On March 31, 2016 NYU -- like dozens of colleges across the country -- responded to Senator Orrin Hatch, Congressman Kevin Brady, and Congressman Peter Roskam about the role of its endowment.

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On March 31, 2016 NYU -- like dozens of colleges across the country -- responded to Senator Orrin Hatch, Congressman Kevin Brady, and Congressman Peter Roskam about the role of its endowment. The full text of the letter is below:


March 31, 2016

The Honorable Orrin Hatch
Chairman, U.S. Senate Committee on Finance
219 Dirksen Senate Office Building
Washington, DC 20510

The Honorable Kevin Brady
Chairman, U.S. House Committee on Ways & Means
1102 Longworth House Office Building
Washington, DC 20515

The Honorable Peter Roskam
Chairman, U.S. House Committee on Ways & Means Oversight Subcommittee
1136 Longworth House Office Building
Washington, DC 20515

Dear Chairman Hatch, Chairman Brady and Chairman Roskam:

Thank you for the opportunity to discuss the New York University (NYU) endowment and efforts to help students gain access to a higher education.

NYU’s mission is to be one of the foremost centers of scholarship, teaching and learning, and research in the world. As such, we encourage congressional efforts to reduce financial barriers facing men and women of talent as they seek to attend a college of their choice. We also welcome the chance to broaden the understanding of the complex nature of endowments, which are critical to the long-term health of colleges and universities, and their relationship to costs and student financial aid. Before proceeding to the questions posed by the committee, we would like to provide some context to clarify a few overarching concepts about endowments and specifically about NYU’s endowment as compared to its peer institutions.

The Mission of Intergenerational Stewardship

For over 300 years, university endowments have been used for one purpose: to provide financial support for the institution generally, and to students and faculty in particular, both in the present and for generations to come. An endowment links past, current, and future generations and allows institutions to provide students with educational programs and opportunities beyond what could be funded solely with tuition and other forms of support such as government aid. Therefore, a prudent spending and investment policy is essential to mediate between the competing demands of present and future generations, to allow an institution to spend as much resources today as is feasible while preserving purchasing power for tomorrow. State laws have been enacted around the nation to mandate the effective long-term health of such funds. In short, the most common objective of a university trustee is to maximize sustainable spending in the present while preserving the basic mission to serve future generations of students.

Factoring in Donor Restrictions

A common misconception is that an endowment is a checking account that can be used by a university however and whenever it chooses. In fact, major university endowments are not a single fund; they are actually a collection of numerous – sometimes thousands – of individual funds, oftentimes donated for a specific purpose. By contributing to the endowment, it is also the donor’s intent that future generations, as well as today’s students, can benefit from the original gift. In terms of NYU’s endowment, approximately 63 percent of the funds are restricted in some form.

The Per Capita Factor: Endowment Per Full-Time Equivalent (FTE) Student, and an Endowment’s True Impact

As Members of Congress seek to better understand the impact of a university’s endowment, it is important that the committee review endowments not only in terms of their overall value but instead in terms of the number of full-time equivalent (FTE) students attending an institution – that is, the per student endowment. Just as the economic well-being of a nation is often best understood through the lens of per capita income, so, too, should universities’ endowments be understood in this manner. It is the only meaningful way to measure the ability of an institution to use endowment funds for aid purposes.

Ranking institutions by the aggregated value of the endowment dollar levels without regard to the number of students being served (FTEs) does not provide a meaningful picture of the financial flexibility – or inflexibility – of a university’s ability to offer aid to low and middle income students.

According to the recent endowment study conducted by the National Association of College and University Business Officers (NACUBO), the NYU endowment is currently valued at $3.475 billion (as of 8/31/2015), ranking the institution 27th out of the 828 institutions surveyed. The endowment per FTE student, however, is approximately $83,000, placing NYU 189th out of the 828 institutions surveyed. Of the 28 independent (i.e., private) institutions that have an endowment valued at more than $2 billion, NYU’s endowment ranks the lowest in terms of FTE per student by a significant margin. If you exclude the three lowest-ranking institutions, all of the other 25 institutions have endowments of at least $200,000 per FTE. The committee wrote to the 56 private colleges and universities with the largest endowments; had the committee written to the 56 private colleges and universities with the largest per student endowments, NYU would not have been on the list. In short, the size of the student body is critically relevant in determining the wealth and ability of an institution to use endowment funds for student aid purposes. And NYU, as the largest, private, not-for-profit university in the nation, has a very large student body.

Universities Allocate Significant Institutional Funding for Student Aid

Most institutions set aside significant resources for student aid in an effort to attract and retain qualified low and middle-income students. NYU has substantially improved its financial aid program over the past 10 years in spite of its low per student endowment, and currently spends more than a half-billion dollars annually on scholarship aid.

