The Rich Get Richer: College endowments mean big money, but Palmetto State schools rank low nationally

She’s been named an All-American, named All-SEC, named state high school player of the year. But the one honor that left Aleighsa Welch truly thunderstruck came far from the basketball court, when the former South Carolina star sat down for lunch with her mother, her college coach, and two people she had never met.

That was when Morris and Sheila Cregger, Columbia business owners and longtime USC supporters, told the Goose Creek product that they were endowing a full athletic scholarship in Welch’s name. It would go to a South Carolina women’s basketball player — every year — forever.

“It was really disbelief, to be honest with you,” Welch said. “I think that’s when I really understood that my effect at South Carolina has gone a lot deeper than basketball. We were at a table, and my mom actually started crying. It’s just amazing when people see something in you that a lot of times you don’t even see in yourself.”

Once the emotions began to subside, she had plenty of questions — understandable, given how rare fully endowed athletic scholarship are among major public colleges in the Palmetto State. Welch’s is only the third at USC, joining those formed to honor former Gamecocks football players Tommy Suggs and Marcus Lattimore. And it was no small gift: a fully endowed scholarship at USC is $300,000.

But that’s just the start. The money is invested in stocks and bonds through the USC Education Foundation, and it’s the interest off that initial amount that pays for scholarships year after year. The price of endowing a scholarship varies from school to school based on tuition costs, and the escalating price of college education can erode the value of an endowment started years or decades ago.

Which is why fully endowed scholarships today carry such large price tags — schools want to make sure the returns off that initial investment are enough to cover tuition costs many years from now. Although most schools welcome partially endowed scholarships beginning at $25,000 or $50,000, a fully endowed scholarship — which can be earmarked for a specific position on a specific team, and named for a former athlete or family member of a donor — is much more.

The cost at Georgia is $200,000, at North Carolina State $250,000, at Alabama $300,000, at North Carolina and Texas A&M $500,000. At some schools, like Stanford and Southern California, it’s $1 million. Smaller schools are no exception: The Citadel requires $400,000, and has two at that level. College of Charleston asks for $500,000 to fund an in-state scholarship and $1 million to fund one for an out-of-state student. Charleston Southern does not release endowed scholarship information.

At Clemson, athletic director Dan Radakovich reset the baseline for a fully endowed scholarship at $500,000, and the school is still waiting on its first one at that level. “What Dan has challenged us to think about is, we have to have a higher endowment price point,” said Bobby Couch, director of major gifts at IPTAY. “It’s more about the impact we want to have in the long run.”

Raising money for endowed athletic scholarships isn’t a priority at every school; some, USC and Clemson included, have more pressing facility needs. The practice is more popular at private institutions, which need endowed funds to offset higher tuition costs. But in every case endowed scholarships allow athletic departments to devote more money to other projects, hardly an insignificant benefit with tuition rising and cost of attendance fast becoming a reality.

“You’re always going to have that money coming in, in perpetuity, until the school is no longer there,” said T.J. Isaacs, associate athletic director for development at College of Charleston. “That’s the value of endowments.”

The godfather of the endowed athletic scholarship resides in Southern California, where he pioneered the practice that helped raise millions of dollars for the other USC. Don Winston, the Trojans’ former senior associate athletic director, retired last year after more than three decades of fundraising which netted over a half a billion dollars for the Southern California athletic department.

His biggest breakthrough came in 1983, when the former academic fundraiser took the concept of the endowed chair and applied it to positions on the football field. Today, 70 of the 85 scholarships on the Trojans’ football team are endowed, and the athletic department’s endowment has grown to $185 million.

“I couldn’t believe no one had ever done it before,” Winston said. “I’ve had every school in the country calling me wondering how we did it.”

It set off a craze. The pursuit of endowed athletic scholarships became “faddish” in the 1980s and ’90s, according to Clemson’s Couch, and some schools were wildly successful. Stanford, nestled in cash-rich Silicon Valley, raised enough to cover most of its athletic scholarships and some coaches’ salaries, according to ESPN. Duke has endowed many of its basketball scholarships. The position of women’s basketball coach at Notre Dame recently became endowed.

