Key Takeaways
Nearly 200 private colleges borrowed from restricted donor endowments in 2025, up from 131 in 2021, according to Perspective Data Science estimates reported by the Wall Street Journal.
The share of private nonprofit colleges drawing down endowments faster than 7 percent a year, a common financial instability signal, nearly doubled to 19.3 percent in 2025 from 9.7 percent in 2016.
Ohio's attorney general is suing former Notre Dame College leaders over more than $2 million in restricted funds, and Huron Consulting Group projects more than 440 colleges could close or merge within a decade.
Struggling private colleges are increasingly spending money their donors legally set aside for other purposes, according to a Wall Street Journal investigation published August 2. Nearly 200 private colleges borrowed from restricted endowments in 2025, up from 131 in 2021, per estimates from higher education consultant Perspective Data Science, and most of that money went to everyday expenses. "A lot of schools are doing whatever they can to keep the lights on," founder Matthew Hendricks told the Journal.
The firm analyzed nearly 1,000 institutions and found the share drawing down endowments faster than 7 percent a year nearly doubled to 19.3 percent in 2025 from 9.7 percent in 2016. The share drawing at 15 percent tripled to 5 percent. Huron Consulting Group projects more than 440 colleges are at risk of closing or merging over the next decade.
The human cost shows up in cases like Natalie Strouse, who funded a $30,000 scholarship at Ohio's Notre Dame College in memory of her late husband. When the college closed in 2024 and she asked to move the scholarship elsewhere, an administrator told her the money was already spent. "I consider it theft," Strouse told the Journal. Ohio's attorney general has sued former trustees and officers of the college over more than $2 million in restricted funds spent outside donor terms, and later expanded the case over asset transfers. The defendants deny wrongdoing.
Kansas, Kentucky, Georgia and Montana have passed laws in recent years making it easier for donors to sue nonprofits that spend restricted gifts outside their terms, a push led by the Philanthropy Roundtable.
Donor intent is becoming the accountability question across the whole giving world, from the slow philanthropy debate over how fast pledged money actually moves to the Lilly Endowment crossing $100 billion while small colleges drain scholarship funds to survive. Watch the state donor protection laws. More are coming.
People Also Ask
Can colleges legally spend restricted endowment funds?
Generally no. Donor restrictions are legally binding, and colleges typically need donor approval, attorney general notification or a court order to redirect restricted gifts.
How many colleges are tapping restricted endowments?
Nearly 200 private colleges borrowed from restricted endowments in 2025, up from 131 in 2021, according to Perspective Data Science estimates reported by the Wall Street Journal.
How many colleges are at risk of closing?
Huron Consulting Group projects more than 440 colleges are at risk of closing or merging during the next decade as enrollment declines and costs rise.
What can donors do if a college misuses their gift?
Donors can complain to their state attorney general, and Kansas, Kentucky, Georgia and Montana have passed laws giving donors expanded standing to sue over misused restricted gifts.