds sees to the fact that the receiving party dances to the tune of the donors. This is why many universities cannot spend their endowments the way they want. They must fulfil the donor’s wish of ensuring that the quality of education enjoyed now, will be the same for the future generations. 

Frequently Asked Questions 

1) Where do universities get their endowment funds from?


Universities endowment funds are gotten from charitable donations from different donors.

2) What university has the highest endowment funds?


Harvard University, with a total sum of $53.2 Billion.