Endowments play a vital role in supporting the operational budgets of colleges and universities, particularly amidst proposed cuts to federal funding. Defined as a pool of investments yielding revenue through interest and capital gains, these funds primarily stem from charitable donations. However, a federal excise tax on high-endowment institutions adds a layer of complexity. With institutions like Harvard maintaining thousands of distinct funds, the reliance on endowments for operational expenses is substantial, yet varies widely across institutions, raising questions about their long-term sustainability and usage in the face of funding cuts.
Endowments are pools of financial investments that belong to a nonprofit. These assets produce a revenue stream, typically from dividends, interest, and realized capital gains.
Money distributed from endowments covered more than 15 percent, on average, of college and university operating expenses in 2024.
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