Amid the current decline of student enrollment due to financial hardship and astronomical tuition rates, it is appropriate to question university endowments and their use.But first, you might be asking yourself, “what is an endowment, anyway?”
Executive Director of the Winthrop University Foundation Robin Embry shared information about the foundation and Winthrop’s endowment.
“We are a charitable organization which has been granted 501(c)(3) status by the IRS. This means that we are recognized by the Internal Revenue Service as a charitable organization exempt from income taxes, and we are allowed to accept donations from donors,” Embry said.
Embry briefly touched on something important, “Our endowment is the pool of money we have received from donors that we invest, manage and pay out according to the donors’ wishes. These wishes can include scholarships, funds for research, building improvement, student travel, internships and much more.” In case you missed it, some key words and phrases she said included “invest,” “pay out” and “donors’ wishes.”
More insight the executive director gave was about what these funds are used for. “As donors may designate their gifts, many are for need-based scholarships for low-income students, for student emergency funds (this could be for books, food, medicine or any basic need), faculty support (including research, travel and professional education.)”
She went on to explain, “An endowment or pool of restricted funds is strictly regulated by state and federal law. Foundations are bound by those laws to uphold the donors’ intent and to only use the funds according to the donors’ directives.”
With this information in mind, it seems reasonable to assume that donors have quite a bit of say-so as to the purposes of their donations. Although, as Embry said, many of Winthrop’s donations are actually for scholarships, student needs and faculty support, it has grown more common for universities across the country to invest in hedge funds, companies, stocks and natural resources such as oil.
Comedian Hasan Minhaj brought up this ambiguous topic on his Netflix show “The Patriot Act,” in which he made the claim that, “when you donate to a university, you’re basically donating to a hedge fund with the same name as a university.”
Because of the simple fact that it takes money to make money, it is obvious that the people who donate to college foundations are at least somewhat wealthy. Many wealthy people continuously regenerate their wealth by investing in various funds, which potentially could mean that when they invest in universities that are using their endowment to invest in stocks, essentially the rich are becoming richer.
Of course, there is nothing wrong with being smart in regards to one’s finances and multiplying it wisely. However, what is problematic is the possibility of higher education being used to widen the wealth gap rather than help the next generation achieve feats unimaginable by the people who came before them.
Though any specific action concerning the issue of university endowments would have to take place at a national level, during a crisis such as COVID-19, Winthrop and all other universities in the country should consider taking out more from the endowment to help at-risk college students who are being negatively financially impacted due to the pandemic. To universities it might seem risky to take this action, but because students are the most valuable investment, funding should be allocated to them rather than hedge funds.
Graphic by Lizzy Talbert
