K-12 schools take a fresh look at their endowments

K-12 schools are under extraordinary pressure. Tuition increases can’t easily cover rising operational costs without squeezing tuition-paying families and further eroding the enrollment of an already shrinking school-age population. At the same time, these schools are facing demands to enhance their educational offerings, adding amenities to keep up with the competition.

Amid such competing priorities and myriad pressures, schools are considering how their sources of funding—especially endowments—fit into a workable financial plan that provides the liquidity they need. This fresh look offers schools an opportunity to recast their approach to endowment management to meet the new reality.

Operating expenses for K-12 schools reached new heights during COVID and have continued to rise faster than tuition. According to NBOA data, median total operating expenses per student increased 5.4% between FY2023 and FY2024, while the median gap between net tuition and fees per student and total operating expenses per student widened 13.9%.^{Disclosure 1}

Everything is on the table as schools seek to balance expenses and enrollment levels. K-12 schools typically direct 45% of endowments toward maintaining student enrollment through scholarships and need-based financial aid^{Disclosure 2} . These funds have also provided the capital base that supports long-term institutional sustainability, but endowment draws are increasingly being accessed to support day-to-day operations—now the destination for 30% of endowment support.^{Disclosure 2}

Higher investment portfolio returns from endowments in the past few years—12.3% in 2024 and 11.5% in 2025—have attracted the attention of boards searching for sources of revenue to close budget shortfalls.^{Disclosure 2} Some schools have reset their endowment policies to increase draws for a limited period while they restructure or work to stabilize the gap between sources and uses of funds. Others have accepted the endowment’s ongoing role in funding operations and begun asking annual fund givers to designate a portion of their gifts for the endowment. Both approaches prompt schools to revisit their financial projections, reassess what they’ll need from endowments, and realign their investment and spending policies to ensure their management approach gets the results required.