We have compiled key indicators for the financial sustainability of each university in the United States and ranked them all.
Why these metrics are important
Endowment per student – A higher $ amount is better. An endowment reflects the donations an institution has received over time and invested. We divide this by the number of students to determine an endowment per student. Stronger institutions have greater endowments, which can support financial aid and many other functions. It is worth noting that some endowment funds are earmarked for specific purposes and cannot be used completely freely (for example, donations made for financial aid purposes cannot be used for other purposes).
Net Tuition as % of Revenues – A lower % is better. The more an institution is dependent on tuition for a source of revenues, the greater the risk and financial vulnerability should enrollment fall. The best institutions have significant revenue contributions from other sources. Note: We calculate net tuition, which reflects the tuition net to an institution after financial aid.
Net Room and Board as % of Revenues – A lower % is better. It is unclear how many universities will be open for student housing. If housing is not fully open, then the university does not collect room and board fees, yet they still incur many building-related costs. So the lower this metric is, the less precarious is the university’s position. Note: We calculate net room and board, which reflects the room and board net to an institution after financial aid.
Government Support as % of Revenues – A lower % is better. With state and local governments under severe economic strain, the more reliant an institution is on government support, the more financial risk it bears if that support is reduced.
Months of Expenses Covered by Net Assets – A higher number is better. Think about this as a coverage ratio. It measures how many months it would take an institution to deplete its net assets (such as cash) if it bore all expenses but had no revenue. In reality, an institution has buildings and land included in its assets that are not liquid (easily sold), but this measure is a good way to put a bound on the institution’s risk.
Endowment Returns (10-yr average) – A higher % is better. Better financial management and higher returns on investments enable the institution to accrue more funds, without needing to rely as much on donations, which may wither in a downturn.
Underlying data on endowment size and revenue breakdown from the National Center for Education Statistics. Returns compiled from Form 990 IRS filings. School opening status from The Chronicle of Higher Education. Calculations powered by Daddy.Finance.