This past week, the House Ways and Means Committee began an investigation into the surprising size of university endowments. These funds have reached a collective $500 billion, raising the question of how institutions in possession of such incredible assets still find it necessary to charge so much for the education they provide. Indeed, some congressmen have promoted legislation stating that Universities with particularly large endowments should devote a fixed share of said endowments to offset student costs. Of particular concern to lawmakers is the possibility that this wealth accumulated in part through tax exemption is not being used to better the education of students.
Ownership of these endowments is heavily slanted towards a few large institutions. In fact, just 94 schools control 75 percent of all endowment funds. Harvard stands on the top of the list with a staggering $37.6 billion endowment, followed by Yale, Stanford, MIT and others. Each possesses an endowment in the tens of billions of dollars. The University boasts an endowment of $7.6 billion, placing it in the top five endowments for public universities and the top 20 for all universities. The use of this money has naturally attracted criticism, and in fact, former Rector Helen Dragas has accused the University of misusing its endowment.
The magnitude of these assets makes them attractive not only to those seeking to enrich themselves, but to those seeking a means by which to enact change. Social agendas can be advanced through the threat of divestment in a company or country, especially if the sum to be divested is as sizeable as those universities control. Protest divestment, in which stockholders remove their assets from a corporation for the purpose of enacting social change, has a long history on college campuses. In the 1980s, campuses were the site of rising protests against the South African apartheid regime, forcing many universities to divest from South Africa.
Following this example, many students across the country see an opportunity to use their University’s endowment as a vehicle for social and political change. This includes a new push to remove assets from fossil fuel companies, a movement which has extended to the University. These students have a fair point. After all, if divestment was successful in the battle against apartheid, why shouldn’t it continue being used as a weapon for change? However, this viewpoint overlooks the essential services endowments are responsible for.
It would be unwise to view these endowments as strong vehicles for social change, or to count too much on the power they can wield. For one, significant barriers to the use of endowments exist. The size of the endowment alone is misleading, as donations are often accompanied by specific restrictions limiting their use to a certain professorship or a scholarship. These positions are funded by the financial returns on the endowment rather than the endowment itself, creating a continuous source of revenue. Moreover, to dip into the endowment itself eliminates future avenues of revenue, essentially trading a short term gain for an irrevocable loss. Endowments also provide stability for universities against fluctuating revenue, and they allow professors to explore new academic fields and research by providing endowed professorships that help attract the most talented faculty and researchers.
Activism for a good cause should not be quickly dismissed, and a blanket condemnation of using endowments to this end is too far. But in using this tool, we also run the risk of widening our gaze too much, aiming at lofty, ambitious goals while ignoring the damage done on a smaller level to scholarship recipients and professors. Our endowment isn’t a pile of money doing nothing; through wise investment it actively contributes to the running and quality of the University. Because of this, manipulating endowments for political purposes needs to be done with caution, if at all, and always with due consideration given to its role in providing for the University.
Alex Mink is an Opinion columnist for The Cavalier Daily. He can be reached at a.mink@cavalierdaily.com.
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