The State of the Higher Education Subsector
Published August 2020
In 2020, several challenges have threatened higher education institutions and their missions. Impacted by the coronavirus pandemic, campuses shut down their operations, pivoted to virtual coursework, accommodated displaced students, managed extracurriculars, and coordinated with research labs. In rapid fire succession, institutions both crafted their immediate response and positioned themselves for the school year ahead.
As institutions look to the fall term, the lists of questions confronting them continue to grow. For campuses that plan to reopen, what parameters will be in place to ensure that returning students and staff remain safe? For families grappling with financial stress, what types of support can they expect from schools that are also facing dips in their endowments or a lack of government aid? Possibly the toughest question of all is: How can we welcome students to a virtual campus that offers opportunities to connect with new people, courses, and ideas?
Confronted by these issues and the need to justify tuition in a virtual environment, schools are rethinking their approach. They are considering the unique cultural and academic offerings that they can provide. Expertise is needed now more than ever, and campuses are in the position to support their communities. Innovations from academic heartlands are enabling rapid progression in our ability to solve some of the most pressing problems confronting our world. Serving as the first line of offense against COVID-19, institutions are global leaders in testing, treating, and researching a virus that has disrupted most of the world’s way of life.
By focusing on the dynamic innovations taking place across their campuses and the irreplaceable value that they bring to their students’ lives, higher education institutions can better communicate their missions, connect their campuses, and position themselves to navigate the coming months. In this report, we will examine the specific ways in which giving to the higher education subsector has unfolded both over the long term and the recent past. This report will offer clues into how colleges and universities weather change, as well as how fundraisers and leaders can prioritize engagement to continue to grow through the challenges ahead.
With 2019 in what seems to be the distant past, how can we better understand which trends reflect the state of our sector now? What types of information can we provide organizations, stakeholders, and constituents to help navigate the road ahead? And when challenges feel stark, how do we remind ourselves that they offer the opportunity to reimagine our futures?
Confronted by these changing times, it is more crucial than ever that we seek greater perspective.
Understanding the long-term trends that have shaped the higher education subsector is a key component of your response to today’s landscape. We hope that these perspectives will help you to identify and invest in the right strategies to move your mission forward in the long run.
The Long View
Taking a longitudinal view allows us to see how charitable giving has weathered similar events. It allows us to learn from these changes, grow, and move organizations forward with data-informed strategies. Adjusted for inflation, giving has increased nearly $300 billion between the years 1979 and 2019 (Giving USA, 2020). Total charitable giving has increased or plateaued in current dollars every year since 1979, with the exception of three years that experienced significant economic declines: 1987, 2008, and 2009.
While these declines coincided with severe economic downturns, overall charitable giving rebounded alongside economy recovery. Giving USA Foundation research indicates that, in the past, it has taken an average of three to four years for inflation-adjusted charitable giving to rise back up to pre-recession levels. Between 2008 and 2019, giving increased $77 billion, from nearly $350 billion in 2008 to $427 billion in 2019. The recent Great Recession ended in 2009 and yet, for the most recent decade from 2010 to 2019, the total growth in inflation-adjusted giving is 33 percent. Giving in 2019 reached nearly $450 billion
In 2019, giving to the education subsector received 14% of all charitable giving, totaling $64.11 billion. Adjusted for inflation, giving to education increased 10.1% year over year and totaled the highest value recorded to date. According to the Council for Advancement and Support of Education, contributions to higher education institutions grew 6.1% in fiscal year 2019. While giving to higher education fell during the 2008 recession, institutions were able to rebound from the downturn in the years that followed. Though the full effects of the coronavirus pandemic are not yet known, a renewed focus on how higher education is moving forward may encourage giving as institutions respond to the needs it has created for students, alumni, and staff.