Private schools, which foster more of a culture of philanthropy and often produce wealthier alumni, tend to be more successful in this area, often by necessity due to their higher tuition costs. Public schools have seen more mixed results. Dozens of endowed athletic scholarships were started at College of Charleston in the 1990s, according to Isaacs, but at dollar figures that generate interest covering only a fraction of today’s tuition cost.

The same thing happened at Clemson, and at a number of other major-conference schools in the region. And when the facility arms race began in earnest, schools found themselves with donor money tied up in endowed scholarships that weren’t accruing at enough of a rate to keep up with rising tuition, and couldn’t be used to bankroll a stadium expansion or a new arena. No wonder the fad ended.

“Big-time college athletics got into the cash game,” Couch said. “In other words, we started building facilities, and it became an effort to keep up with the Joneses. And an endowment doesn’t help you build facilities. And here at Clemson, I can speak for us, there was a real push back in the late ’90s and early 2000s when cash became king.”

It still is. USC has three fully-funded endowments, the Welch scholarship included, and only a handful of older or partial scholarships, because the school’s athletic department has had larger priorities since joining the SEC. The video board added to Williams-Brice Stadium in 2012 cost $6.5 million, the tailgating area across the street $30.5 million. The new practice fields which opened this spring were $3 million, the indoor facility opening this fall costs $14 million.

“There are a number of schools that have been in the mode of scholarship endowments for quite some time,” said Jeff Crane, USC’s senior associate athletic director of development. “Our need for new facilities, and to frankly keep up with others in the SEC, has put us in a position where we spend most of our time raising money for new facilities, and we don’t have the luxury of raising money for scholarship endowments. So when these sort of things happen, it’s great for us.”

But when it comes to funding athletic scholarships, money raised by the athletic department is sometimes only part of the picture. There’s another endowment on campus capable of spinning off scholarship money for athletes, this one belonging to the university itself. And those can be so enormous, they make athletic department endowments seem like pocket change by comparison.

Only one Division I school finished unbeaten in football last season, and it doesn’t award athletic scholarships. Harvard may be banned from Football Championship Subdivision playoffs by an obscure (and some would argue outdated) Ivy League rule, but the Crimson still finished 10-0 to win their third conference title in four years.
How? It’s made possible by Harvard’s enormous endowment, the largest in the nation, a coffer of $32 billion according to a 2014 listing by the National Association of College and University Business Officers. The Ivies may not award athletic scholarships, but many including Harvard draw upon their huge endowments to give academic scholarships every bit as competitive as what an athlete may receive somewhere else.

According to the Wall Street Journal, qualifying Harvard students from families with incomes under $65,000 pay nothing for tuition, room and board. Those from families which make between $65,000 and $150,000 can be asked to contribute up to 10 percent of their family’s income. Endowment money has helped turn Harvard in a school capable of going unbeaten in FCS football, and competing with traditional powers in the NCAA men’s basketball tournament.

In the Palmetto State, there are no $32 billion endowments lying around. South Carolina ranks 151st nationally with an endowment of $544 million. Clemson stands 153rd with an endowment of $528 million. But particularly at USC, those amounts are enough to make a difference for some academically-minded athletes, especially in sports which are limited in how many athletic scholarships they can award.

“That definitely happens,” said USC’s Crane. “We have some student-athletes who have partial athletics scholarships, and partial academics scholarships.”

Russ Meekins, executive director of the USC Foundation, estimates that the school has about 14 athletes who are also enrolled in the Honors College, meaning they’re likely receiving academic and athletic funds. Sports like football, which are fully funded in terms of athletic scholarships allowed by the NCAA, are “off the table,” he said. Endowment money would be reserved for students in sports like baseball and cross country, which face strict athletic scholarship limits.

Meekins points to USC first baseman Kyle Martin, a Greenville native who has a strong grade-point average in mechanical engineering and is a regular on the SEC Academic Honor Roll, as someone who’s likely receiving a partial academic scholarship in addition to whatever percentage he’s getting of the 11.7 baseball scholarships USC can award under NCAA rules. But students must be academically deserving to receive any general endowment funds, which are restricted under state law.

The S.C. Prudent Management of Institutional Funds Act is “a firewall” Meekins said. The law mandates that donated funds be used according to the donor’s conditions, which is why school endowment funds can’t bankroll a new football stadium. “It won’t happen. It can’t happen,” Meekins said. If $100,000 is donated for a history scholarship, by law it must be used for that purpose. But that doesn’t mean it can’t go to an athlete, if he or she meets the qualifying criteria.

