Endowments, 1990 to 2055

In trying to understand the future of the university, 1990 is a good place to start. Many of us remember higher education in 1990. That year spans the second half of my junior year and the start of my senior year at Washington University in St. Louis. Looking ahead 30 years to what higher education and universities may be like is easier if we can think about how things were around 1990.

One of my favorite documents is a NACUBO publication that contains a table of the top 60 university endowments in 1990. Investigating how endowments have changed in the last 30 years, and how they might in the next 30, is not a perfect way to think about the future of the university. Wealth is only one variable. The size of the endowment is important, but many other endogenous and exogenous factors shape how universities function.

Relatedly, endowments are only important for a select few institutions of higher learning. Most colleges and universities rely on a combination of tuition and public support (especially community colleges) to run. Only a very few schools have endowments large enough that their size is determinative in understanding their structure, culture, ambitions and operations. Still, with these limitations in mind, it is fascinating to think about the 1990-to-2055 arc of the wealthiest colleges and universities.

In the table below, I’ve copied the 1990 endowment figures from the NACUBO publication (column No. 2). Then, using the CPI online calculator, I’ve updated the 1990 endowment figures to 2023 dollars (column No. 3). The most recent endowment numbers I can find are for fiscal 22, taken from another NACUBO publication (column No. 4).

What is striking is the increase (in constant dollars) of the endowments of these 60 wealthy institutions. These figures show the power of compounding at work. How many people at these colleges and schools considered that their institutions would be so much wealthier in just three decades? The growing endowments at wealthy universities have funded everything from campus building booms to the expansion of financial aid.

It would be interesting to look to see what has happened to enrollment numbers at these ever-wealthier schools. I suspect that growing endowments have translated primarily into greater selectivity, and that enrollments have not grown nearly commensurate with endowments.

What might today’s wealthy universities look like in 30 years? Column No. 5 contains a back-of-the-envelope calculation, where I used an online calculator to do some crude endowment forecasting. This online calculator allows us to see the future return of the endowments adjusted for today’s dollars.

The assumptions I used are that returns would equal 10 percent annually, and inflation would run at 3 percent. The reason that I was aggressive in returns and put a lower inflation number is that I did not input any additions to each endowment through capital campaigns or other giving. The calculations also leave out potential future annual drawdowns of endowments.

The assumption that there will be no giving to these universities in the next 30 years is not defensible. An aging cohort of high-net-worth baby boomer alums is set to transfer enormous sums of capital to their heirs and to charity, and universities will almost surely benefit from that eventuality. Still, not knowing what investment or inflation will do in the next 30 years—we can leave out future giving to help with some confidence that the projections below are at least in the ballpark.

What do these back-of-the-envelope calculations show for 2055? If the assumptions that went into these projections are anywhere near accurate, then it seems clear that the wealthiest 60 institutions of 1990 will be hugely wealthier 30 years hence.

If you have a better methodology for making 2055 endowment projections or a more refined set of projections, please get in touch. My goal is to start with some reasonable figures for 2055 and then try to make sense of what these estimates might mean.