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What is an endowment?

“Endowment” is a term applied to a collection of individual funds pooled together for investment purposes to provide annual financial support for all that the college does—teaching, research, financial aid, building and grounds maintenance. Endowment refers to assets that are invested in perpetuity, unlike expendable funds which are typically used for current-year needs.

Academic endowments came into being during the Middle Ages, when early European universities relied on the income from rent on land holdings donated by wealthy patrons. Endowments have changed a lot since then, but they remain fundamental to the financial stability of colleges and universities, large and small.

Most endowments are not, as many may think, a single “pot” of money that can be used as the college or university wishes. In fact, a college’s endowment is not one fund, but a collection of funds, many of which are named for donors and designated for specific purposes. Endowed funds are established according to the donor’s interests, with stipulations about how and for what purpose the income may be used, as specified by the donor.

What does an endowment do?

Endowment funds provide a steady, predictable source of income over time. This predictable income (a draw of a percentage of the value of the funds) offers stability against downturns in the economy or fluctuations in the political or regulatory climate, which allows a college or university to make multi-year commitments and build programs.

Through endowment resources, activities can be supported that might not otherwise have had a chance to exist. Faculty members who hold endowed professorships—faculty appointments supported by annual funding from an endowment gift—benefit from opportunities for enhanced teaching and research and increased prestige. Students benefit from the scholarships, fellowships, and excellent teaching, programs, and research initiatives that endowment support helps make possible. Generally speaking, the strongest and most stable institutions have strong endowments.

How does the endowment support Augsburg?

Augsburg’s main sources of income are tuition revenue, grants, and private support, which includes new gifts as well as the annual draw from the endowment funds. A strong endowment allows Augsburg faculty and administrators to pursue critical initiatives that enhance our ability to be a leader in higher education. In addition to providing stability for the future, endowment gifts help us attract and retain top faculty and students.