The University of Pittsburgh hasn’t been tapping into its multibillion-dollar endowment at the same rate as other affluent universities, choosing not to spend millions annually that some experts say could support the university and its students as college costs rise.
Opening the books
Investigating how Pittsburgh’s wealthiest universities invest their billions
Endowments are composed of gifts from individual donors. State law and donor stipulations place restrictions on how Pitt can spend its roughly $5.5 billion endowment, which is meant to support scholarships, faculty positions and academic programs in perpetuity. But Pitt has some leeway over the allocation of its endowment funds — and its choices can reflect certain priorities.
Pitt spent about $172 million — or 3% — of its endowment in the 2022 fiscal year, financial records show. On average, universities with endowments of more than $5 billion spent 3.8% that year. That’s according to survey results from the National Association of College and University Business Officers, which has analyzed endowment data for decades.
What may seem like a slight gap in proportional spending between Pitt and its peers amounts to more than $43 million in just one year.
That would have been enough money for Pitt to give about $2,700 in extra financial aid to every undergraduate who received grants or scholarships on its main campus, of which there were nearly 16,000.
Or to cover the average amount of student loans borrowed by the campus’s incoming freshmen, clearing about $10,000 in debt apiece.
Or to pay for the average cost of attendance, after financial aid, for at least 2,290 low-income students from Pennsylvania.
Over the last six fiscal years, a PublicSource analysis of endowment spending data shows Pitt could have spent up to $248 million more if it spent at the same rate as similarly wealthy universities. If the university spent at the same rate as other public universities, regardless of endowment size, it could have spent up to $135 million more.
Regardless of if the money went toward financial aid or another priority, some experts say the university should be spending more of its endowment. The nation’s wealthiest universities are, they say, “empire building” and piling up the money to compete with one another, rather than spending more now to lower costs, expand access and improve the campus experience.
“In general, universities with large endowments spend too little of it each year. And the fact that Pitt has been especially tight-fisted, I think, is difficult to defend,” said Brian Galle, a law professor at Georgetown University who teaches courses on nonprofits.
“What’s going to build a successful institution is investing that money wisely, today, in more tangible resources, whether it’s a new lab or it’s financial aid,” he added. “Both of those are a form of long-term investment in the school, in the same way that keeping the money in the bank is, but they also have other important social returns.”
Other experts point out that universities must consider a variety of factors in their endowment spending, from concerns over dwindling state funding to investment risks, and that Pitt falling below industry averages does not alone indicate the university should be spending more. Some argue that universities must consider the needs of future students and that significant increases in spending would be financially unwise.
On top of that, about 40% of Pitt’s endowment comes with spending restrictions from donors.
“There are times when it’s clear that some institutions are too focused on preserving or growing their endowment,” said Sandy Baum, a nonresident senior fellow at the nonprofit Urban Institute. “But the idea that there’s a clear answer to that trade-off … there’s no general truth about that.”
Over roughly the last decade, the price that the average Pennsylvania family has paid to send their child to Pitt has grown by about 12%, to $24,286 a year, while the university’s average financial aid award has grown by about 9%, to $12,392. Pitt’s endowment has more than doubled in that same time, with the university largely reporting multimillion-dollar returns, sometimes in the hundreds of millions.
Some advocates think that wealthy universities should spend 5% of their endowments each year to assist tuition costs, in line with the minimal charitable spending limits the federal government imposes on private foundations. Others believe that threshold would be too rigid and unfair to universities because their endowments serve different purposes and missions.
Pitt declined to make officials in its Office of Finance available to comment for this story. The chief investment officer offered to speak with a reporter over the summer and on background, which typically means that the official could not be named and the information they provide could not be attributed. The university did not respond to additional requests for comment.
The University Times, a publication for faculty and staff, reported in February that Pitt has based its current distribution on the endowment’s three-year average fair market value. The university has set a 4.75% distribution rate on the “quasi endowment” and 4.25% on the rest. The data in PublicSource’s analysis reflects annual distributions.
Universities grow endowments as students take on debt
Evan Levasseur, a freshman majoring in public health, came to Pitt from Maryland. He received $9,500 this year in grants and scholarships, but he was left with a $43,648 bill. His parents, a teacher and a retired librarian, are helping to pay but can’t close the gap entirely.
He took out all he could in federal loans and borrowed a riskier private loan — worth tens of thousands of dollars — to cover the rest.
“I’m taking a gamble on myself, to hopefully be able to pay it off one day. It might not be the best decision, I can definitely say that,” he said. Pitt allows him “to have so much opportunity for growth and developing my career that I’m hoping that it will pay off.”
His loans are his biggest stressor, he said. Because private loans collect interest while students are in college, Levasseur is making monthly payments now, his next totaling about $160. When he goes home this summer, he’s going to be working as much as he can to save enough money to not only make more payments on the loan but also to cover new expenses, including off-campus rent.
“It makes living very stressful, because I’m constantly watching what I’m buying. It’s always a thought in the back of my mind, like, ‘I have this huge loan that I have to pay off. And it just keeps getting bigger and bigger,’” he said.
