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.
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.
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).
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.
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