Cash-strapped colleges are draining their endowments to survive

A college endowment is supposed to last forever, supporting students, professors and research in perpetuity.

Instead, many cash-strapped schools are draining their nest eggs just to stay alive.

Faced with multi-million dollar deficits, Hiram College in rural Ohio borrowed from its $56 million endowment. The 1,000-student liberal arts school — which boasts a statue of US President James Garfield, who worked as a janitor there to pay his tuition — eventually pulled more than $47 million from the fund. It even tapped money that donors had explicitly set aside for specific purposes, not for balancing the budget.

Hiram is now working with the state attorney general’s office and is hashing out a repayment plan, a spokesperson said. The school is also notifying its donors about the draw from the endowment, both in writing and through in-person conversations.

David Haney, Hiram’s president from 2020 to 2023, said he was surprised to learn about the loans when he took office. He considers them a risky bet that many smaller schools feel forced to take in an era when US student enrollment has started to decline. Colleges need to focus on cutting expenses instead, he said.

“What a lot of these small colleges do is they think that things are going to turn around,” Haney said. “‘If we just invest in new athletic facilities, everything is going to be fine.’ In most cases, that doesn’t happen. To me, that’s why borrowing from the endowment and taking out debt is not the way to go about it.”

Hiram is far from alone. Nearly 200 private colleges borrowed from restricted endowment funds in 2025, up from about 130 in 2021, according to estimates from higher-ed consulting firm Perspective Data Science. Other colleges have avoided loans but are drawing more from their endowments each year than advisors consider sustainable. Analysts liken both strategies to borrowing from a 401(k) — it may help in the short-term but carries long-term risks, such as downgrading a school’s credit rating. 

For some institutions, “there’s just nowhere else to turn,” said Tracy Filosa with investment firm Cambridge Associates, which works with endowments. “It’s not a rainy day fund — we know that. But in one way, it is there for an institution to get through a rainy day.”

Dipping into the endowment can sometimes work, which is one reason schools keep trying it.

Avila University in Kansas City received court approval in 2023 to loosen the restrictions covering........

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