$2.8 billion is a lot of money. In recent years, according to Forbes magazine, Oprah Winfrey’s net worth was $2.8 billion. The Estée Lauder Companies acquired the Tom Ford brand earlier this year for $2.8 billion. And as of June 30, 2022, the College’s endowment was worth roughly $2.8 billion, ranking below the net worth of Star Wars creator George Lucas ($5 billion) and above that of singer-superstar-CEO Rihanna ($1.4 billion). Not a bad spot to be. But that’s not the entire picture of the College’s finances.

Let’s start off with the most important bit: Wellesley is doing well. “The College is very sound financially,” says Debby Kuenstner ’80, chief investment officer. A lot of work has gone into getting Wellesley to a place where the healthy endowment is met with an equally healthy—and balanced—operating budget. But many moving parts go into running a college the size and age of Wellesley. Keeping everything running smoothly requires a lot of work from players around the College who are committed to not only this year’s success, but the success of the next 150 years as well.

Operating in the black

Although the College’s endowment is eye-catching—that’s a lot of zeros, and we’ll get to them—it’s important to consider the annual operating budget, something Wellesley has struggled with in recent history. “In the 25 years prior [to fiscal year 2019], we only had four years where our revenue met or exceeded our expenses,” says Piper Orton, vice president for finance and administration and treasurer. Simply put, she says, “We spent more than we had.” And it wasn’t just how much we spent, but what we spent it on.

“One of the things that characterized our position, that we needed to address, is that we were under-investing in our campus and had an academic program that was larger than we could sustainably afford,” says Andrew Shennan, provost and Lia Gelin Poorvu ’56 Dean of the College. The size of the faculty was not in line with the size of the institution, so over the last 10 years, the College has reduced the number of tenure-track faculty, largely by not filling positions as faculty retired or left the College. “We’ve had to make hard choices about what we teach and how we teach,” Shennan says, but “we are in a significantly better, more solid, more sustainable position now than we were 10 years ago.”

In fact, the fiscal year 2023 budget is in line to be balanced: $255 million in revenue, $255 million spent. “We’re trying to operate in such a way that we’re keeping our expenses in line with the revenue that we have, to support those expenses consistently,” Orton says. But getting to that place is a challenge, given the demands and ever-increasing costs of running a competitive and highly selective liberal-arts college—with a beautiful but aging campus. The annual budget puts in stark relief the commitments the College has made and the strongly held values that ensure those commitments are kept.

Click here for a PDF of the graphics above.

Meeting our commitments

For fiscal year 2023, 56% of the annual operating budget went toward people. That is, faculty and staff salaries and benefits comprise Wellesley’s largest expenses, and those people are here to meet the needs of the College’s 2,300 students. And what’s important to remember about those commitments is this: They are long-term. Tenured faculty can serve for 30 to 40 years, and the College must be prepared to pay those salaries for the full length of their service.

In addition, students are admitted to Wellesley on a need-blind basis. The College does not consider financial need for domestic students when determining admission, and once accepted to the College, Wellesley is committed to meeting the full calculated need of all students. “It’s a significant financial commitment that the College is willing to make, and is excited and enthusiastic to do so,” says T. Peaches Valdes, dean of admission and financial aid. “We are part of a very small cohort of institutions, less than around three dozen, that have the ability to be need-blind but also to meet calculated need 100%.”

That policy is part of what helps make Wellesley stand out, while also making the College more accessible to a wider and more diverse applicant pool. In fact, this year’s pool was the second-largest in the College’s history, with 8,460 applications for an incoming class of 585. “We are highly selective,” Valdes says. “If we offer you admission to Wellesley, it means that we are admitting an amazing individual, and we’re making an investment in your future.”

That need-blind policy also makes the annual financial aid budget a moving target. Because acceptance to the College is offered based on the merits of the students and not their ability to cover the comprehensive fee, the amount the department will need each year may fluctuate. In addition to the needs of incoming first-years, current students’ financial situations may change during their four years on campus. “Currently, we have nearly 60% of our students receiving financial aid,” Valdes says. Over the last 10 years, that number has stayed somewhat steady, between 55% and 60%. “Last year, approximately $83 million was spent on financial aid,” says Valdes, “and 30% of the $83 million was funded by the endowment.” (That 30% refers to endowment funds that are restricted to financial-aid use; other funds may have come from unrestricted endowment income—but we’ll get to the intricacies of the endowment a bit later.)

A student received a pin at the Madeleine Korbel Albright Institute for Global Affairs in 2023.
Photo by Lisa Abitbol

The true cost of a Wellesley education

Coming up with the 70% of the financial aid budget not met by restricted endowment income is just one of the challenges the College faces. The two largest drivers of the College’s annual revenue stream are endowment income (44% for fiscal year ’23) and net tuition and fees (41% for fiscal year ’23). “It’s really the first year in my time here where endowment income is a larger proportion of total revenue than net tuition and fees,” says Orton. The Wellesley Fund—nimble current-use funding that can be used to address urgent needs—and other gifts and grants also play an important role. These types of gifts, which can be applied in full to support immediate needs at the College, comprise about 10% of fiscal year ’23 revenue, roughly $26 million.

