Colleges Raiding Their Endowments to Pay the Bills

There are too many marginal colleges selling too many marginal degrees to too many marginal students.

If half the colleges in the country were to shutter, our country would be moving in the correct direction.

Colleges in financial trouble? Cry me a river…. Decades of increasingly woke faculties and programs leading to unsustainable degrees, suppression of free speech, cancel cultures, absurd cost structures and, of course, faculty tenure inevitably will lead to financial ruin. Far too much supply to meet demand, especially when high schools grads can earn six-figures in the trades without incurring debt. Good riddance. (WSJ Commenter)

The Struggling Colleges Raiding Their Endowments to Pay the Bills

It’s the last resort for institutions on the brink: tapping restricted funds from donors to keep the lights on. ‘The money they donated is not being used for what they gave it for.’

A green pennant flag with an embroidered gold dollar sign followed by three cut out dollar signs.

By: Alexandra Citrin-Safadi, Douglas Belkin, Wall Street Journal, Aug. 2, 2026:

Struggling private colleges are increasingly tapping restricted donor endowments to cover day-to-day operating expenses.

When Natalie Strouse’s husband of 20 years died of cancer, she honored his memory by creating a scholarship in his name at the college where she taught accounting.

Each year, she helped select a student to receive a few thousand dollars at Notre Dame College, a small Catholic school outside Cleveland. But in 2024, the college closed. Strouse wanted to re-establish the scholarship at another institution.

She asked Notre Dame for the $30,000 endowment, which under the terms of the gift could only be used to support the scholarship.

Not possible, she said an administrator informed her. The money was gone.

“She told me they used it to pay the bills,” Strouse said. “I consider it theft.”

Ohio’s attorney general last year filed a complaint against 14 trustees and officers of the college alleging they improperly used more than $2 million of restricted endowment funds outside donors’ intended purposes. The defendants have denied allegations that they breached their fiduciary duties and failed to exercise proper oversight of the school.

Higher education is in real financial trouble and Strouse’s lost scholarship is one piece of the growing collateral damage. College leaders are cutting programs, laying off faculty—and digging into endowments to pay operating expenses. Boards of trustees are under intense pressure and some are turning on one another and the presidents they employ. In extreme cases, schools are covering day-to-day bills with funds that donors gifted for other purposes, without the donors’ knowledge or consent.

This tactic is creating a new loser in the consolidation of higher education: thousands of philanthropists who have donated billions of dollars to colleges and universities across generations.

Nearly 200 private colleges borrowed from restricted endowments in 2025, up from 131 in 2021, according to estimates from Perspective Data Science, a higher-education financial consultant. Schools used most of the money for everyday expenses, said Matthew Hendricks, the company’s founder.

“This is going to be a huge problem as small colleges close,” said Joanne Florino, a fellow at Philanthropy Roundtable, a nonprofit organization that advocates on behalf of philanthropists. “A lot of living donors are finding out the money they donated is not being used for what they gave it for.”

Kansas, Kentucky, Georgia and Montana have passed legislation in the past few years making it easier for donors to take legal action against nonprofit organizations, including colleges, that use restricted gifts outside the intended terms. The Roundtable pushed for the legislation amid growing concerns about the possibility of misuse, said Florino. More than 440 colleges are at risk of closing or merging in the next decade, according to a forecast by the Huron Consulting Group, which advises schools on operations and mergers.

The percentage of private, nonprofit colleges drawing down endowments at greater than 7%—considered a sign of financial instability—nearly doubled to 19.3% in 2025 from 9.7% in 2016, according to Perspective Data Science, which analyzed nearly 1,000 institutions. The percentage of schools drawing down endowments at 15% tripled to 5%.

“A lot of schools are doing whatever they can to keep the lights on,” said Hendricks.

Continued….