Filed Under: Business

Move over tuition: 5 surprising ways universities make money

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The conversation over the cancellation of student debt is shining a light on how much colleges charge for tuition. The cost to attend college has risen 169% from 1980 to 2019, while pay for young workers is up just 19% over the same time period, according to a Georgetown University report. But tuition, grants and state aid aren’t the only ways universities rake it in. Here’s how higher education institutions are becoming multi-billion dollar entities in this week’s Five for Friday

#5: Philanthropy

It’s no surprise that the ultra-wealthy like to put their stamp on universities. Just think about all the buildings with names on them across campuses. In 2018, billionaire Michael Bloomberg donated $1.8 billion to Johns Hopkins University, a record-setting number. And there aren’t many alumni closer to their old stomping grounds than Nike founder Phil Knight, who gave multiple $500 million gifts to the University of Oregon, the latest for a new science complex. Oregon is even dubbed “Nike University” over its close connection with the billionaire. 

#4: Research

Research can be a huge funding source for universities. Northwestern, for example, developed the nerve pain and seizure medication known as Lyrica. The university licensed the drug to pharmaceutical giant Pfizer, which has kept the money rolling in. Northwestern invested nearly every penny it earned into the school’s endowment, and by 2016, it accounted for as much as 18% of its fund. 

#3: Real estate holdings

Real estate is generally viewed as a solid investment. That’s probably why George Washington University has been gobbling up property throughout Washington D.C. over the years. In fact, GW owns so much commercial real estate that it was the city’s 10th highest property tax payer in 2018 and is one of D.C.’s largest landlords. If you include the campus, its property holdings are worth well over $1 billion. It should be noted that GW doesn’t pay taxes on buildings used for education. More than half of GWU’s endowment is invested in real estate and can bring in nine figures per year. 

#2: Stocks

The stock market isn’t just for Wall Street brokers. Former Coca-Cola President Robert Woodruff may have dropped out of Emory University in his college days, but he was still so fond of the Atlanta-based liberal arts school that he donated millions of shares in the company in 1979. The gift is now worth around $5 billion today. Emory is often ranked in the top 25 academic universities in the nation and has one of the biggest endowments in the south. But you might be accused of lacking school spirit if you drink Pepsi on campus. 

#1: Oil Money 

Big oil might not fit the college funding bill until you realize it’s in Texas. The University of Texas leases more than 2 million acres of land to oil companies in the Permian Basin. With oil prices high, the university makes $6 million per day off the land. UT even recently surpassed Yale to become second-richest American university in terms of endowment size ($42.9 billion as of 2021). As long as the oil-rich land remains in demand, UT will likely catch up to No. 1 Harvard in the coming years.

SIMONE DEL ROSARIO:

THE STUDENT LOAN CONVERSATION IS SHINING A LIGHT ON JUST HOW MUCH COLLEGES CHARGE FOR TUITION. BUT THAT’S NOT THE ONLY WAY UNIVERSITIES ARE RAKING IT IN. HERE’S HOW THEY BECOME MULTI-BILLION-DOLLAR ENTITIES IN THIS WEEK’S FIVE FOR FRIDAY.

DONATIONS FROM THE UBER-WEALTHY COME IN AT NUMBER 5. (Mike Bloomberg – $1.8 billion to Johns Hopkins – Side by side with Johns Hopkins campus) SOME OF THE BIGGEST INCLUDE MICHAEL BLOOMBERG’S $1.8 BILLION GIFT TO JOHNS HOPKINS IN 2018, AND NIKE FOUNDER PHIL KNIGHT’S $500 MILLION DONATION TO UNIVERSITY OF OREGON FOR A NEW SCIENCE COMPLEX.

AT NUMBER 4, RESEARCH CAN BE A HUGE BOON FOR A UNIVERSITY’S BOTTOM LINE. TAKE MY ALMA MATER NORTHWESTERN, WHICH CREATED THE NERVE PAIN AND SEIZURE MEDICATION KNOWN AS LYRICA. LICENSED TO PHARMA GIANT PFIZER, THE UNIVERSITY INVESTED NEARLY EVERY PENNY OF THE SALE INTO THE SCHOOL’S ENDOWMENT. BY 2016, THE DRUG ALONE ACCOUNTED FOR UP TO 18% OF N-U’S RICHES.

