Funding America’s Future: Larger Endowments Could Help HSIs Further Accelerate Latino Student Success
By: Sami R. Nour, Excelencia in Education
Hispanic-Serving Institutions (HSIs)¹ are less likely to have an endowment relative to other colleges and universities despite enrolling, as a group, more than half of the Latino undergraduate students in the United States. Endowments are important resources that provide institutions with opportunities to invest in students and programs. For HSIs that do have an endowment, their funds tend to be smaller per undergraduate full-time-equivalent student (FTE), on average, than those at other institutions. This disparity in endowments constrains HSIs’ capacity to invest in their students and educational quality.
Endowments are vital to the financial health of colleges and universities. In general, an endowment is a sum of money built from charitable donations to an institution with the intent of supporting the institution’s programs, facilities, and operations. The investment income and revenue generated by an endowment can be used to fund scholarships, professorships, research programs, and other expenses. They can provide a stable source of funding that can help offset tuition costs, support new initiatives, and help institutions to better weather emergencies and economic downturns. Endowments can therefore play an important role in the efforts of HSIs to provide a high-quality education and serve Latino, and all, students.
Institutions analyzed
Excelencia in Education analyzed over 3,000 degree-granting, public and private not-for-profit, Title IV-participating colleges and universities in the United States with at least one undergraduate student enrolled for Fall 2021.² Of these institutions, 571 are HSIs (including 59 HSIs located in Puerto Rico) and 401 are Emerging HSIs (eHSIs). The 571 HSIs in 2021–22 represent a small segment of higher education (19% of colleges and universities), yet enroll the majority of Latino undergraduates (62%).
This analysis compares HSIs with all other institutions (meeting the criteria above) that are not HSIs. HSIs in Puerto Rico are further highlighted as a subset of HSIs. Puerto Rican institutions are an important — yet still often overlooked — part of US higher education. In 2021–22, Puerto Rico was the location with the 3rd largest number of HSIs in the US, after California and Texas. In 2020–21, Puerto Rico had the 5th highest enrollment of Latino undergraduates in the US, enrolling 5% of the country’s Latino undergraduates.
HSIs are less likely to have endowment funds
HSIs are less likely to have any endowment funds compared to other institutions, which limits their ability to invest in important efforts such as student support services, research opportunities, and infrastructure upgrades. HSIs located in Puerto Rico are even less likely to have an endowment — in fact, more than half of the HSIs in Puerto Rico have no endowment. This funding disparity not only affects the institutions themselves but also the students they serve (for example, in the amount of institutional aid available). This highlights the urgent need for greater investment in HSIs to ensure that all students have access to opportunities. As shown in Table 1, around 30% of HSIs, and over 60% of Puerto Rican HSIs, have no endowment compared to 17% of all other institutions.
Table 1. Institutions with no endowment funds
Sources: Excelencia in Education analysis of U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education System (IPEDS), 2021 Institutional Characteristics and Finance surveys; and Excelencia’s HSI list.
Endowments are lower at HSIs
HSIs with endowments tend to have substantially smaller funds per undergraduate full-time equivalent (FTE) student than other institutions with endowments — less than a third of the size on average. This means that, in general, HSIs have less opportunities to invest in their students and programs. The disparity is even more drastic for Puerto Rican HSIs, where the median endowment per undergraduate FTE is less than one fifth of the median at all institutions — just $2,338 per undergraduate FTE student.
Figure 1 shows that the median endowment per undergraduate FTE student at HSIs is a little over $5,000 compared to almost $16,000 at all other institutions. This gap highlights the glaring disparity in financial resources between HSIs and other institutions. HSIs thus might miss out on some of the opportunities to invest in their students and programs that are available to many other institutions.
Figure 1. Median endowment per undergraduate FTE student at institutions with endowments
Source: Excelencia in Education analysis of U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education System (IPEDS), 2021 Institutional Characteristics, Finance, and Fall Enrollment surveys.
Endowments are often related to the sector of the institution. In general, it is expected that 4-year institutions will have larger endowments than 2-year institutions, and that private institutions will have larger endowments than public institutions. Although HSIs have historically been more likely than other institutions to be 2-year and public institutions, that is not the reason for the disparity in endowment sizes. The disparity in endowment size per undergraduate FTE between HSIs and other institutions actually occurs within every sector. Figure 2 below, shows that sector is not the entire story for why HSIs tend to have lower endowments.
Figure 2. Median endowment per undergraduate FTE student at institutions with endowments, by sector
Source: Excelencia in Education analysis of U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education System (IPEDS), 2021 Institutional Characteristics, Finance, and Fall Enrollment surveys.