In addition to trends in total giving, gross domestic product (GDP) is one of the most helpful indicators for tracking and explaining changes in revenue across the nonprofit industry. Research shows that giving revenue growth rises during periods of strong economic growth, when the GDP is growing, and slows (or even falls) during periods of relative economic weakness (Target Analytics, 2015). Charitable giving in the United States has been about 2% of total GDP for more than 40 years. In boom times it has reached as high as 2.3%, and in recessions, it has dipped as low as 1.7%. This means that in a slow economy, not only does giving slow down, but it also declines as a proportion of the average American’s spending dollar.
In recent years, however, this figure has remained steady while overall giving has grown and philanthropy has opened its doors to additional channels like crowdfunding and donor-advised funds (DAFs). When larger circumstances influence those factors like financial capacity and inclination to give, fundraising often feels the effects. However, philanthropy tends to lag behind stock market volatility, following the general up- and downward trends across time. As markets fluctuate and as philanthropy continues to shape its response to today’s current events, it remains too early for recent market volatilities to be felt across overall giving.
Education Subsector Trends in
Total Giving, 1979-2019
Just as the percentage of GDP has remained steady, the percentage of disposable income has also hovered around 2% for the past 40 years (Giving USA, 2020). Despite this continuity, major events and social movements have the power to temporarily attract attention toward specific causes. Natural disasters, for example, have consistently prompted a noteworthy charitable response in their immediate wake. In 2017, an extraordinary multitude of circumstances motivated Americans to engage socially and politically (Vital Signs Part 2, 2018). Beginning in late 2016 and gaining massive energy in 2017, civic involvement was charged with political and social energy due to the presidential election. In tandem with those influences, 2017 tax reforms further shifted giving dynamics by motivating the use of DAFs and foundations.
In the immediate aftermath, organizations saw significant rises in households making new gifts. While organizations did not retain all those new donors, the spotlights shone on their causes provided a renewed interest in giving.
Year-to-Year Change in Households Making New Donations
So far, 2020 has felt an unforeseeable convergence of similar influences. From economic shutdowns due to the pandemic to the advocacy and protests generated by the Black Lives Matter movement, we should anticipate 2020’s climate of giving to be affected by these events.
History—specifically the 1970s and 80s—shows us that while these kinds of social and political movements do not directly benefit all charitable subsectors, expanding the population of donors inevitably benefits all types of organizations. It stands to reason that advocacy organizations and those most directly affected by social and political movements receive the lion’s share of increased support most.
We can better see this by assessing the long-term change in allocation of charitable dollars across subsectors. For instance, while overall giving to religion continues to receive the majority of giving year over year, it has declined as a share of giving to all organizations since the early 1980s (Giving USA, 2020). Moving from 54.8% of all giving in 1979 to 31.4% in 2019, this reallocation has allowed additional subsectors to flourish, furthering their growth. Throughout the last 40 years, the education subsector has comprised between 11% and 14% of all giving. Giving to education has been at its strongest within the last five years. This subsector is second only to religion in receiving the most charitable giving from year to year.
Giving by Type of Recipient: Percentage of the
Total in Five-Year Spans, 1979–2019
Additionally, the breakdown of charitable dollars given by individuals, foundations, bequests, and corporations has fluctuated. Over the last 40 years, giving by individuals has begun to decline as a percentage of total giving. And for the most recent two years in a row, individual giving has totaled less than 70% of all giving. This is in sharp contrast to the five-year period beginning in 1980, when individuals gave 82% of all charitable dollars. The increasing concentration of wealth throughout the U.S. has played an outsized role in creating foundations. This trend may continue to increase the share of giving by foundations and decrease the percentage of giving from individuals.
Giving by individuals remains the largest contributor to overall giving year over year. More than ever, this reminds us that while much is in flux, the core values of donors remain the same. It is up to our institutions to remain committed to cultivating these relationships. Staying attuned to the long-range trends will support your mission area as you approach your strategy for 2020 and beyond.
2019 In Review
In 2019, charitable giving in the United States grew 1.0% based on analysis of $36.3 billion in donations by the Blackbaud Institute (Charitable Giving Report, 2019). Online giving grew by 6.8% compared to 2018 after analysis of $2.7 billion in online donations. In the higher education subsector, overall giving increased 1.7% year over year and online giving increased 7.0%.