REAL ESTATE INVESTMENT COMES IN AT NUMBER 3. GEORGE WASHINGTON UNIVERSITY OWNS SO MUCH COMMERCIAL REAL ESTATE IN D-C IT WAS THE 10TH HIGHEST PROPERTY TAX PAYER THERE IN 2018, AND IS ONE OF THE CITY’S LARGEST LANDLORDS. IF YOU COUNT THE CAMPUS THEIR PROPERTY HOLDINGS ARE WORTH WELL OVER A BILL. THOUGH THEY ONLY PAY TAXES ON THE NONEDUCATIONAL HOLDINGS. MORE THAN HALF OF THE ENDOWMENT IS INVESTED IN REAL ESTATE, WHICH CAN BRING IN 9 FIGURES A YEAR.

AT NUMBER 2. STOCKS AREN’T JUST FOR WALL STREET TYPES. FORMER COCA-COLA PRESIDENT ROBERT WOODRUFF MAY HAVE DROPPED OUT OF EMORY UNIVERSITY, BUT HE WAS STILL SO FOND OF THE ATLANTA-BASED LIBERAL ARTS SCHOOL THAT HE DONATED MILLIONS OF SHARES IN THE COMPANY IN 1979. TODAY, THOSE SHARES ARE WORTH AROUND $5 BILLION.

AND OUR NUMBER ONE IS BIG OIL, WHICH MIGHT NOT FIT THE COLLEGE FUNDING BILL, UNTIL YOU REALIZE IT’S IN TEXAS. THE UNIVERSITY OF TEXAS LEASES MORE THAN 2 MILLION ACRES OF LAND IN THE OIL-RICH PERMIAN BASIN, WHICH BRINGS IN ABOUT $6 MILLION A DAY. WITH OIL PRICES HIGH, UT’S ENDOWMENT IS CLOSING IN ON BECOMING THE NATION’S RICHEST, STOMPING OUT THE OLD-GUARD IVY LEAGUES.

BEFORE YOU ASK WHY THEY NEED YOUR TUITION DOLLARS AT ALL, KNOW THE MEDIAN UNIVERSITY HOLDS JUST $35 MILL IN AN ENDOWMENT, WHERE TUITION COVERS HALF THE SCHOOL’S FUNDING. THAT’S YOUR FIVE FOR FRIDAY, I’M SIMONE DEL ROSARIO AND IT’S JUST BUSINESS.

The conversation over the cancellation of student debt is shining a light on how much colleges charge for tuition. The cost to attend college has risen 169% from 1980 to 2019, while pay for young workers is up just 19% over the same time period, according to a Georgetown University report. But tuition, grants and state aid aren’t the only ways universities rake it in. Here’s how higher education institutions are becoming multi-billion dollar entities in this week’s Five for Friday

#5: Philanthropy

It’s no surprise that the ultra-wealthy like to put their stamp on universities. Just think about all the buildings with names on them across campuses. In 2018, billionaire Michael Bloomberg donated $1.8 billion to Johns Hopkins University, a record-setting number. And there aren’t many alumni closer to their old stomping grounds than Nike founder Phil Knight, who gave multiple $500 million gifts to the University of Oregon, the latest for a new science complex. Oregon is even dubbed “Nike University” over its close connection with the billionaire. 

#4: Research

Research can be a huge funding source for universities. Northwestern, for example, developed the nerve pain and seizure medication known as Lyrica. The university licensed the drug to pharmaceutical giant Pfizer, which has kept the money rolling in. Northwestern invested nearly every penny it earned into the school’s endowment, and by 2016, it accounted for as much as 18% of its fund. 

#3: Real estate holdings

Real estate is generally viewed as a solid investment. That’s probably why George Washington University has been gobbling up property throughout Washington D.C. over the years. In fact, GW owns so much commercial real estate that it was the city’s 10th highest property tax payer in 2018 and is one of D.C.’s largest landlords. If you include the campus, its property holdings are worth well over $1 billion. It should be noted that GW doesn’t pay taxes on buildings used for education. More than half of GWU’s endowment is invested in real estate and can bring in nine figures per year. 

#2: Stocks

The stock market isn’t just for Wall Street brokers. Former Coca-Cola President Robert Woodruff may have dropped out of Emory University in his college days, but he was still so fond of the Atlanta-based liberal arts school that he donated millions of shares in the company in 1979. The gift is now worth around $5 billion today. Emory is often ranked in the top 25 academic universities in the nation and has one of the biggest endowments in the south. But you might be accused of lacking school spirit if you drink Pepsi on campus. 

#1: Oil Money 

Big oil might not fit the college funding bill until you realize it’s in Texas. The University of Texas leases more than 2 million acres of land to oil companies in the Permian Basin. With oil prices high, the university makes $6 million per day off the land. UT even recently surpassed Yale to become second-richest American university in terms of endowment size ($42.9 billion as of 2021). As long as the oil-rich land remains in demand, UT will likely catch up to No. 1 Harvard in the coming years.

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