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What About the Endowment?

With an endowment valued at $28.9 billion (as of August 31, 2020), it’s reasonable to wonder why Stanford can’t spend more. The endowment makes amazing things possible, but there are limits on how it can be used.

The endowment does not sit idle. Every dollar is at work, funding about 22 percent of Stanford’s operating expenses every year.

Endowment is defined as assets invested to provide a steady stream of funding over a long period of time. Stanford withdraws a portion of the endowment each year to support its operating expenses. In 2019-20, the endowment paid out $1.36 billion, or about 22 percent of the university’s operating costs of $6.1 billion.

The payout supports nearly every part of the university, including faculty salaries, research, student services, libraries, athletics, and student financial aid.

Stanford must fund the rest of its operating expenses from other sources, such as research grants and contracts, student tuition and fees, health care income, and gifts from alumni, parents, and friends.


Increasing payout by even 1 percentage point can cause the endowment to decline over the long term, in which case the annual payout would inevitably fall, covering an even smaller portion of the budget.

The payout from the endowment is carefully calibrated to continue supporting the university’s operating budget over time.

Like most peer institutions, Stanford’s annual payout is roughly 5 percent. This payout is precisely calibrated and adjusted annually based on market performance, inflation, and other factors.

Nearly 80 percent of the Stanford endowment is restricted or designated for specific uses.

The endowment is actually made up of more than 8,000 different funds. Of these, 7,300 were established by donors, and most of them are designated for specific purposes, such as supporting first-generation college students or advancing a particular field of study. Stanford has a legal and fiduciary obligation to use these funds as intended.

For example, payout from the endowment is the largest source of undergraduate and graduate student financial aid. Stanford is one of the few institutions that commits to meeting the demonstrated need of students through scholarships—not loans. In 2019-20, Stanford spent $556 million on financial aid and graduate student support, of which about half came from the endowment.

With the help of alumni and friends, Stanford can keep supporting everything it does.

Stanford’s endowment provides support for nearly 16,400 students and 2,300 faculty members, seven schools, and dozens of centers, institutes, and programs. If the endowment continues to be spent at a sustainable rate, then it can spend that much forever. The partnership of endowed gifts and annual gifts from alumni and friends make this possible.

It’s the income generated from investing the endowment, not the endowment principal itself, that supports 22 percent of our annual operating budget. If we start to consume the endowment principal, there will be less to invest and therefore less income to support the university in future years.

Randy Livingston, ’75, MBA ’79,
Stanford’s vice president for business affairs and CFO

Randy Livingston