Focus on affordability for students — the 'living endowment' — can weaken the institutions' bottom lines
The Chronicle of Higher Education
August 10, 2008
When the main building of Our Lady of the Lake University was damaged
in a fire this spring, its president, Tessa Martinez Pollack, worried
the blaze would exacerbate its money woes. "It's a known fact," she told
The New York Times, "that we're like a lot of other Catholic universities that are struggling to stay afloat financially."
Not all leaders of Roman Catholic institutions agree with Ms.
Pollack's assessment, but Catholic colleges and universities do face
financial challenges unique to them. For much of their history, they
have relied on unpaid faculty members — brothers, nuns, and priests —
who are in shrinking supply. They have a shorter history of fund
raising, and therefore smaller endowments than most private colleges.
And many see a core mission as providing access to all students — and
thus keep their tuition relatively low.
A report scheduled to be released this week from Moody's Investors
Service, "Spotlight on U.S. Catholic Higher Education Sector," focuses
on the 55 Catholic institutions Moody's rates, which are among the
largest and most affluent of those colleges.
As a result, "the overall conclusion is slightly more positive than I
expected," says Richard A. Yanikoski, president of the Association of
Catholic Colleges and Universities, which represents 196 American
colleges. "Schools that borrow are more likely large institutions or
growing fairly rapidly," he says. Still, the report notes that even some
larger colleges are feeling a pinch.
The 'Living Endowment'
The vast majority of Catholic colleges and universities were founded
by religious orders, such as the Jesuits or the Sisters of Notre Dame. A
smaller number were founded by individual dioceses of the church. In
either case, the institutions usually relied on the order or the church
for resources, including land. Priests, brothers, and nuns served as
faculty members — free of charge. As membership in the religious orders
began declining in the 1960s, after the reforms of the Second Vatican
Council, colleges began hiring lay faculty members, who had to be paid.
Until the 1970s, most Catholic institutions' boards were also
exclusively made up of brothers and sisters. That set Catholic colleges
in stark contrast to most private colleges, where board members were
chosen for their ability to help raise a lot of money. Catholic colleges
still lag behind in that regard. "We've got schools out there that
don't even have half a million dollars in endowment," says Mr.
The Catholic-college mission also results in comparatively small
endowments, Mr. Yanikoski says. Many Catholic colleges strive to provide
an affordable education, a response to Catholic social teachings about
prioritizing the needs of the poor. Traditionally the colleges are much
more likely to encourage donors to invest in students — the "living
endowment," as he calls it — rather than other projects.
Catholic women's colleges are even less likely to have built up large
endowments, Mr. Yanikoski says, because most of them were founded after
World War I, much later than institutions like Georgetown University
that began as men's colleges. The smaller endowments also reflect
couples' giving patterns, Mr. Yanikoski says: Couples who attended
different single-sex institutions are more likely to give to the man's
Finally, women's colleges today are particularly likely to focus on underserved students.
That is certainly the case at Trinity Washington University in
Washington, D.C. Before the 1960s, Trinity attracted women from "the
good, hearty, Catholic middle class," says the university's president,
Patricia A. McGuire. But once the Catholic men's colleges opened their
doors to women and Catholic students began attending secular colleges in
larger numbers, "students at institutions like Trinity realized they
could go anywhere."
As a result, "the question became what to do, and was there a future
for us?" Ms. McGuire says. Trinity's answer was to step up its efforts
to recruit underserved women, particularly those from the Washington
area. About 60 percent of the women enrolled at Trinity receive federal
grants for lower-income students. And 95 percent of its students receive
At a college with a $10.7-million endowment, that has required
careful financial planning. But it has also allowed Trinity to pursue
its founding mission, Ms. McGuire says.
Trinity, though a member of the ACCU, is not rated by Moody's, so it
was not included in the agency's new report. That report compares 55
Catholic institutions with the other 225 private colleges in Moody's
The institutions in the report, which have the strength to borrow
money, are among the healthiest Catholic colleges. The other private
colleges Moody's uses for comparison are similarly among the strongest
in their group.
The University of Notre Dame has the largest endowment of any
Catholic institution, and the 14th largest over all, at $5.9-billion.
But only a handful of other Catholic colleges break into the top 100
largest endowments list. "We are just not, as an entire group, not
nearly as wealthy as other private colleges," Ms. McGuire says.
Those endowments aren't going to grow overnight, either. In the 2007
fiscal year, the Catholic institutions rated by Moody's brought in a
median of $9.7-million in gifts, compared with $13.2-million at other
But according to Moody's, the endowment gap between Catholic
institutions and other private ones is slowly narrowing. Catholic
colleges and universities are beginning to invest more resources in fund
raising, and several are in the midst of capital campaigns.
Seton Hall University, in New Jersey, has revved up its fund-raising
efforts. Twelve years ago, the university's endowment was "just barely
$50-million," says Dennis J. Garbini, vice president for finance and
technology. Today it stands at more than $230-million, and the
university just wrapped up a $150-million capital campaign. A third of
the money it raised will go toward scholarships.
The Catholic tradition of serving the poor also influences tuition.
In the 2007 fiscal year, the Catholic institutions rated by Moody's had a
median net tuition of $15,636, compared with $18,101 for other private
Tuition and fees at Saint Joseph's College, in New York, will be
$15,973 this year. "We have a mission of providing quality, affordable
education to our students," says Theresa LaRocca Meyer, vice president
for enrollment management. The college reaches out to middle- and
lower-income students, particularly on its Brooklyn campus, she says.
Doing so is "part of the mission of the Sisters of St. Joseph," who
founded the college.
Affordability is also a priority at Seton Hall. Tuition and fees are
$29,360, but the college steeply discounts tuition for most students.
"As a Catholic institution, we strive to focus our budget priorities not
only on budget issues and attracting students, but consistent with our
mission of maintaining affordable and accessible education," Mr. Garbini
Despite their comparatively low tuition, most Catholic colleges and
universities are dependent on it. At the ones rated by Moody's, a median
of 82 percent of operating revenue came from student charges, compared
with 68 percent at other private colleges. According to the report,
Catholic colleges' reliance on tuition "makes it imperative that the
institutions maintain a strong market presence to attract net tuition
paying students and for continued sound operating performance."
In addition to limiting revenue, Catholic colleges' focus on access
affects their enrollment policies. According to the report, "Many
Catholic institutions have emphasized growth in their undergraduate
enrollment as an expression of their service mission, whereas many other
privates have been heavily focused on limiting enrollment growth in
order to become more selective and enhance a market reputation for
Despite their commitment to access, Catholic colleges are increasing
their tuition revenue more quickly than other private institutions,
Moody's found. Between the 2003 and 2007 fiscal years, Catholic
institutions had a 6 percent compound growth rate for net tuition
revenue, compared with 4.7 percent at other private colleges. Moody's
attributes the rise in tuition revenue to increasing costs, as well as
the growth of professional degree programs, which colleges are less
likely to offer at a discounted rate.
Catholic colleges have found a number of ways to walk the line
between bringing in tuition and providing access. For one, they tend to
keep a tight rein on spending, which Moody's says contributes to their
strong operating performance as a group.
Catholic colleges also are playing up their special strengths. Their
religious identity is often viewed as an asset, even by some
non-Catholic applicants. And a good number of Catholic colleges are
located in urban areas, which have become more popular with students.
The report points to Boston College as a good model on those fronts,
saying that over the last 20 years the college "has transformed itself
from a local commuter institution into a nationally prominent provider
of professional degree programs."
Not every Catholic institution will follow Boston College's path, but
they will look to increase enrollment and giving. After all, if they're
going to continue to promote access, they have to stay around.