The Real Reason America’s Colleges Are Running Out of Money

A shocking new report from The Wall Street Journal has revealed that many of America’s most prestigious colleges and universities are nearly flat broke – and are even raiding their endowments to keep the lights on. But while university administrators pin their financial woes on declining enrollment, demographic shifts, inflation, and changing attitudes toward higher education, they have no one to blame but themselves.

As the Journal reports, “The percentage of private, nonprofit colleges drawing down endowments at greater than 7% – considered a sign of financial instability – nearly doubled to 19.3% in 2025 from 9.7% in 2016.” Endowments are funds that donors often intend for scholarships, academic programs, faculty positions, or other specific purposes – not to cover routine operating expenses.

One particularly troubling example cited by the Journal involved Natalie Strouse, who established a scholarship at Notre Dame College, a small school outside Cleveland, Ohio, in memory of her late husband. When the college closed in 2024, Strouse hoped to transfer the scholarship funds to another institution so students could continue benefiting from the gift.

Instead, she learned that the money had been spent to help cover the college’s bills. It was just gone, the school told her.

Stories like Natalie’s are becoming more common and are drawing calls for lawmakers to take action. Endowments are not emergency funds designed to rescue administrators from years of poor financial decisions. They are built through legally binding agreements with donors who entrust colleges with their money for specific educational purposes. Universities also enjoy tax-exempt status because those assets are presumed to serve a public educational mission.

When institutions begin treating restricted endowments as operating accounts, they undermine donor trust and raise serious questions about whether they are fulfilling the responsibilities that accompany their tax privileges.

But while Congress and state legislatures undoubtedly have a role to play in ensuring that higher education institutions act as responsible stewards of donor money, it is also important to understand how colleges and universities got themselves into this mess in the first place.

For years, American higher education enjoyed seemingly endless streams of revenue. Tuition climbed steadily, taxpayer support remained substantial, and generous donors poured billions into institutional endowments. Yet instead of using those resources to improve educational outcomes, lower costs, or strengthen core academic departments, many institutions embarked on a vastly different mission: building massive administrative bureaucracies more concerned with pushing far-left political ideologies than teaching students or preparing them for successful careers.

What many university administrators are reluctant to acknowledge is that higher education spent the last decade building an expensive administrative apparatus that created the financial crisis they now face. The explosive growth of Diversity, Equity, and Inclusion (DEI) offices is perhaps the clearest example of a broader trend that has driven costs higher for no discernible return on investment.

The numbers tell a revealing story.

At The Ohio State University, financial disclosures in 2023 revealed more than 130 DEI-focused employees drawing a combined $13.4 million in annual salaries – enough money to cover full in-state tuition for more than 1,100 students. At the University of Michigan, the DEI bureaucracy grew to more than 160 administrators in 2024, with annual costs reaching into the tens of millions of dollars.

Research from the Heritage Foundation examining 65 major public universities found that DEI personnel outnumbered history professors by 40 percent. Across those campuses, there were 3.4 diversity administrators for every 100 tenured or tenure-track professors. At some institutions, the ratio was even higher.

The question is not whether universities should support students from diverse backgrounds. The question is whether building ever-larger administrative bureaucracies is the best use of tuition dollars, taxpayer resources, and charitable donations.

A report from the American Council of Trustees and Alumni found little evidence that the administrative boom improved graduation rates or educational quality at four-year public colleges. What it did do, however, was contribute to rising institutional costs that were ultimately passed on to students and their families.

Those rising costs undoubtedly led some high school students to forgo college entirely. Others were likely turned off by the far-left politics jammed into every university program. In one way or another, there is a clear connection between the growth of the DEI regime on university campuses and the other challenges facing higher education.

For too long, many colleges operated under the assumption that tuition would continue rising forever, donations would continue flowing, and taxpayers would continue subsidizing ever-expanding administrative bloat. Rather than focusing resources on teaching, research, and student success, institutions increasingly poured money into bureaucratic growth and ideological initiatives that often seemed disconnected from their educational mission.

Now, they are having to face the consequences.

If American universities hope to restore financial stability and regain public trust, they must begin with a measure of accountability. A good place to start was outlined in a recent letter from Secretary of Education Linda McMahon to the nation’s university presidents and governing boards calling for them to reaffirm higher education’s commitment to “academic excellence, pathbreaking research, and national service.”

America’s colleges are not running out of money because they lacked resources – they are running out because they squandered them on ideological bureaucracy. The path back begins by returning higher education to its roots of pursuing truth, transmitting knowledge, and preparing students to lead productive lives.