Traditionally, most transformational and major gifts are not yet made online, so on average, online gifts are lower than offline gifts. In 2019, the average donation amount was $617, while the average online donation was $148.
Higher education institutions should continue to watch these trends closely, as the shift to virtual fundraising and engagement events may impact supporters’ reliance on online giving.
According to the 2019 donorCentrics® Report on Higher Education Alumni Giving, giving days continue to be an ever-increasing bright spot for higher education annual giving programs. The percentage of donors giving through these events continues to climb each year, with 2019 bringing some of the greatest historical growth. The yreport that about 13% of private institution alumni donors give on giving days, while just over 10% of public institution donors do the same.
2019 also saw a continuation of multi-year trends in monthly giving patterns. While December remains the largest month as a percentage of giving, June continues to drive giving due to end-of-fiscal-year fundraising campaigns. While this year has proven to be a mixed bag of unexpected spikes in need and attention, institutions should continue to anticipate growth throughout their year as they execute giving days. According to the Blackbaud Institute Charitable Giving Report, one fifth of all donations arrive in December alone. Know which months yield the highest giving for your subsector to ensure that you are prepared to maximize your opportunities.
Snapshot in Time
As trends throughout 2020 emerge, we can identify how subsectors have begun to navigate the current environment.
Year over Year change in overall giving, June 2019 - June 2020
Pertaining to year-over-year trends, data from the Blackbaud Institute Index shows that overall giving declined in the immediate onset of the pandemic. The general donor population froze with the rest of the social good sector, as businesses shut their doors and individuals stayed home to quarantine. The cancellation of major events, conferences, and galas created a decrease in giving for March and May, but resulted in slight increases in April and June compared to giving in the same months in the year prior.
Heading into April, overall giving spiked as philanthropy responded to the pandemic. Wide-scale giving days (such as #GivingTuesdayNow in May) shone a spotlight on charitable giving at a time when many were receiving economic impact payments.
Higher Education Subsector
Year over Year change in giving, June 2019 - June 2020
Data from the Blackbaud Institute Index, which captures giving to higher education institutions, shows that giving in this subsector has decreased since March compared to the previous year’s cumulative 12 months. As detailed in the chart above, higher education institutions experienced a year-over-year decrease in June 2020 compared to June 2019.
Beyond the higher education subsector, other mission areas such as food banks received significant support throughout the past several months. Across other charitable subsectors, increased demand for services due to economic shutdowns, job losses, and healthcare needs have been supported by increased contributions. Organizations found their stride in late spring with overall giving in June increasing 1.2% for the last 12 months ending in June compared to the same period ending in June 2019.
While the percentage of online donations have remained low on average for several years, we may see an inverse of this trend in 2020, as in-person stewardship and programming give way to online-only engagement. These effects will be telling if seen throughout major giving, where gifts have traditionally been made offline. Across all subsectors, there has been a 36% increase in online giving year over year from the three quarters ending in June 2020 compared to June 2019. Higher education institutions saw a 1.9% increase in online giving for the three months ending in June 2020 compared to June 2019. Several subsectors saw significant jumps in May 2020, indicating an increasing reliance on online platforms as many organizations rushed to leverage momentum for #GivingTuesdayNow.
In addition to these emerging trends, several other factors may continue to shape the year in charitable giving. Throughout the remainder of 2020, we may experience heightened civic and political giving following the saw growth of the Black Lives Matter movement, as well as increased advocacy for social justice, healthcare, and workers’ rights. Driving participation in Black Lives Matter protests and breaking records in early voter turnouts this summer, students are returning to their schools with an elevated desire to see their institutions reflect their personal values. Additionally, in the fall, the potential effects of hurricane season may also draw increased support to disaster relief causes.
In tandem with this engagement, the upcoming presidential election presents an opportunity for organizations to broadcast their causes and how they relate to issues on candidates’ agenda. The election will coincide with the start of many organizations’ end-of-year campaigns, which could further fuel charitable activity. Underpinning each of these factors, the CARES Act of 2020 reinstated a $300 charitable deduction for one year, which could encourage low- and mid-level donations as many individuals race to give to the causes of their choice.
