Let's say a University has $1m in the bank. In this case, they decide to use it to "endow" a "chaired professorship" to retain some top faculty member. The reason it works - the professor stays at said University - is because they give the professor the proceeds from the endowment (usually, this is like 5% expected rate of return, or in this case, $50k), which he/she uses for their research.
So now, should the University instead reallocate funds like that, thus (perhaps) losing top faculty, to (marginally) lower tuition?
Similarly, imagine a university raises millions of dollars for scholarships. Once again, they use the proceeds to fund the scholarships. Should they instead use the principal (as you're kind of suggesting), thus eventually running out of funds, or should they keep the endowment, and thus keep giving out scholarships?
Before condemning endowments, it would be better to first understand how they're being used. For example, if you found out that some large fraction was for student scholarships, would that change your position?
(to be clear, I'm not particularly on one side or the other here; I just think more nuanced positions are needed...)
Thanks for the reply and valid points. But I didn't say they should deplete the endowments; I'm saying that they are already garnering significant income from them (if they're large and invested competently).
And I still won't excuse raising tuitions sky-high "just because." And while I don't know the economics of athletic programs, screwing students while building three stadiums in a couple of decades isn't a good look.
So now, should the University instead reallocate funds like that, thus (perhaps) losing top faculty, to (marginally) lower tuition?
Similarly, imagine a university raises millions of dollars for scholarships. Once again, they use the proceeds to fund the scholarships. Should they instead use the principal (as you're kind of suggesting), thus eventually running out of funds, or should they keep the endowment, and thus keep giving out scholarships?
Before condemning endowments, it would be better to first understand how they're being used. For example, if you found out that some large fraction was for student scholarships, would that change your position?
(to be clear, I'm not particularly on one side or the other here; I just think more nuanced positions are needed...)