NYU spent approximately $552 million last year in institutional funds specifically for student aid (undergraduate, graduate and doctoral) purposes. This is grant aid, which does not have to be paid back. With regard to undergraduates specifically: over the last decade, the budget for financial aid for undergraduates has tripled – it currently exceeds $300 million/year. The average grant NYU gives incoming freshmen who receive aid has also more than tripled over that period – from approximately $8,900 to over $30,000. Approximately 57 percent of full-time undergraduate students receive some form of university (institutional NYU funds), federal or state grant for the current academic year. And virtually all of NYU’s financial aid is need-based.

By contrast, the total spending from the endowment was approximately $145 million. In other words, NYU spends far more on financial aid for students than the total yearly revenue from its endowment – approximately four times as much.

The implication of this is important. Financial aid from endowment earnings adds to spending power of a university’s budget; for universities with large per student endowments, the endowment actually pays the university to fund the financial aid, so that the school has revenue equal to the full amount of tuition revenue to spend. By contrast, financial aid funded directly from the budget – as is the case with most of the financial aid provided by NYU – actually reduces the amount of tuition revenue available to the institution to spend and puts budgetary pressure on the operations of the university. In order to achieve its substantial growth in financial aid, NYU has had to look long and hard at its priorities and spending choices – which we believe is one of the long-term goals prompting your inquiries. We believe the choices we have made – to increase scholarship aid so considerably – clearly indicate how high a priority this is for NYU.

Even with NYU’s recent success in allocating increasing amounts of funds for student aid, given our modest endowment compared to peer institutions, we are not able to meet the financial needs for many of our students. That is why scholarship aid is our foremost fundraising priority, and we are currently embarked on the NYU Momentum Campaign, dedicated to raising $1 billion by 2017 for scholarships. To date, the campaign has raised $550 million and we are well on our way to reaching the goal.

NYU’s Success in Educating Low Income Students

NYU’s admissions policy is “need blind,” and the University has a long and successful history of attracting low-income students. In academic year 2015-16, approximately 23 percent of the institution’s incoming freshman undergraduate population was eligible for a federal Pell Grant. Pell Grants provide direct aid to the nation’s neediest families and represent the foundation of a low-income student’s aid package. For the current academic year, NYU has the highest percentage of incoming freshman that are eligible for a Pell Grant among private college members of the prestigious Association of American Universities (AAU). This success can be directly attributed to NYU policies, including waiving application fees for low-income applicants, tasking staff members to identify and assist low-income families in navigating the admissions process, and improvements to financial aid (over the past five years as NYU has improved its financial aid program, the average NYU grant to Pell students has gone from covering 55% of tuition and fees to 82% of tuition and fees).

Endowment Growth Permits More Financial Aid

A fundamental reason most universities, like NYU, seek to build their endowment is to enable them to expand their public service mission of educating and increasing accessibility for students regardless of family income. The data makes the point: universities with larger endowments per student are able to offer larger institutional aid packages to students and families. Universities with large per student endowments are able to offer generous aid not just to those with low incomes, but also to those in middle and high-income brackets, too. In short, as an institution’s endowment grows, so does the ability of that institution to meet the financial needs of its students.

NYU is far more tuition dependent than its peers – over 60 percent of its annual budget comes from tuition income, while only approximately four percent comes from endowment income -- and is not able to meet the full need of its students. Our goal, then, is to focus resources on the neediest students allowing them to enroll, and to build an asset base to support the mission over an extended time period. If NYU is successful in growing its endowment over time, the institution fully expects to increase the amount of scholarship funding to decrease the unmet needs of our students

College Costs

NYU takes seriously the issue of college cost, and its impact on students and families. In addition to the expansion of scholarship aid, we know we must devise long-term strategies to alter the trajectory of college costs at NYU. This will be one of our highest priorities over the coming years. As an important first step, last month NYU announced the smallest increase in year-to-year cost-of-attendance in 20 years, which included the lowest increase in tuition and fees in 20 years, freezing room and board at this year’s rate, freezing NYU registration and service fees, and, in addition, lowering prices on some student housing to increase our stock of lower-cost dorm rooms by 50 percent. We are aware that our proposed tuition increase for next year is lower than a number of our peer schools.


Again, thank you for the opportunity to discuss the NYU endowment and institutional efforts to attract students regardless as to family income or background . If Members of Congress would like any additional information or need clarification about data provided, the University will make every effort to comply in
a timely fashion. The following pages contain the responses to your thirteen questions.

Martin S. Dorph
Executive Vice President, Finance and Information Technology / Chief Financial Officer
New York University




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