To brace for these, several core practice areas can help bolster your institution.
Diversify Your Revenue Mix
Higher education institutions should not overlook revenue mix as a component of ongoing strategic planning. Data from the Urban Institute’s Nonprofit Almanac show that, across subsectors, organizations follow a multitude of revenue models. While different organizations may thrive through various combinations of revenue sources, higher education institutions should avoid an over-reliance on certain sources.
Percentages of Revenue by Sources of Reporting
Public Charities, 2013
As the coronavirus pandemic has shown, earned income lost through the cancellation of in-person events, stewardship meetings, fundraisers, galas, and more have left many institutions in weakened positions. Although crises like the pandemic are unpredictable, your institution should be aware of revenue sources that exert an outsized influence on their budgets. Across the higher education, many are concerned by the potential declines in endowment returns due to low or fluctuating stock market performance. At the same time, families and students are deferring their educations, whether out of financial necessity caused by the pandemic, a preference of health and safety, or the inability to justify tuition costs for online coursework. The pressures of declining enrollment sit against the backdrop of increased calls for government grants and services. Though the impacts on any given institution may depend on their financial models and endowments, you’ll want to be familiar with the metrics that can help you uncover hidden variables in your budget.
Percentages of Revenue by Sources of Reporting
Education Charities, 2013
- For instance, the dependency quotient is a metric that quantifies the risk associated with a lack of revenue diversification. It assesses the percentage of an operating budget that would be left unfunded if an organization were to lose their top five donors. To calculate your dependency quotient, divide the total contributions of your top five supporters by your institutional expenditures. While some organizations may cease to exist if they lost their top five donors, others may experience minimal distress. This metrics allows you to take a more nuanced approach to your fundraising strategy to steward your top donors, while also staying focused on your other revenue sources. See The Right Mix to learn more.
- In addition to their dependency quotient, organizations should regularly calculate their cost to raise a dollar. This metric shows the investment that your organization requires to fundraise. To calculate this, add the staff and all fundraising expenses together, then divide that by the net fundraising total. Most development staff understand that investment is often required to achieve long-term fundraising success. Regularly tracking this metric across your campaigns, grants, events, and more will help you to assess your most affordable or unaffordable actions, and better steer your budgeting process in the long run.
In addition to these metrics, there are tangible steps that institutions can take to prepare for a year of unpredictable impact. For example, your institution may create plans (and backup plans) to prepare for multiple scenarios that could unravel in the upcoming fall and spring terms. Whether your institution has already decided to shift online or is preparing to in the event of a surge in coronavirus cases, consider risk planning as an extension of your budget. Make sure that your plans account for the varying levels of financial support your institution operates within, such as funding from tuition or major giving, and plan appropriately.
While revenue mixes in the higher education subsector are unique, these metrics can illuminate the weak spots that may be hiding in your budget. By putting the costs of your fundraising into perspective, you can strive toward financial sustainability and prioritize a revenue mix that can weather downturns and position you for long-term success.
Inspire Your Major Giving Strategy
Data from the Vital Signs series has found that, while the overall amount of dollars donated continues to grow, the number of individuals donating money since the last recession has been shrinking. However, donors who are still giving are giving more than ever before. Research from How America Gives also demonstrates that the influence of major donors masks the distribution of giving across income levels. A decrease in the number of lower- and mid-level donor households shows that major donors persist as a critical component of any organization’s fundraising performance.
To shore up your major giving strategy, ensure that you are familiar with the donors in your file who are already giving as well as the prospects who have the capacity to make a major gift. Continually review your file to evaluate your major giving program and track the success of your stewardship and moves management. Key demographic indicators can help to help estimate an individual’s likelihood to engage with and donate to religious causes. Additionally, wealth indicators can help assess capacity to make a major gift. Doubling down on retention, stewardship, and cultivation efforts are crucial steps in ensuring that your mission resonates with major donors.
