Hillsdale College received the top financial rating from Forbes this summer, as Congress exempted the college and several other schools from having to pay a new tax on endowments.
Forbes released its annual college financial ratings list earlier this summer, ranking private American colleges based on the size of their endowments, management of those assets, and other factors. Hillsdale ranked third among the 20 colleges that received an A+ grade, behind only Carleton College and Johns Hopkins University.
“Because we don’t take even a single penny of taxpayer money, we have to work even harder to raise and steward private support,” said Bill Gray, vice president for institutional advancement. “This ranking shows that an independent college, faithful to its principles because of its independence, can thrive at the very highest level.”
Hillsdale’s endowment investments totaled more than $900 million as of June 2024, and the four-year average of the endowment balances is about $800 million, according to Assistant Director of Media Relations Bruno Cortes.
“Our college is fully responsible for itself. We don’t wait upon Congress or the bureaucracy to tell us how much money we have or what we may do with it,” College President Larry Arnn said. “These things give us motives to take care of our finances. So far, so good.”
Forbes is a media company that is known for its rankings, such as the Forbes 400, which ranks the 400 richest people in America. Since 2013, it has published annual financial rankings of private colleges and universities.
“If we were taking federal money, all the information the school could give donors about you as a student would be your name and where you’re from,” said John Cervini, executive vice president of institutional advancement at Hillsdale College. “But if I were funding your scholarship at Hillsdale, the college could give me a bio on you with your major, how you’re doing academically, the family you come from and what your parents do, things that help donors get to know you a little bit.”
These private donors fill up Hillsdale’s endowment fund, the majority of which is invested through a private firm to create financial security, according to Cervini.
“If a donor wants to give $100,000, 5% of that will be paid out in the first year, and the rest is reinvested in the endowment for the future,” Cervini said. “So the endowment is a perpetual scholarship that’ll go on and continue to grow as long as the college is in existence.”
While Hillsdale’s endowment fund is not nearly as large as some of the multi-billion dollar endowments at Ivy League institutions, Cervini said he believes better management has elevated Hillsdale to a stronger financial position.
“We don’t like debt here, so we have a strict spending policy,” Cervini said. “The thing that sets us apart is that, even though those Ivy League schools have enormous endowments of several billion dollars, they’re actually still borrowing money to run the place. That’s the sign of a place that’s not managed very well financially. There’s a lack of financial control there.”
The “One Big Beautiful Bill Act” passed by Congress this summer created a tax on private college endowments valued at more than $500,000 per student and more than 3,000 full-time students paying tuition. Several large schools, such as Harvard University, Yale University, and Princeton University will likely now need to pay a tax or increased tax on their endowments, according to Forbes. This tax exemption for Hillsdale and the other smaller schools will take effect next year.
Hillsdale is one of many colleges that will be exempt, including Amherst College, Wellesley College, California Institute of Technology, Swarthmore College, The Juilliard School, Claremont McKenna College, and the Mayo Clinic College of Medicine and Science, among others, according to a Forbes analysis. The tax will apply to Ivy League schools.
The tax exemption criteria originally included a provision to protect religious schools from taxation, but Senate Parliamentarian Elizabeth MacDonough said it did not pass a Senate rule that seeks to keep policy issues from encroaching on budget reconciliation bills.
Hillsdale’s private donors have put the school in such a strong position that students are receiving an education that is valued at almost double the actual price, according to Cervini.
“Our student-to-faculty ratio is seven-to-one, our average class size is about 15, we have excellent faculty and they’re well paid, and with the activities, dormitories, and facilities we have for the students, the actual cost of that education is over $90,000 the last time I was told by our CFO,” Cervini said.
In the college’s press release about the Forbes financial rating, Cervini said Hillsdale students are able to receive their education for a little over $48,000, and many students are paying even less, thanks to the generosity of donors.
Hillsdale benefactor Cleves Delp said he believes the college has a unique appeal to private donors by demonstrating an unwavering commitment to its mission.
“Hillsdale doesn’t so much solicit donors as it inspires them,” Delp said. “Remaining true to its principles through cultural shifts, political attacks, and financial pressures has been the single most important factor in earning donor trust and loyalty. Donors are drawn not by clever fundraising tactics, but by Hillsdale’s unwavering integrity.”
In the wake of the Forbes rating, the college will continue the practices that led it to this point of financial strength, according to Gray.
“We’ll keep working to protect our independence,” Gray said. “We’ll keep working to be good stewards of our resources and expand our mission to reach and teach millions of people from here on campus to every corner of America.”
