College is expensive, but there is one place in higher education where there’s no shortage of money — endowments. There’s more than $616 billion worth of endowments assets in the U.S. Most of that endowment wealth lies with a few affluent schools, such as Harvard with its $39.2 billion.
Lawmakers are starting to question why tuition is still rising if some schools have billions of dollars. Most schools only spend about 5 percent of their endowment every year. The rest is invested to grow the endowment even larger. And that’s where things get complicated.
Universities with big endowments have a lot of power, and that power draws the eyes of both investors and activists. Investors look to endowments as inspiration for their strategies, and activists have gone after multimillion- and sometimes billion-dollar investments in things like fossil fuel companies, Puerto Rico debt and private prisons.
In 2017, Trump’s tax bill started to chip away at those universities’ tax-exempt status, adding a 1.4 percent tax on endowment income at schools with more than 500 students and $500,00 per student.
Watch the video above to learn how college endowments helped fuel the rise of wealth in American higher education.