As the comprehensive fee continues to increase (just like inflation and other costs), it seems counterintuitive that the College’s net tuition revenue has become a smaller share of total revenues. Part of that is due to the high percentage of students on financial aid, combined with the commitment to meet full calculated need. And if you look at the cost per student of running Wellesley every year, you’ll get a better understanding of the complexities of funding a Wellesley education. (See “Cost of a Wellesley Education,” at left.) In 2022, it cost $104,014 per student to run the College. In that year, the comprehensive fee was $79,040—a lot of money to be sure, but still not the full picture, nor the full cost. Net tuition and fees to the College that year averaged just $43,458 per student, meaning there was a gap in funding of more than $60,000 per student. “The only reason we can have this model at all is because we have this significant endowment income, along with gifts and other sources of revenue,” Orton says.

“We’re ever reliant on the endowment to produce income to fund the College’s annual needs,” says Maia Heymann ’89, member of the board of trustees, chair of the board’s Campus & Finance Committee, and member of its Investment Committee. In this light, suddenly that $2.8 billion endowment figure doesn’t seem so large. And it becomes evident why careful stewardship of it is critical to the College now—and in the future.

What is an endowment, anyway?

There isn’t a simple way to explain the endowment. It is, after all, one of the most important and complicated assets of the College. It’s been likened to a retirement fund—but for the College, which lives forever. Because the endowment is meant to provide for Wellesley in perpetuity, the principal isn’t touched. “You don’t spend down all the earnings of the endowment, because you have to keep growing the size of the endowment, because prices go up,” Kuenstner says. Oh, and by the way, there’s not just one endowment. There are thousands.

“We refer to the endowment, but there is not a single endowment,” says Kuenstner. “It’s the pool of all of our endowed funds.” Over the years, alumnae and other donors have given generously to various endowed funds; some are restricted as to purpose (like an endowed chair in a particular academic department or a fund designated for financial aid) and some are unrestricted. “The largest part of the endowment—roughly 2,200 individual funds—most of those funds given to us by donors were given with a restriction,” Kuenstner says. “We are legally bound to spend the money in the way that the donor indicated.”

That means if the money was given for financial aid, it can only be used for financial aid. If the money was given to acquire art for the Davis Museum, it can only be used to buy art for the museum. If the money was given to buy flowers for the library, it can only be used to buy flowers. (Well, in the case of that particular endowment to Wellesley, the funds can be used to purchase flowers or plants to provide “a spot of color and beauty in an unexpected place to give a lift to the working day of all who pass.” And the library is just the first preference location.) Although restricted funds do limit the flexibility of the College’s spending, they have also provided the means for some unique and quintessential Wellesley experiences—like the Madeleine Korbel Albright Institute for Global Affairs, Career Education, the Ruhlman Conference, and the Tanner Conference. “There are a lot of elements of a Wellesley education that go beyond the sort of bread and butter of the curriculum that we would not be able to offer without the endowment,” Shennan says.

So that endowment budget number—44% of 2023 revenue, or roughly $111 million—encompasses income earned from restricted and unrestricted gifts. “All that unrestricted money goes to support the rest of the College,” Kuenstner says, particularly expenses that donors may not have anticipated years ago—from the salary of a neuroscience professor to the need to purchase virtual reality software.

Matthew Kaliner, lecturer in sociology, taught a course last fall in Pendleton East, now undergoing critical repairs.
Photo by Joel Haskell

An exception to every rule

As one might expect with something that is intended to support Wellesley forever, guidelines govern how much the College can draw from the earnings every year. Generally referred to as the “endowment spending rule,” these strictures aim to smooth out the dips from years with poor investment returns as well as the peaks from years with bountiful returns—to strike a balance between not spending too much now and not hoarding too much for the future. “If we invest for the long term successfully,” Kuenstner says, “the spending rule will smooth things out operationally.”

But recent returns and circumstances at the College have called for an exception: a one-time special draw of $125 million from the endowment to fund some of the most critical repairs needed to a handful of the aging buildings across campus, including Pendleton East, Founders/Green Hall, Clapp Library, the Davis Museum, the Stone Center and Simpson Hall, and Chandler Pool. The board of trustees approved the draw last year, and work is already underway to address these urgent projects. What precipitated the draw was the confluence of building maintenance too long deferred and unprecedented returns on the general endowment pool in 2021. That year, the College saw returns of 46.5%, a record high. Those returns were unlikely to be sustained (and they weren’t), but construction costs continue to increase rapidly while the College’s buildings aren’t getting any younger.

“It became clear to Senior Leadership, to the trustees, that the longer we waited, the more these projects would cost,” Heymann says. “So we’re better off taking that money and investing it in buildings at today’s dollars than at tomorrow’s much more inflated dollars. We want the facilities to be able to live up to the high standard that Wellesley sets.”

Wellesley does set a high bar in everything it does—from its academic programs to its admission and financial aid policies to, yes, its endowment. “There is a deep sense of pride in Wellesley and the Wellesley education,” Valdes says. “The contributions of the donors to Wellesley have enabled us to maintain inclusive excellence. It’s helped us to create an environment where students have an unparalleled living and learning experience.”

As the College nears its 150th anniversary, these gifts ensure that the Wellesley experience will continue well into the future. “That’s what the whole endowment is about, being a place that is here in perpetuity,” says Shennan.