Philanthropic giving is an indispensable source of funding for American higher education. In 2020, individuals gave over $11 billion to both public and private institutions. Colleges and universities received another $23 billion from private foundations and other sources, such as donor-advised funds.
For a private liberal arts college, philanthropic gifts are crucial. A large public university gets significant revenue from various sources: student tuition, research grants, patent licenses, vendor contracts, state appropriations, and sales and fees (think of patient billing at the university hospital or tickets for football games). Philanthropic gifts are one slice in a large budgetary pie.
While researchers at Gustavus win major grants and the College sells tickets for campus events, those sources of revenue are much smaller. A college like Gustavus depends on student tuition and fees for the bulk of its operating revenue. Yet tuition and fees do not fully meet the costs of educating, housing, and feeding a student. Then there are the additional costs of running a college: equipping science labs, upgrading computer networks, sending athletes to national tournaments, and more. To meet those needs, as well as the basic expenses not covered by tuition, a school like Gustavus relies on a community of donors.
That’s why colleges have fundraising campaigns.
Like the annual campaigns for the United Way or other nonprofit organizations, the Gustavus Fund starts at zero each June 1 and then grows with new donations over the next twelve months. These donations provide a funding base for meeting the day-to-day costs of running the College. As noted above, the cost of educating, housing, and feeding a Gustavus student exceeds what the full charge for tuition, room and board. Tuition and fees account for 72% of the College’s operating revenue. The remaining 28% comes from philanthropic gifts.
The Gustavus Fund is a vital part of that 28% of operating revenue. Many of the gifts to the campaign were for specific programs, scholarships, building projects, or other needs. These are called restricted gifts. By contrast, the Gustavus Fund is made up of unrestricted donations. They can be used wherever there is the greatest need.
The campaign was indeed a great success. The entire Gustavus community––alumni, parents, faculty, staff, and friends of the College––showed remarkable generosity during difficult times. But only a small percentage of the $225 million the community gave during Show the World can be used for immediate budget needs.
First of all, one quarter of the campaign total was not in dollars at all but in planned gifts that the College will receive in the future. Planned gifts are made in wills, charitable annuities, or designations in life insurance policies. It is standard practice in fundraising to count the planned gifts today, even though the money will not be received for years or even decades to come.
Of the assets the College did receive as gifts, a large percentage were restricted, either to specific projects or long-term support of programs. Nearly one quarter of the cash and current assets the College received went toward building projects such as Nobel Hall and Lund Center. Another third went into the College endowment. Just under 8% of the cash, stock, and other assets received for the campaign was designated for unrestricted current spending––in other words, money that can be used for immediate budgetary needs.
In terms of immediate impact, an important benefit of the campaign was funding for scholarships. The Gustavus Acts strategic plan set the goal of meeting the demonstrated need of every Gustavus student. The broader Gustavus community wholly supports that goal. Donors proved that they want to ensure the College’s affordability.
Scholarships are especially important right now. The number of college-aged young people nationwide has begun to trend downward, even before the demographic drop expected in 2026 (due to the lower American birthrates during the Great Recession of 2008-09). The social makeup of the generation is also changing. In Minnesota, where Gustavus still recruits the largest part of its incoming classes, students from historically underserved communities will be more than a quarter of high school graduates in 2030. There are also economic shifts. In years ahead, a majority of new college students in Minnesota will likely come from households earning less than $100,000 per year.
With over $15 million in gifts for Heritage and other current scholarships, along with even more for endowed scholarship funds, the campaign has helped ensure the accessibility of a Gustavus liberal arts education. In today’s competitive environment, having scholarships to attract and retain top students is an important boost for Gustavus.
The decision to renovate and expand Lund Center followed a campus master plan determined by the Board of Trustees and the Cabinet. Coming after the renovation and construction of three facilities devoted wholly to academic uses (Nobel, Anderson, and Beck), Lund Center was next on the list as an older building that had reached its limits as a functional, efficient, and safe space.
Before the renovation, Lund already welcomed the most visitors to campus. More than 6,000 campers used Lund each summer. Thousands more visited the building once or twice during the year ––student-athletes and coaches from other schools, alumni, parents, and Nobel Conference participants. More than 40 years after its opening, Lund was no longer a suitable gateway to Gustavus.
Lund is also one of the three buildings that all students use, along with the campus center and library. Since opening in spring 2022, Lund’s new facilities have proven popular with students, as well as faculty and staff. This past March, members of the campus community scanned their IDs at the Lund wellness facility more than 24,000 times––an average of 812 scans per day. In making decisions about building projects, the Board of Trustees and Cabinet pay attention to academic needs and overall student experience. Lund falls into both categories. Clearly, the renovation was much needed.
The endowment functions somewhat like a retirement account. With regular contributions and careful investing, the account grows over the years. The analogy helps explain how the endowment ensures a stable financial future for Gustavus. Money is being invested for use decades from now.
At the same time, the College also draws from the endowment for current needs. In consultation with the Board of Trustees, President Bergman and the cabinet draw somewhere between 4 and 5 percent from the endowment each year. In 2021–22, the draw amounted to $9.4 million.
Unlike a retirement account, however, endowment funds cannot be spent anywhere the cabinet wishes. The endowment is made up of hundreds of different funds established by different donors for different purposes. It would be as if your IRA was divided into accounts for groceries, utilities, and so forth, and the money had to be spent only for those purposes. Part of the endowment is unrestricted and thus can be used for the College’s general expenses. But most funds are restricted to a specific purpose.
Yet even these restricted funds are helpful to the College as a whole. Endowment funds pay for scholarships, endowed professorships, student research fellowships, travel for sports teams and music ensembles, equipment for science labs, databases for the library, and other needs at the College. By providing support for these specific things, the endowment provides general budget relief. The more the endowment grows, the greater the amount of the draw, both in unrestricted and restricted money.
Contrary to current opinion, getting a college degree still has plenty of benefits. Recent economic research confirms that an undergraduate degree brings a major boost for employment prospects and earning potential. Even in the immediate term, the median earnings for a college grad right out of school, at ages 22–27, are over $20,000 per year higher than a high school graduate the same age.
The benefits of higher education go beyond a higher paycheck. Studies show that post-secondary institutions are engines of economic growth for their communities. They develop well-trained workers, promote research and development, and foster a variety of civic partnerships.
Certainly, this is the case for major research universities in urban centers. But small liberal arts colleges in rural towns also have a positive impact. According to a study from Western Kentucky University, rural counties in the U.S. with an undergraduate institution not only have higher income levels, but also better health indices than counties without a college.
In short, dynamic, healthy colleges are good for communities––and for the country as a whole. Donations toward scholarships, research, and endowed professorships are investments in future economic growth, innovation, and a strong workforce. Moreover, philanthropy toward higher education helps strengthen communities by ensuring that their colleges remain vibrant hubs of learning and engagement.
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