Endowments lead to increased institutional aid for students
Endowments provide more opportunities to invest in students. Excelencia’s exploratory analysis found that a positive relationship exists between endowment per undergraduate FTE and the average amount of institutional aid among the full-time, first-time undergraduate students who were awarded institutional aid. The average institutional aid award increases as endowment per FTE increases (by approximately $86 for every $10,000 increase in endowment per undergraduate FTE), after controlling for an institution’s sector. The percentage of full-time, first-time students awarded institutional aid does not change greatly, but an increase in average award for students receiving institutional aid can mean quite a lot to an individual student. Increases could help students to overcome financial hardships like covering rent and basic needs or enable them to undertake internships, study abroad, or research and creative projects — ultimately supporting the student to enroll, persist, thrive, and graduate. The plot in Figure 3 below shows the average institutional aid award to full-time, first-time students awarded institutional aid versus the logarithm of endowment per undergraduate FTE (the points for HSIs are darker and plotted in blue). The figure visually shows the positive relationship between average institutional aid award and endowment per undergraduate FTE student.
Figure 3. Mean institutional aid award (among full-time first-time undergraduates awarded institutional aid) as a function of endowment per undergraduate FTE (HSIs plotted in blue)
Source: Excelencia in Education analysis of U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education System (IPEDS), 2021 Institutional Characteristics, Finance, Student Financial Aid, and Fall Enrollment surveys.
HSIs award fewer dollars in institutional aid on average to full-time, first-time undergraduates ($1,948 at HSIs compared to $5,257 at other institutions). Along with median endowments per FTE around $5,000 for HSIs and $15,000 for other institutions (see Figure 1 above), and the relationship in Figure 3, it’s clear that endowment size impacts institutional aid. Larger endowments would provide more opportunities for HSIs to invest in students through institutional aid as illustrated in Figure 4 below.
Figure 4. Disparities in endowments and institutional aid
Source: Excelencia in Education analysis of U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education System (IPEDS), 2021 Institutional Characteristics, Finance, Student Financial Aid, and Fall Enrollment surveys.
Having smaller, or no, endowments could be constraining HSIs in their efforts to intentionally serve their students. This becomes even more of an equity concern when one considers that HSIs enroll over 60% of the Latino undergraduates in the US.
As Emerging HSIs³ become HSIs they might help reduce the overall endowment gap
Emerging HSIs are more likely to be private non-profit institutions, have an endowment, and tend to have substantially larger endowments (per undergraduate FTE) compared to HSIs. Endowments per undergraduate FTE students at eHSIs are more than double those at HSIs, as shown in Table 2.
Table 2. Endowments at HSIs compared to eHSIs
Sources: Excelencia in Education analysis of U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education System (IPEDS), 2021 Institutional Characteristics and Finance surveys; and Excelencia’s HSI and eHSI lists.
As the Latino population continues to grow and enroll in higher education, many eHSIs are expected to eventually cross the 25% threshold and become an HSI. This will lead to changes in the makeup of the pool of HSIs.
As a result, HSIs as a group might appear to be better resourced with larger endowments over time, and the overall gap between HSIs and other institutions could decrease. However, it is important to remain aware that as the pool of HSIs changes, many individual HSIs within that pool could still be operating with constrained resources such as smaller, or no, endowments.
The bottom line
HSIs, and especially Puerto Rican HSIs, are less likely to have any endowment, and when they do have an endowment it is typically much smaller per undergraduate FTE. As a result, HSIs face financial limitations compared to other colleges and universities. Endowments are important resources that enable institutions to invest in students and programs. Having smaller, or no, endowments at HSIs limits these institutions’ ability to invest in their students and perpetuates inequities in higher education. It is essential for policymakers and higher education leaders to recognize the critical role that HSIs play in higher education and support them with additional resources. Investment in HSIs allows them in turn to invest in themselves and their students.
To address this issue, there are several steps that can be taken:
- Increase federal funding for HSIs and support for capacity building. Although Title V funding can be used to increase endowments, few institutions have used this approach as it may have less of an obvious and immediate impact than other efforts. More funding and support could enable institutions to access funds and to use them for multiple efforts.
- Provide targeted grants and scholarships for students — including Latino students — directly. Getting aid to students directly can quickly and efficiently support institutions as they build up endowments for longer-term commitments.
- Promote partnerships between HSIs and the private sector. Beyond an opportunity to invest in endowments, scholarships, and endowed chairs or professorships for example, these partnerships also support investment in the local workforce and community needs.
By investing in HSIs, we can help ensure that all students have access to opportunities for success, regardless of where they enroll. It is important to recognize the indispensable role that HSIs have in our country’s higher education system, and provide them with the resources they need to succeed. Investing in HSIs enables them to in turn invest in themselves and their students.
For more information on HSIs, please see: https://www.edexcelencia.org/research-policy/hispanic-serving-institutions-hsis
For more information on higher education in Puerto Rico, please see Excelencia’s research below:
[1] HSIs are defined as accredited, degree-granting public or private not-for-profit institutions of higher education with 25% or more total undergraduate Hispanic full-time equivalent student (FTE) enrollment.
[2] The most recent data available from IPEDS at the time of analysis.
[3] Excelencia in Education developed the Emerging HSI (eHSI) classification in 2009 to track the pipeline of institutions with 15–24.9% undergraduate full-time equivalent (FTE) Hispanic student enrollment, many of which are on a path to eventually passing the 25% enrollment threshold to become an HSI. In 2021–22, there were 401 eHSIs.
