Viewpoint | The Main Purpose of Independent School Endowments

March 26, 2024 |
3 minute read
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Viewpoint | The Main Purpose of Independent School Endowments
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The FY2023 Commonfund Benchmarks Study® of Independent Schools (CSIS) prompted survey respondents to select the main purpose of their school’s endowment for the first time.

When looking at all 210 participating schools, need-based financial aid was the most common response, with 37 percent of respondents reporting that it is the main purpose of their endowment. The second most common endowment purpose reported was general operating support, with 34 percent of total respondents. Thirteen percent chose “other”, many of which indicated some variation of long-term savings or growth, and some writing in “all of the above.”1 The remaining options saw response shares in the single digits. 

The main purpose of independent school endowments differs by school size, according to these data. Those with the largest endowments tend to rely more heavily on their endowments for operating support—43 percent of respondents with assets over $50 million responded that general operating support was the main purpose of their endowment. Fewer than a third, 29 percent, of the largest schools reported need-based financial aid as their main endowment purpose. A plurality of schools with mid- and smaller endowment sizes responded that financial aid was the main purpose of their endowments—44 percent and 32 percent, respectively. 

Both day schools and schools with boarding cited need-based financial aid and operating support as the top two, but financial aid was more often cited for day schools (38 percent for day vs. 34 percent for boarding), and general operating support was more often cited for schools with boarding (43 percent for boarding vs. 31 percent for day). This mirrors the findings for all schools by size, which makes sense given that schools with boarding tend to have larger endowments than day schools on average. 

CHT1-MainPurpose-of-EndowmentCHT1-MainPurpose-of-Endowment

Need-Based Financial Aid at Independent Schools

Need-based financial aid is an important use of endowments because it can improve access and affordability for current and future generations of students, which in turn can bolster enrollment and financial sustainability. Financial aid can also foster equity and inclusion within the school setting by helping students from different financial backgrounds access the educational opportunities offered by independent schools. 

In the 2023 fiscal year, independent schools invested an estimated total of $2.3 billion in financial support for students including need-based financial aid, merit-based scholarships, and tuition remission (a tuition discount for employees’ children), in support of 37 percent of all enrolled students, according to NBOA.2 Schools’ spending for need-based financial aid increased by 19 percent from FY2021 to FY2023,3 and about one third—32 percent of schools—reported receiving more requests for financial aid for the 2023-2024 school year than the previous year.4 In FY2023, 19.9 percent of the total amount of need-based financial aid and merit-based scholarships were funded by gifts and endowment income rather than funds from a school’s operating budget (18.8 percent at day schools, 23.4 percent at schools with a boarding component). Altogether, this indicates that endowment support for the growing need for need-based financial aid will continue to be critical to ensure access to an independent school education.

Operating Budgets and Independent School Endowments

Thirty-four percent of the 210 respondents to the FY2023 Study stated that general operating support is the main purpose of their endowment, the second most common answer following very closely behind need-based financial aid. From this year’s Study, we know that on average, 6.4 percent of schools’ operating budgets were funded by their endowment in FY2023, slightly above the 5-year average of 6.3 percent. Institutions with the largest endowments rely more heavily on the endowment for operations—respondents with endowments over $50 million have an average of 11.2 percent of general operations funded by the endowment, compared with 1.7 percent of operations funded by the endowment among the smallest cohort of schools (those with less than $10 million in endowed assets).

CHT2-Avg-of-Operating-Budget

Trend differences between day and schools with boarding mimic trends by school size. Schools with boarding, which tend to have larger endowments on average, support 10.9 percent of their operating budgets with the endowment, compared with just 4.8 percent of operating budgets supported by endowments at day schools, on average.

Request your copy of the CSIS for FY2023

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  1. In addition to the top responses, choices included scholarships (not need-based), faculty/staff support, educational programs, and facilities maintenance or capital projects.
  2. NBOA’s Business Intelligence for Independent Schools (BIIS) data reporting platform
  3. Ibid. 
  4. NAIS, “Financial Aid at a Glance,” NAIS Snapshot, October 23-25, 2023, accessed December 2023.
Commonfund Institute

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Commonfund Institute

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Disclaimer

Certain information contained herein has been obtained from or is based on third-party sources and, although believed to be reliable, has not been independently verified. Such information is as of the date indicated, if indicated, may not be complete, is subject to change and has not necessarily been updated. No representation or warranty, express or implied, is or will be given by The Common Fund for Nonprofit Organizations, any of its affiliates or any of its or their affiliates, trustees, directors, officers, employees or advisers (collectively referred to herein as “Commonfund”) or any other person as to the accuracy or completeness of the information in any third-party materials. Accordingly, Commonfund shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in, or omission from, such third-party materials, and any such liability is expressly disclaimed.

All rights to the trademarks, copyrights, logos and other intellectual property listed herein belong to their respective owners and the use of such logos hereof does not imply an affiliation with, or endorsement by, the owners of such trademarks, copyrights, logos and other intellectual property.

To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated herein. Forecasts of experts inevitably differ. Views attributed to third-parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Market and investment views of third-parties presented herein do not necessarily reflect the views of Commonfund, any manager retained by Commonfund to manage any investments for Commonfund (each, a “Manager”) or any fund managed by any Commonfund entity (each, a “Fund”). Accordingly, the views presented herein may not be relied upon as an indication of trading intent on behalf of Commonfund, any Manager or any Fund.

Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Fund. Such statements are also not intended as recommendations by any Commonfund entity or any Commonfund employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information or statements. Past performance is not indicative of future results. For more information please refer to Important Disclosures.