Richer Colleges Get Richer – The Wealthiest 10 Universities in the US

yale springOxford dictionary defines an “endowment” as: “An income or form of property given or bequeathed to someone.”  It also explains it as: ” A form of life insurance involving payment of a fixed sum to the insured person on a specified date, or to their estate should they die before this date.”

While the latter is less true of what Time magazine recently reported as the “10 Richest Colleges in the United States,” it does have some special relevance to what these truly mean to the Universities.  More on that after we share who were the universities who had billions of dollars in their coffers.

The Top 10 are

10 Richest Universities in the US

As you can see,  most of the Ivy League continue to grow financially stronger.  Harvard, Yale, Princeton and the University of Pennsylvania saw their endowments rise.  Two other universities, commonly associated with the Ivy League, Stanford and MIT also saw their “backup funds” rise as well this past year.  Two other very strong universities, University of Michigan, many times called a Public Ivy grew as did Northwestern University, a challenging school which many would be envious to obtain acceptance.

While the UT and UT A&M systems dropped slightly, they still remained in the Top 10.

Why is it important?  And why should we care as parents of students going to US Universities or students who will eventually land on American soil for your collegiate education?  

Carnegie Mellon University explains:

How does the endowment support the university? A strong endowment allows Carnegie Mellon faculty and administrators to pursue critical initiatives that enhance our ability to be a leader in higher education and research. In addition to providing stability for the future, endowment gifts help the university attract and retain top faculty and students. The benefits to a faculty member who holds an endowed professorship—which is a faculty appointment supported by the investment return of an endowment gift—include opportunities for enhanced teaching and research and increased prestige. Students benefit from the scholarships, fellowships, and the excellent teaching, programs, and research initiatives that endowment support helps make possible. Through endowment resources, activities can be supported that might not otherwise have had a chance to exist. Generally speaking, the strongest and most stable institutions have strong endowments.

CMU’s endowment stood at $2.1 billion at the end of June 2014.

Johns Hopkins University claims:

An endowment is a university’s financial cornerstone, the core of its ability to fuel progress in research, patient care, and teaching.

US News reported back in 2013 that a decrease in endowment could affect a college’s rankings.

A decline in a college’s endowment can have a negative impact on the school’s ability to fund its yearly operating budget, since institutions use income from their endowment to supplement tuition from students and other sources as a way to fund ongoing operations. Schools in the study spent an average of 4.2 percent of their endowments on their yearly operating budgets in 2012. One of the factors in the Best Colleges methodology is financial resources per student, which has a weight of 10 percent in the overall rankings. This factor measures the average spending per student on instruction, student services, academic support, research, and related educational expenditures. U.S. News believes that generous per-student spending indicates that the college can offer a wide variety of academic programs and services. Colleges with large endowments, which tend to be private universities, can spend more per student on educational services than schools without endowments or with very small ones. So if a school’s endowment shrinks, it may have less money to spend on the education of its students.

Having a large endowment now is one thing, but an added factor to a University’s ability to fund their students is how the endowment money grows – without the actual donations.  There are universities out there investing their way to the top.  In a New York Times article, a smaller University (Abilene Christian) managed to grow their money 6% higher than one of the top schools in the aforementioned list.

Forbes reported that many universities found ways to grow their financial base at double digit rates.  The University of Virginia grew their endowment 28.4% in 2011, with the University of Pittsburgh following at 24.3% and Purdue at 22.6%.

Bloomberg provided a list in 2012 showing the top returns of many universities:

top endowments by growth

And a few years later, you saw the numbers change again in a report by Bloomberg again:

top endowments in 2014

While you peruse through the various Universities, don’t forget that their financial reesources are also going to help fund what keeps that brand name alive for the many years after.  You now have a snapshot of many of the Universities who have been managing their money wisely and as a result will be managing your future in many respects as well – when you attend their colleges (with our help of Hong Kong’s Top Test Prep & College Admissions company).