Last year saw a “parade of horribles” for universities and colleges across the US. New data shows these institutions dipped into their endowments to counteract federal funding cuts and budget deficits like they never have before.
Endowments included in the NACUBO-Commonfund annual survey withdrew a cumulative $33.4 billion in 2025, a 10.9% year-over-year increase. These institutions used that cash to fund an average of 15.2% of their operating budgets, the highest rate in the history of the study.
Colleges and universities have faced a host of financial pressures in recent years, forcing them to dip into their endowments to cover shortfalls.
Declining international student enrollment has eaten into a key source of tuition income. Also, rising tuition discount rates mean schools are paying out more in scholarship money, and federal funding cuts to research have forced universities to reconsider their endowment spending policies.
Last year, President Donald Trump’s Task Force to Combat Anti-Semitism, an outshoot of the Justice Department, cracked down on the largest and richest universities in the country over allegations of discrimination and antisemitism on campuses. The task force’s review led to the freezing and termination of federal funding for scholarship programs and research initiatives at the nation’s top universities, including Harvard, Cornell, Northwestern, Columbia and Brown.
Federal funding for several of these universities has been restored after settlements with the Trump administration that cost schools hundreds of millions of dollars. In July, for example, Brown University agreed to pay the federal government $50 million over the next 10 years.
Harvard had its federal funding restored after a lengthy legal battle that culminated in a federal judge striking down Trump’s freeze on multiyear grant and contract commitments to the university. Still, the processes added meaningfully to the university’s operational expenses for FY 2025, according to its annual financial report.
Related read: Timeline: University endowments’ annus horriblis
At the same time, endowments are steadily getting bigger. The total market value of the endowment assets included in the survey reached over $944.3 billion in 2025, up 8% year-over-year. A larger capital base, combined with meaningful increases in withdrawals, rising operational costs for schools, and elevated inflation, means that endowments need to generate higher average returns to keep up.
“Let’s say you take a spending rate of 5% with 3.5% for inflation, now you’re at 8%. Guess what? Now your return target is higher,” said Tim Yates, President and CEO of Commonfund’s OCIO business, which manages roughly $19 billion in endowment and foundation assets.
“It’s a conundrum,” Yates said. “In order to generate a higher return target, you have to take more risk. The two core risks endowments take to generate higher returns are equity or credit risk and illiquidity risk. But to meet those spending rates, endowments need liquidity.”
Yates said he’s seeing most colleges and universities pulling back on their pace of investments in illiquid products, such as private equity funds, to free up cash to reach spending targets.
“The question is whether that increase in spending is temporary or permanent,” Yates said. “I don’t think anybody thinks it’s sustainable.”
The study includes data from 657 U.S. colleges and universities, representing $944.3 billion in endowment assets.
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