Harvard isn’t the only place where that trickle-down can make an athletic difference. Baseball programs have been buoyed by endowment dollars at schools like Vanderbilt, whose endowment of $3.6 billion ranks 23rd nationally. It’s perhaps no coincidence that schools with the largest endowments are also among the best baseball programs in both the SEC and ACC. The larger the endowment, the more flexibility schools have in helping academically deserving athletes in underfunded sports.

In terms of school endowments, USC and Clemson both rank well down the list in their respective conferences. South Carolina’s stands 11th in the SEC, which is led by Texas A&M’s mammoth $8.7 billion oil-and-gas-fueled endowment, which ranks seventh nationally. But USC’s endowment is competitive with many of the other state schools in the SEC, while Clemson ranks last in an ACC dominated by billion-dollar endowments, with Notre Dame and Duke leading the way at over $6 billion each.

That’s why Clemson doesn’t typically use school endowment money to augment athletic scholarships, preferring to save it to entice top students. “We’re in a whole different class, if you will, and not a higher class, when it comes to endowment dollars,” Couch said. “… We’ll be north of $50 million in athletic giving this year, so that allows us to be in a position where we don’t have to rely on endowment funding. Whereas our academic folks, they need the endowed funding, because it’s a highly competitive market.”

At the annual SEC meetings held recently in Florida, one of the most hotly debated topics had nothing to do with a football field. In January the “power five” conferences granted a degree of autonomy by the NCAA, voted to adjust their scholarship model to cover full cost of attendance — meaning a scholarship amount can now include travel and personal expenses as well as room, board and tuition.

Among coaches, the school-to-school disparity in those cost of attendance figures — which are calculated by the financial aid offices at each institution — looms as a potential advantage or disadvantage in recruiting. But in the short term, the additional money has to come from somewhere, and it will ultimately be up to athletic departments to generate the additional $4,151 per athlete at USC and extra $3,608 at Clemson, according to figures reported by the Chronicle of Higher Education.

Schools are also awaiting the NCAA’s appeal of its loss in the lawsuit brought by former UCLA basketball star Ed O’Bannon, in which a federal court ruled that the NCAA restrained trade by not compensating athletes for their image and likeness. That could lead to another $5,000 per player per season going into a trust fund. No wonder, then, some schools like Georgia and N.C. State are making renewed pushes in scholarship endowment, with the aim of endowing their entire annual scholarship bill.

“Colleges and universities are going to have to do the things the NCAA has talked about doing. We’re already doing that. There are lawsuits pending, and who knows where that’s going to go. But the cost is not going to go down,” said Southern California’s Winston. “And as they increase, the more endowment you have, the less heartache you have, frankly. You don’t have to raise as much. If you can have 20 percent of your annual income coming in from endowment — boy, you’re in a pretty good shape.”

Isaacs, the associate AD for development at College of Charleston, said some major-conference schools have already started cost of attendance funds to try and offset the additional expenses. And even at USC, where endowments aren’t necessarily a top priority — and which recently received a $31.2 million share of SEC revenue — there’s the understanding that in this new world, every dollar matters.

“As some new initiatives come into play to support our student-athletes, we’ll find that we’ll send more time raising money in these areas. Because the financial need is going to be there at a much higher rate than it has been in the past,” said USC’s Crane. “And really, we’ve felt that when we have those sort of conversations with our donors, they’re very open and willing to provide financial support that will directly impact the student.”

Ultimately, more than any big-picture issue, it’s often a personal connection between donor and athlete which spurs the creation of an endowed athletic scholarship. The Suggs scholarship at USC was started by a pair of his fraternity brothers, and now includes donations from over 100 people. The Lattimore scholarship was started by Greenville resident David Glenn and his family, who cited the former Gamecocks star as an inspiration.

And the Welch scholarship was started by the Creggers, who were impressed by her leadership and work ethic, and wanted to create a gift which would commemorate those qualities for as long as basketball is played at USC.

“I always said, when I graduated, I wanted to be remembered in some way, shape or form for something positive,” Welch said. “Years down the line, when you ask somebody about me, they’ll remember something positive. And now, we have that.”