Its slimmed-down finances could prove as significant as its curriculum.
Its slimmed-down finances could prove as significant as its curriculum.
T he University of Austin (UATX) has garnered considerable attention for challenging higher education’s entrenched aristocracy. Launching a new institution unapologetically committed to free inquiry and merit has rattled an ecosystem dominated by aging incumbents, groupthink, and corroded standards.
But noble intentions don’t pay the bills. After the initial wave of good feelings fades, will UATX prove to be financially sustainable — and, if so, will it be a solitary outpost, or a pioneer?
That question matters because the modern university’s relentless pursuit of revenue has proven corrosive, fostering country club expectations and an unhealthy dependence on federal largesse. UATX has struck a bold blow against all of this by pledging never to charge tuition or take government money. But are such promises sustainable?
UATX’s youth and novelty make the road ahead uncertain. Still, early signs point to both financial durability and the potential for scale. Last November, President Carlos Carvalho announced a $300 million fundraising campaign anchored by a $100 million gift from billionaire Jeff Yass.
This was justifiably big news, but it also raised the question of whether $300 million is enough to get the job done. After all, Harvard University’s endowment tops $50 billion; Yale’s exceeds $40 billion. And when even these institutions are publicly hand-wringing over their financial straits, can UATX really deliver on its remarkable promise with an endowment that’s less than one one-hundredth the size?
The short answer is yes.
Our AEI colleague Preston Cooper has previously used federally collected data to determine what four-year institutions spend annually on core education functions — instruction, academic support, student services, and institutional support. In current dollars, the cost works out to about $28,000 per student per year at public universities and $45,000 at private ones.
Assuming that UATX successfully raises the full $300 million, the math becomes interesting. The National Association of College and University Business Officers reports that, on average, private colleges drew precisely 5 percent from their endowments in fiscal year 2024. At that figure, a $300 million endowment would yield $15 million a year.
UATX currently enrolls about 150 students and plans to grow to 500 over the next several years. A student body of 500, at an annual cost of $35,000 per pupil — the midpoint of Cooper’s estimate — would cost about $17.5 million annually.
That implies a relatively modest shortfall of $2.5 million a year. But there’s every reason to think that UATX can and should operate toward the low end of Cooper’s range. It has no legacy costs, a lean administrative structure, no expensive research laboratories, and no intention of wading into the amenities arms race with pricey sports or luxury dorms. If UATX can operate at $30,000 per pupil, then a $300 million endowment should cover the bill, permitting it to stay tuition-free and off public money in perpetuity.
That raises a second question: How replicable is the UATX model? The numbers here are equally encouraging.
In 2024, total U.S. philanthropic giving to higher education hit $61.5 billion. Setting aside onetime start-up costs, the $300 million to build an endowment that could cover UATX’s operating expenses in perpetuity amounts to less than one-half of 1 percent of annual giving to higher education.
Put another way, donors could fully bankroll two UATX-sized institutions every year for roughly 1 percent of current annual giving to higher education. If new donors are inspired to enter the field by the possibilities of UATX and would-be imitators, the numbers get that much easier.
None of this is to wave away the challenges. Will UATX’s lack of lab-based hard sciences be a problem? Will a slimmed-down curriculum and minimalist academic environment wear as well as early returns suggest? Is it wise for a college to offer itself up as entirely tuition-free, or would students benefit from having some modest financial skin in the game?
Meanwhile, recent turmoil and staff turnover at UATX make clear that this undertaking isn’t easy and that the institution is still taking shape. Nor is it yet clear how many students and faculty out there are seeking what UATX has to offer. But early returns are promising.
Once upon a time, a dozen or more new colleges launched in this nation every year. Today, higher ed could sorely use some of that dynamism.
The toughest and most important step in any journey is the first one. UATX has already shown that its model is both viable and in demand. If the remaining financial challenges prove equally surmountable, higher education may never be the same.