What We Learned from a Deep Dive into Higher Ed Giving

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IP recently published the most recent white paper as part of our “The State of American Philanthropy” project—an in-depth look into giving for higher education from individuals, foundations and corporations. This was the seventh brief I’ve worked on, and I can say without hesitation that it was the most challenging one of the bunch.

As is the case with all of our white papers, we aimed to balance high-level trends with practical guidance for development officers within the confines of a 50-page brief. This challenge was all the more acute across an extensive and diverse space that includes elite ivies, four-year public universities, small private schools, community colleges and historically black colleges and universities (HBCUs).

At the risk of oversimplifying a complex and fluid ecosystem, the paper adheres to the following narrative arc. Thanks to the longest bull market in history, advancement teams have raised huge amounts of money in recent years, most of it coming from wealthy alumni. Elite schools receive the lion’s share of funding, although large public universities and regional schools are also benefiting from the rising tide. Historically underfunded community colleges and HBCUs have made progress, but still have a long way to go toward reaching philanthropic parity.

The most pressing issues for the field revolve around boosting student access and success, supporting STEM-related initiatives, and addressing the student mental health crisis. And yet, the multi-year fundraising windfall hasn’t moved the needle on some of the core problems plaguing the sector, like access for historically underrepresented demographics and ballooning student debt. In fact, some alumni may be unwittingly exacerbating these problems by bankrolling expensive capital projects that drive up tuition, thereby fortifying financial barriers to entry.

Let’s set the stage by looking at multi-year funding trends across the broader space.

A stabilized sector

The Council for Advancement and Support of Education (CASE) found that individuals, corporations, foundations and other organizations gave higher education institutions $49.5 billion during the fiscal year ending June 30, 2020.

This figure, the council noted, was “essentially flat” compared to the previous year, when universities raised $49.6 billion. However, there are two caveats we need to keep in mind. First, CASE’s 2019 data set included Michael Bloomberg’s $1.8 billion financial aid gift to Johns Hopkins University. Take away that gift, and giving in fiscal year 2020 increased by 3.6%.

But a closer look at the data set shows that the 2020 fiscal year only included four months coinciding with the pandemic—March to June—when the real fundraising cliff truly materialized in the early summer and throughout the fall. Last February, I spoke with Jeff Martin, senior director at education consulting firm EAB, who confirmed this hypothesis, calling 2020 “a very tough year” for university fundraisers. 

We kicked off the research process in mid-2021. The markets had fully recovered from their 2020 lows and the big question was when—or if—the sector would stabilize and return to something resembling a pre-pandemic “normal.” We’ll get a more definitive answer in mid-February when CASE releases its survey for the 2020–2021 fiscal year. In the meantime, anecdotal evidence suggests that fundraisers turned the corner and stepped on the accelerator.

The Chronicle of Philanthropy’s Big Charitable Gifts database reveals that high-net-worth individuals—the true engine of the higher ed fundraising machine—made 159 gifts, pledges or commitments equaling or exceeding $10 million in 2021, totaling $6.7 billion. This figure represents a 109% increase over a pandemic-stricken 2020, when individuals gave 69 gifts in the same dollar range, totaling $3.2 billion. Even more intriguing, the $6.7 billion figure for 2021 represents a 46% increase over 2019’s total of $4.6 billion.

The tyranny of restricted giving

As noted previously, some key priorities for higher ed funders are boosting student access and success, bankrolling innovative STEM-related initiatives, and tackling the student mental health crisis. A closer look at funders’ support for these issues underscores a tension that runs through the entire brief.

We can trace this tension to the fact that most support for colleges and universities takes the form of restricted giving, whereby the funder earmarks a grant for a specific purpose like medical or research institutes, new buildings, financial aid, an MBA program or a football practice facility. TIAA Institute classified 93% of dollars donated to higher education from 1988–2018 as “restricted.”

In a perfect world, a restricted gift strikes the balance between what EAB’s Martin calls “margin” (the development shop’s ability to meet ambitious fundraising goals) and “mission” (the extent to which a restricted gift advances key university priorities). Yet some gifts don’t hit this sweet spot.

Take a gift earmarked for the construction of a new STEM building. At first glance, it’s the perfect gift. The advancement team is over the moon for netting a nine-figure gift and administrators pat themselves on the back since a new STEM building can attract high-performing students and boost the school’s profile. But new capital projects don’t come cheap. According to some estimates, it costs twice as much to maintain a building than to construct one, and donors rarely make eight-figure gifts for upkeep—assuming, of course, the building is completed in the first place. 

