Highly selective private schools are actually going the other way as donors and alumni demand the schools do something with those endowment dollars instead of making financial advisors and administrators rich. Poor kids are getting more money.
Your statement may be true for public schools and private schools with a smaller endowment.
This is a bit of a common misunderstanding, I think, that a lot of folks have. But donors and alumni can’t “demand schools do something with those endowment dollars” because endowment dollars, by their very nature, are highly restricted in their specific utility by legally-binding gift agreements that are essentially contracts between institutions and donors. It’s why schools like UVA with a $15B endowment still work hard to continue to raise enormous amounts of money year over year, even though you’d think that they wouldn’t need to, what with a $15B endowment.
At schools with huge endowments, it is very typical for 90%+ of the overall endowment to be comprised entirely of restricted-use dollars. Endowments at universities, while they are generally invested and managed as a one large pool of money, they are not accessible as, or distributed as, one large pool of money as similar to, say, a checking account or a slush fund. A university endowment is comprised of hundreds or thousands of small individual endowed funds, each one individually created by an individual donor, for things like scholarships, student aid, faculty support, research, capital projects, etc. Each of those smaller endowed funds within the larger overall university endowment has its own legally-binding gift agreement signed by the donor and the university that the funds can only be used in the exact manner specified in the gift agreement. In other words, if a donor creates an endowed fund for a scholarship for an engineering student from Wake County, that fund cannot be used for a student studying business from Durham County. Or an endowed fund created with the purpose of providing funding for the department of English, can’t be used to provide funding to the department of physics. And so on.
The only funds from a university’s endowment that can be used in any manner at the discretion of the president, chancellor, dean, etc. are funds that are considered to be fully unrestricted. So if, as an alumnus donor, you wanted to give unrestricted support to the College of Egineering at Georgia Tech, you’d have to give it to whatever the CoE at Tech calls their “dean’s discretionary fund” at the CoE. Similarly, if you want to broadly support Georgia Tech as a whole, you’d give your dollars to the Georgia Tech Fund which is essentially the Institute’s presidential discretionary fund.
As I mentioned, only about 10% (and often times much less than that at many schools) of annual operating revenue from donor gifts and/or endowment returns comes in the form of unrestricted dollars. So if a school like UNC, with a $4B endowment, has an annual return of 4%- and if 90% of that return is already essentially spoken for because the dollars are restricted, it leaves comparatively very little discretionary income.
For any school that is offering more need-based financial aid to low-income and middle-income students, it’s because that school is specifically focusing its fundraising efforts on increasing the number of endowed scholarship funds that it has, not because the school is deciding to use other endowment funds to increase the financial aid pool.
