Huffpost College

College Endowments Rebound After Bleak Period

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(AP) -- College and university endowments rebounded in the fiscal year that ended last June, a positive sign that could bring students and families relief from big tuition increases.

After plummeting almost 19 percent on average the previous fiscal year during the global financial meltdown, endowments grew an average of almost 12 percent, according to a report Thursday from the National Association of College and University Business Officers and Commonfund.

The ranks of billion-dollar endowments are on the rise again, the report said. Now, 62 colleges and universities claim that distinction, up from 54 a year ago but short of 77 the year before that.

Although far removed from the flush days of earlier in the 2000s, the better numbers take some pressure off schools at a time when other financial challenges loom.

Federal economic stimulus money that provided a life raft will disappear this year, and public schools across the nation are raising tuition to offset cuts in state funding. In the University of California system, tuition for in-state undergraduates has risen more than 30 percent over the past year and is set to increase another 8 percent this fall.

Terry Hartle, senior vice president of government and public affairs for the American Council on Education, said solid endowment returns should allow schools to backfill budget cuts and "hopefully" keep tuition increases modest after colleges and universities spent conservatively out of their endowments in the downturn.

Schools spend 4 to 5 percent of their endowments annually on student aid, faculty, research and other costs. Spending inched up in the past fiscal year from 4.4 percent to 4.5 percent, the report said. Forty-five percent of colleges and universities reported higher spending rates in the fiscal year.

In one sign that better returns are trickling down to students, Princeton University this week announced its lowest increase in undergraduate tuition and fees in 45 years -- 1 percent, to $49,069. The university cited its 14.7 percent annual return on its endowment in 2009-2010 as one factor.

A recent College Board report found average in-state tuition and fees at public colleges and universities this fall rose 7.9 percent to $7,605, while the average sticker price at private nonprofit colleges increased 4.5 percent, to $27,293. Government subsidies and aid from schools did help hold down net tuition and fees -- the actual cost students pay when grants and tax breaks are factored in.

Endowments are managed as permanent assets and are especially important for large private schools that don't rely on state funding. Returns have swung wildly up and down in recent years. Critics say colleges do not tap their endowments enough to lessen the burden on students struggling with rising tuition and costs.

Several universities halted construction projects, slashed jobs and took other steps as their endowments withered. Verne Sedlacek, president and CEO of Commonfund, which manages money for colleges and other nonprofit institutions, said the belt-tightening is likely to continue.

He said big building plans will likely stay on hold for a long time, and projects such as student unions, health clubs and stadium renovations will need to be backed by private donations.

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