Almost half of Pitt’s endowment is earmarked to support current and future students through financial aid. While that has helped the university lower the cost of attendance for students today, many families must still shell out tens of thousands of dollars a year after receiving aid. The state’s poorest families needed to pay almost $18,000 on average during the 2021-2022 academic year — even though they reportedly earned up to $30,000 annually.
“Pitt could easily afford to spend more of its endowment revenue on making their college more affordable, and maybe they could attract more low-income students,” said Mark Kantrowitz, an expert on financial aid and student loans. “They are a public college. Why are they acting like a private college?”
Why is Pitt spending less than other universities?
Pitt’s endowment spending trailed the combined averages for similarly wealthy public and private universities between at least the 2018 and 2023 fiscal years, according to data from the National Association of College and University Business Officers. Penn State’s spending rate was almost the same as Pitt’s in the most recent fiscal year, even though Pitt’s endowment was roughly three times larger per full-time student.
It’s fair to question why Pitt is spending less than similar universities, said Baum of the Urban Institute. However, Baum said she would not presume that the university should draw more from its endowment or that additional spending should go toward financial aid. “You’d have to know a lot more about the institution,” she said.
Universities often have competing demands for their endowment money and have to make tough choices on how to spend it, she said. “I’m sure if you talk to the faculty on most campuses, you would get demands for lots of things that they think are more important than growing the endowment because they don’t really understand the importance of the endowment.”
Pitt could be spending less of its endowment to account for potential cuts in state funding, some experts said. The state has cut its support of higher education over the years and ranked second-to-last nationally in its funding per full-time student during the 2022 fiscal year, according to the State Higher Education Executive Officers Association. Pitt relies on these dollars to reduce tuition for Pennsylvania residents.
State House Republicans have also delayed the state’s allocations in recent years. Last summer, some voted down bills to approve the funding over concerns that Pitt and several other state-related universities had not committed to freezing tuition for the current academic year. Five months after the budget deadline, lawmakers approved a roughly $152 million allocation for Pitt.
Gov. Josh Shapiro has acknowledged that Pennsylvania’s diminished support of higher education has forced universities to raise tuition and has recently proposed a new funding formula. Still, storing away endowment money for rainy days at the state House may be unwise, said Galle, the Georgetown professor.
“When legislatures see you have a big endowment that you’re not using to benefit your students, that motivates them to cut the state support,” he said. “So, even though universities might characterize this as being very conservative with their money, it’s actually, in some ways, a risky strategy.”
Lawmakers seek answers on spending
The spending practices of the country’s wealthiest universities have repeatedly drawn scrutiny from federal lawmakers on the right. Senators have held hearings, put forth a variety of tax and spending proposals and requested information from private universities on the management and use of their endowments.
A small sliver of institutions are subject to a 1.4% tax on net investment earnings, implemented under former President Donald Trump. Neither Pitt nor Carnegie Mellon University are among them. Wealthy universities have argued that taxing their endowments will reduce the amount of financial aid they can provide students.
Steven Bloom, assistant vice president of government relations at the American Council on Education, said he believes that federal lawmakers “have a very misguided understanding about what institutions do with their endowments.” The membership organization for colleges and universities frequently engages in advocacy around federal policy.
Endowments are “not savings or checking accounts. They aren’t a big pot of money that you can spend how you think you need to spend them,” Bloom said, adding that the tax “seems as if it was meant to punish more well-resourced institutions.”
Part of the reason university endowments have become vulnerable to political attacks is because the institutions have been reluctant to talk in detail about how they use the funds, said Martin Van Der Werf, director of editorial and education policy at Georgetown’s Center on Education and the Workforce.
“Colleges are seen as hoarding money in numbers that can’t be easily explained. And as a result, they become targets for lawmakers,” he said. “I think colleges would do themselves a favor by talking more proactively and more constructively about their endowments.”
Pitt has worked to lower costs
While the cost of attendance at Pitt has burdened some students, others say the financial aid that they’ve received from the university has helped them attend comfortably. Lorena Ye, a third-year biochemistry student from outside of Philadelphia, said that attending Pitt made the most financial sense for her family.
She said that she will receive $15,000 a year through a merit-based scholarship, and her family is covering much of her tuition and housing costs. “I’m pretty grateful for the money that I got, especially because it just takes a lot of weight off of my mom, who’s paying not only my tuition, but also my sister’s tuition right now,” Ye said.
Azriah Crawley, a Pittsburgh resident and a junior political science major, is able to attend the university partly because of Pitt’s Pell Plus Program, which matches the federal Pell Grant award that many low-income students receive. She also found external scholarships in high school and received The Pittsburgh Promise.
Receiving the matching funds from Pitt “has been a very big contributor” to her attendance, said Crawley, who comes from a single-parent household and had an older sibling in college during her freshman year.
“All of it makes such a difference for me because if I was not getting these scholarships, I would not be here.”
Emma Folts covers higher education at PublicSource, in partnership with Open Campus. She can be reached at emma@publicsource.org.
This story was fact-checked by Elizabeth Szeto.