While some prospects may be concerned by the current market’s performance, it’s critical to double down on your prospecting and cultivation efforts. Donors, parents, alumni, and community members are eager to assist in their response to this crisis. Focus on these efforts by updating your case for support so that it reflects how your institution has been affected by and responded to the pandemic. Keep in mind that your top donors have also been affected by the pandemic; with your continued stewardship, donors will remain responsive to connect virtually. Make sure that your advancement and gift officers are prepared to leverage technology for virtual engagement and to answer questions and concerns about how your institution is responding to the pandemic. Use this as your time to promote your school’s unique value. These are crucial steps in ensuring that your mission and institution continue to resonate with major donors.
Focus on Retention
With all the factors affecting philanthropy, fundraisers play a more important role than ever in guiding their organizations and causes through turbulent waters. Donor retention reflects how you keep in contact with your donors and build a pathway for their continued support. It is a direct, quantifiable reflection of how you are engaging your donors and communicating your mission.
You should annually calculate your overall donor retention rate to assess who is choosing to stay in your donor circle every year. While institutions with a high retention rate keep or renew many donors from year to year, those with a low rate must acquire new donors to keep their bottom lines above water. This reinforces the significance of calculating retention to benchmark your internal progress annually and over time.
Donor Retention in the Education Subsector, 2010-2015
While first-year donor retention continues to be a challenge, multi-year retention rates remain strong. According to the 2019 donorCentrics® Report on Higher Education Alumni Giving, there is evidence of a continued trend of retained donors giving at higher levels enjoyed uniquely by higher education institutions, indicating is a more sophisticated donor base in general. However, reactivating lapsed donors also continues to be a challenge.
New donors disproportionately come from the pool of supporters who are already donating to other organizations. Not only do they give to twice as many nonprofits, but they also give twice as much per year when compared to donors who did not make a new gift.
While the value of your retained donors should be clear, their continued stewardship should remain a core priority across your organization. Recall that your marketing and fundraising strategies must be aligned to best frame and communicate the societal values embraced by your institution’s mission. This results in stronger donor engagement and retention.
Invest in Sustained Giving Programs
Sustainer giving is a long-term strategy in which donors commit to regularly giving a set donation amount. Sustainer programs automatically support your retention efforts while ensuring a dispersed revenue source.
Data from Sustainers In Focus examined multiple donor files and compared the retained revenue of new donors—those who first gave a sustainer gift and those who later converted to sustainer giving—against those who never gave a sustained gift. Overwhelmingly, this shows that revenue per donor increased in the years preceding to the two years following a donor’s commitment to a sustainer program. Giving increased from 50% to 300%, with even the low end far exceeding the typical return for non-sustaining donors. As a strategy choice, there is substantial value to be found in sustainer fundraising.
It is vital to maintain relationships with your key stakeholders throughout the year and your sustaining donors are no exception. Reflecting today’s landscape, some donors may wish to extend their sustained gifts and others may need to pause for a period. Keep focused on building these relationships through genuine curiosity and investment. Your donors—whether they are alumni, parents, or community stakeholders—want to be informed about the schools they love. Mirroring some of the trends in alumni groups, consider taking an online appreciation event or providing interactive engagement to your sustainers. Remember that returns on sustainer giving are long-term and that the success of your sustainer program relies on excellent retention strategies.
Double Down on Acquisition
To expand, institutions need to focus on strategies that address the changing macroeconomic environment in which we find ourselves. Though many of us are focused on retention and sustained giving at this time, they cannot happen without the acquisition of new donors. Institutions should not take their foot off the gas of acquisition. To provide the most long-term growth for your team, you’ll want to continually add to your pool of donors and enhance your acquisition strategy as a sustainable practice.
You should continually check your donor acquisition cost. This metric is calculated by adding all expenses that go into recruiting a new donor, then dividing by the number of new donors acquired over a given period. By calculating the donor acquisition cost at your institution, you can better pinpoint the tactics that merit further investment while zeroing in on the channels, preferences, and behaviors that will expand your supporter base.