A “disconnect” between institutions and funders

Who pays for additional construction and upkeep? Sometimes it’s the students in the form of higher tuition, and when tuition goes up, every dollar donated for financial aid has less impact. Even before the pandemic struck, college enrollment was declining nationally as “high tuition costs discouraged prospective domestic students,” wrote the New York Times’ Stephanie Saul. So in a strange and circuitous way, alumni can bankroll projects that exacerbate the very same tuition burden that fellow funders are trying to ease. 

We’ve explored this tension before, often questioning the utility of multimillion-dollar gifts earmarked for new athletic facilities, state-of-the-art residential dorms, a $40 million gift for a building designed to “foster collaboration,” and institutes focused on advancing the Buddhist concept of the “beginner’s mind” and the controversial field of integrative medicine.

On the other hand, a development officer’s job isn’t to weigh the relative impact of alumni proposals, much less leave eight-figure gifts on the table. If they did, they’d quickly find themselves out of a job.

The pandemic significantly amplified this tension. One respondent to IP’s survey of fundraising professionals lamented “the disconnect between what higher education is asking for—i.e., foundation support for endowment, scholarship and endowed professorships—and what funders want to give.” Another said, “The wealth is still concentrated in the hands of few, and thus, we fundraisers are still subject to the whims of donors/their foundations. The philanthropic sector needs to give out unrestricted funds to organizations and stop funding programs that we all know have to be contrived to satisfy the philanthropists.” 

Open questions

Going forward, we’ll be tracking funders’ evolving approaches to a handful of emerging opportunities cited in the brief, such as the proliferation of public/private partnerships, impact investing and climate change initiatives. While these areas have yet to reach critical mass across the funding ecosystem, they nonetheless represent a growing area of opportunity for higher education advancement teams.

We’ll also see if some of these funder priorities have staying power. Not surprisingly, a search of the Philanthropy News Digest’s grants database shows that funders have kept the spigot open for STEM-related purposes. Don’t be shocked if STEM gifts become even more prevalent in a world transformed by COVID, which, according to the New York Times’ Frank Bruni, provided “extra incentive for schools to redirect money from the humanities to the sciences, because that’s where big grants for biomedical research are.” 

The outlook is less clear for other areas. Last May, I argued that funders’ robust giving to HBCUs finally went mainstream due to unprecedented support from evergreen funders and an array of new entrants. While it’s an encouraging read, it doesn’t mean some funders won’t revert back to their pre-2020 posture, especially if the markets continue to slide into correction territory, putting a damper on higher ed advancement teams’ momentum.

Should a market correction materialize, expect fundraisers to double down on support from “top-of-the-pyramid” donors, and in the process, continue to navigate that hazy middle ground between margin and mission.

Middle-of-the-pyramid donors and young alumni, on the other hand, will remain a wild card. Even before the pandemic, fundraisers had trouble engaging less affluent alumni grappling with higher housing costs and student loan debt, and research suggests that when younger donors, in particular, do reach for their checkbooks, it’s usually to support organizations in fields like education, civil rights and activism, and the environment—rather than their alma maters. 

Surging demand for student mental health services

Perhaps the most urgent trend moving forward involves funding for student mental health. When asked to name “two or three most important trends in your field,” multiple respondents from IP’s survey of higher ed fundraising professionals cited the student mental health crisis, including “social, mental, and emotional health,” and “health services moving online post-pandemic.” 

Our brief documents how funders stepped up to provide support for student mental health initiatives over the past two years. That said, they’re playing catch-up, given philanthropy’s historically tepid support for mental health treatment—both within higher ed and across society in general. Compounding matters is the fact that as we approach the two-year anniversary of the pandemic, the student mental health crisis is getting worse.

Inside Higher Ed and TimelyMD, a provider of student-focused telehealth services, recently published an extensive white paper called “The Unrelenting Campus Mental Health Crisis.”

“Our data from the first half of the fall 2021 semester show demand for mental health care among students is surging,” wrote Alan Dennington, TimelyMD’s co-founder and chief medical officer.

The Inside Higher Ed and TimelyMD brief is replete with concerning data points illustrating the breadth and severity of the crisis. But it also includes important guidance by looking at how colleges are reassessing their strategies for and investments in addressing student mental health needs. If there’s any bright spot to be gleaned from that report, it’s that it provides university development officers with a compelling list of talking points to make the case for student mental health support from funders from all income brackets.

With colleges cautiously emerging from the pandemic, the biggest open question from our Giving for Higher Education white paper is the extent to which funders and the sector’s philanthropic engine—affluent alumni—modify their priorities to focus on emerging challenges like the student mental health crisis, revert to a pre-crisis posture, or attempt to strike a balance between these two poles.