Princeton University makes so much money—it could allow students to attend for no cost and still have plenty left in its endowment.
- Princeton University has so much money that it could operate as it does now without any outside financial support at all.
- Princeton’s endowment hit $37.7 billion in 2021, or $4.5 million per student. The school’s entire annual operating expense that year was $1.86 billion—which is less than 5% of the value of the endowment, according to Axios writer Felix Salmon.
- So with the amount of money Princeton brings in, it could run without grants or tuition costs and be completely fine.
Why it’s important
Universities typically run off of government grants, student tuition, and distributions from their endowment. Without this income the schools would not be able to continue operations—but not Pricenton.
Princeton could be considered a perpetual motion machine, because it can run completely on its own efforts without any outside help. Most universities can’t do the same.
The cost of attendance for Princeton for the 2022-2023 school year is $79,540. It includes tuition for $57,410, room charge for $10,960, board rate for $7,670, and estimated other expenses for $3,500. Compared to a state school like the University of Tennessee which tuition costs $13,244 for in-state or $31,644 for out-of-state.
Even with the high tuition costs, the university could let in every student completely tuition free and cancel all grants and still have plenty of money left over for any other expenses.
The university has so much money that it increasingly resembles a hedge fund with a nonprofit educational arm attached, but unlike typical hedge funds Princeton is a tax-exempt nonprofit that pays only 1.4% excise tax on its investment returns.
Princeton’s endowment hit $37.7 billion in 2021, but will most likely decline in value in 2022. Although it is expected to decrease in value, it is expected that the school’s endowment will continue to grow faster than the expenses.
In all, Princeton could run completely on its own without any tuition fees or research grants and be completely fine, even though it will never have to.It’s a virtuous cycle, its wealth allows it to attract the best researchers, who in turn make it a center of academic excellence—that attracts even more money from funders, current students, and alumni, according to Axios.
Others in the big leagues
There are some schools that have similar sized endowments.
For the fiscal year of 2021 Stanford’s endowment was $37.8 billion, Yale University’s was $42.3 billion, University of Texas System was $42.9 billion, and Harvard University’s was $51.9 billion, according to AdmissionSight.
Some believe that Harvard could technically be considered a perpetual motion machine as well, but writer Malcolm Gladwell disagrees. He says that Harvard has a budget of roughly $5 billion and an endowment of $52 billion, but a 10% return on $53 billion only gives you $5.3 billion to play with, and after paying all the bills with that, Harvard would be left with a margin of just $300 million.