Eighty-six percent of University of Rhode Island students received foundation scholarships last year according to the University’s website, but few understand where that money comes from.
When students think of scholarships, they think of operating accounts. Operating accounts allow donors to give money that goes directly to students. However, much of the money that students actually receive comes from endowments. Through endowments, students only receive scholarships based upon the interest rate on the money that donors give. URI will pay out more than $2.2 million in scholarships during the 2020 fiscal year, which is between July 1, 2019 and June 30, 2020.
Chief Financial Officer of the URI Foundation and Alumni Engagement Adam Quinlan manages scholarships for URI. He said that there are almost $160 million in assets in endowments right now. The endowment gives off about $4.57 million each year.
“The endowed scholarship is meant to remain in existence for perpetuity,” Quinlan said. “It is meant to be kept in place so that every year it’s a reliable source of funding to help fund scholarships. An immediate use [operating account] is equally important of course, but it goes right to the students. It’s not invested and it’s not handled in the same way, so that ultimately gets depleted. [An endowment] is invested and we determine what we can payout based on earnings from the endowment.”
Donors must give a $50,000 minimum to open an endowment. That money is then combined together with other endowment gifts in different units. Together, the units have a greater amount of buying power.
According to Quinlan, the money is invested in all major asset pools: U.S. equities, international equities, hedge funds, stocks, commodities, fixed income, bonds and, most recently, private equities. He said diversifying where the money is invested is safer than putting it all in one asset. Currently, the annual interest rate from these investments is approximately 17.1 percent, according to Quinlan.
Quinlan works with investment managers to aggregate monthly reports and calculate the total returns from investments. URI currently has approximately 3,000 different funds, about 1,200 of which are endowed. Of those endowed funds, 847 are scholarships. The rest of the funds go towards other university programs.
Donors can decide which college, major or needs the recipient of the scholarship must fulfill for eligibility.
“There’s a strong recognition on campus of the importance of these funds,” Quinlan said. “I take that very seriously in my role, how we invest it steward it and take care of it. I think it’s harder for people to afford education today. It’s increasingly expensive so [it] puts much more pressure on endowment as a resource going forward. It’s a collective effort, we have a great organization and a lot of great people that work here at the University. I think students should be excited about the future.”
Megan Flynn, a freshman at URI, said that endowments are a good thing as long as students are still getting the financial support that they would.
“I get why endowments are a good idea, they will support more people over a long time,” Flynn said. “I just think that there should be more money going into scholarships, though. I think [URI] should do what gives students the most money.”
Endowments can also be used to fund research projects, to support department chairs, or even to support capital projects.
Donors to endowment funds receive tax breaks for charitable donations, which can be 30 percent cuts. The donors have full control of the nature and intent of where their money goes. Approximately 30 to 35 percent of donations go towards endowments each year, and they are becoming more common over time.