10-Year Overall DonorCentrics Index Revenue & Donor Trends, 2007 - 2017
As highlighted above, major social and political advocacy throughout 2016 and 2017 resulted in a spike of new donors in 2017. In 2020, spotlights on widespread political change, civil rights, and social movements have garnered similar attention. Organizations aligned with these causes are in advantageous positions to welcome new donors into the fold. On top of the increased advocacy for social justice this year, the 2020 CARES Act reinstated a $300 charitable deduction for one year. These influences could potentially inspire an increase in low- or mid-level donors. It is up to institutions to complete the additional due diligence required to initiate and maintain relationships with these new donors.
Some of these effects may play out in the higher education subsector. Many communities are looking to their local colleges and universities for guidance right now. From researching the medicines and vaccines that save lives to training the next generation of healthcare and social service workers, higher education institutions are places of exploration and discovery. Advancement and fundraising officers should leverage this momentum by engaging with new donors.
Historically, higher education institutions have seen some of the greatest success on giving days. These present the opportunity to not only tap into the community, but also to reach a broader network of new individuals. Encourage your team to view these days as an opportunity to widen your network, while reiterating how you have been affected by the pandemic. For example, in the immediate wake of the pandemic, some institutions shifted their giving day plans to fundraise for student emergency funds. Others shifted to “Day of Caring” themes. As you approach the fall term, think through how you can approach your giving days to be most responsive to your institution’s needs, while also preparing to share your mission and focus with new supporters. Learn more in the Charitable Giving Report Addendum for Higher Education Institutions.
Navigate Your Digital Transformation
From reducing your manual processes through workflow automation to thriving in remote work environments, institutions must adhere to a new focus on delivering strong, digital experiences to their stakeholders. While a focus on retention and stewardship will advance your campus, you’ll also want to be sure that you are speaking to your stakeholders through the channels, experiences, and platforms that they are embracing.
An institution’s success in these arenas lies in leading their staff, students, and stakeholders. Whether you are leading your school through shifts in day-to-day operations, managing a strained supply chain for resources like PPE, or moving your course offerings fully online, you must be prepared to support the students, parents, staff, donors, alumni, and networks who advocate best. Communicating needs and understanding the realities your community and staff are working within will help you find tech tools that match their access and skill options. For example, students are now even more laser-focused on your institution’s digital experiences. Investing in your mobile and digital platforms can support the cultural shifts taking place as a result of the pandemic.
Marketing and communications staffers may serve as front-line responders, preparing for and managing crisis communications about closures, healthcare responses, online coursework, and more. Your recruiters, alumni relations managers, and advancement officers will be largely suspending travel and pivoting to virtual engagement in the immediate future. The key is to use these tools to strengthen your relationships and build loyal supporters for life. In a changing digital environment, these platforms will be more crucial than ever before, offering you the ability to make more informed decisions about how to identify your supporters and nurture relationships with them.
Though we are still watching 2020 unfold in real time, we can expect a further confluence of influences to alter the year ahead. As the Black Lives Matter movement grows across the U.S. and as we head toward a presidential election, we may anticipate heightened civic activity resembling the waves felt in 2016 and 2017. The potential for hurricane season this summer and fall coupled with continued coronavirus relief may also usher in similar activities. While much may feel uncertain, we can better prepare for these events by grounding ourselves in the long-term perspectives that have helped philanthropy to adapt over time.
When challenges expose the areas in our organizations that require additional support or change, we can use these moments to emerge in stronger positions. Time and again, institutions of learning have fueled the innovations that helped us weather challenging times. Higher education provides the sense of belonging that our students and communities seek, supporting many as they strive toward their life’s purpose. By reflecting on how our institutions respond to today’s challenges, we can better tap into the practices that will support our organization’s sustainability in the long run. As we grapple with the pandemic, the intentions that we set in our processes, relationships, and cultivation efforts will inform our institutions’ responses to this challenge—and any others that lie ahead.