By Douglas Belkin

Aug. 2, 2026 9:00 pm ET

When Natalie Strouse’s husband of 20 years died of cancer, she honored his memory by creating a scholarship in his name at the college where she taught accounting.

Each year, she helped select a student to receive a few thousand dollars at Notre Dame College, a small Catholic school outside Cleveland. But in 2024, the college closed. Strouse wanted to re-establish the scholarship at another institution.

She asked Notre Dame for the $30,000 endowment, which under the terms of the gift could only be used to support the scholarship.

Not possible, she said an administrator informed her. The money was gone.

“She told me they used it to pay the bills,” Strouse said. “I consider it theft.”

Ohio’s attorney general last year filed a complaint against 14 trustees and officers of the college alleging they improperly used more than $2 million of restricted endowment funds outside donors’ intended purposes. The defendants have denied allegations that they breached their fiduciary duties and failed to exercise proper oversight of the school.

Higher education is in real financial trouble and Strouse’s lost scholarship is one piece of the growing collateral damage. College leaders are cutting programs, laying off faculty—and digging into endowments to pay operating expenses. Boards of trustees are under intense pressure and some are turning on one another and the presidents they employ. In extreme cases, schools are covering day-to-day bills with funds that donors gifted for other purposes, without the donors’ knowledge or consent.

This tactic is creating a new loser in the consolidation of higher education: thousands of philanthropists who have donated billions of dollars to colleges and universities across generations.

Nearly 200 private colleges borrowed from restricted endowments in 2025, up from 131 in 2021, according to estimates from Perspective Data Science, a higher-education financial consultant. Schools used most of the money for everyday expenses, said Matthew Hendricks, the company’s founder.

“This is going to be a huge problem as small colleges close,” said Joanne Florino, a fellow at Philanthropy Roundtable, a nonprofit organization that advocates on behalf of philanthropists. “A lot of living donors are finding out the money they donated is not being used for what they gave it for.”

Kansas, Kentucky, Georgia and Montana have passed legislation in the past few years making it easier for donors to take legal action against nonprofit organizations, including colleges, that use restricted gifts outside the intended terms. The Roundtable pushed for the legislation amid growing concerns about the possibility of misuse, said Florino. More than 440 colleges are at risk of closing or merging in the next decade, according to a forecast by the Huron Consulting Group, which advises schools on operations and mergers.

The percentage of private, nonprofit colleges drawing down endowments at greater than 7%—considered a sign of financial instability—nearly doubled to 19.3% in 2025 from 9.7% in 2016, according to Perspective Data Science, which analyzed nearly 1,000 institutions. The percentage of schools drawing down endowments at 15% tripled to 5%.

“A lot of schools are doing whatever they can to keep the lights on,” said Hendricks.

Notre Dame College.

Notre Dame College in South Euclid, Ohio, closed in 2024. Lisa Scalfaro/USA TODAY Network/Reuters

College and university enrollments are hitting the so-called demographic cliff, a falloff in the population of potential students caused by lower birthrates. The largest number of Americans born in a single year started college this past fall. Now, enrollments are projected to fall 13% by 2041, according to the Western Interstate Commission for Higher Education. In the Midwest and northeast the decline has been ongoing for several years.

Skepticism about the value of a college degree—amplified by the tough job market for recent graduates—has also reduced the share of Americans choosing college.

Tuition that outpaced inflation for decades has saddled students and families with high debt and yielded uneven returns on the time and money poured into a four-year degree. The wealthiest universities can offset tuition costs with large endowments, making many of them more affordable than smaller, lesser-known colleges with fewer resources.

Using restricted donor funds to cover day-to-day expenses is tantamount to putting a going-out-of-business sign on campus, so it is little discussed outside college boardrooms. Even third-party annual audit reports are often vague on where schools are pulling money. The result, said Chuck Ambrose, former president of the University of Central Missouri and now a senior adviser at Husch Blackwell Consulting, is that a lot of reckless behavior will likely come to light as schools close or merge.

Restricted funds

Donations to colleges fall into two buckets: those for general use and those restricted to a specific purpose by the benefactor. Generally, schools can only change how a restricted gift is spent by asking permission—from the donor if still alive, or from the attorney general or the courts if the donor has died. Trustees are the institution’s fiduciaries and it is their responsibility to see that restricted funds are spent appropriately, said Ben Porter, founder of Principal Gift Strategies, a fundraising consultancy.

As student enrollment sinks and schools struggle to keep up with costs, a pattern plays out, says Doug Moore, founder of Highland Group, a firm that specializes in closing failed colleges. First, trustees dig into unrestricted endowment funds. Then they try to raise money from alumni and foundations. Then they ask donors to lift restrictions and allow the money to be spent on operating expenses.

When Jennifer Schuller became president at Ohio’s Lake Erie College in 2023, the school was in the red and in danger of closing, she says. One of her first acts was to contact eight donors and ask them to free up $594,000 in restricted donations. She applied that money to the general operating budget, she says, and bought the school more time.

Jennifer Schuller.

Jennifer Schuller, president of Ohio’s Lake Erie College. Mike Demeter

“I explained to them the school needed the money now and could not wait,” she said.

She believes that cash and other changes helped set Lake Erie on a sustainable trajectory.

But persuading living benefactors to lift restrictions doesn’t always generate enough money to keep schools afloat. So boards start “digging for dollars” by searching for loopholes in restricted funds given by benefactors who are deceased, Moore said.

It wasn’t until the mid-1990s that clear documentation for gift agreements was the norm. Prior to that, money earmarked for scholarships was often expressed in correspondence between benefactors and college presidents. Some schools are hiring archivists to locate those letters and re-evaluate the terms of gifts.

‘Retroactive approval’

Last year, Quincy University in Illinois borrowed about $6 million from its endowment “for cash flow needs,” without permission from the attorney general, according to a 2025 audit. The auditor recommended that the school “seek retroactive approval from the Illinois Attorney General for the endowment borrowings.”

The school has adopted the auditors recommendations “to demonstrate legal support for the allowability of the internal borrowings,” according to a school spokesman. “Donor intent has been and will continue to be fully honored.”

Baldwin Wallace University in Ohio last year reclassified about $20 million from donor-restricted to unrestricted, according to a 2025 audit. The funds were withdrawn without prior authorization of the Board of Trustees. The audit found the school had “material weakness in internal controls.” Dan Karp, a school spokesman said Baldwin Wallace “has appointed a new President and leadership team, and is implementing internal financial controls in consultation with third-party experts.”

In Virginia, Averett University spent most of its restricted endowment funds after a chief financial officer allegedly hid budget deficits from the trustees, according to a federal complaint brought by the school and a 2025 audit. A spokesman for Averett declined to comment; an attorney for the former CFO said the claims are “without merit and represent a concerted effort to shift responsibility for decisions made by Averett University onto an accomplished professional.”

For generations college trustees were primarily institutional caretakers focused on preservation and continuity. Today governance is shaped by sustained financial, political, legal and reputational volatility, according to a recent report by WittKieffer, an executive search firm.

That is translating into boards ill-prepared for tough choices, said Laura MacDonald, who runs Benefactor Group, a company that helps institutions build and preserve endowments. When they are faced with closing schools, they think: “Not on my watch,” MacDonald says. They borrow from restricted funds because they’re trying to buy more time. She calls the aversion to scenario-planning “magical thinking.”

Florino, of the Philanthropy Roundtable, said when schools spend money from restricted endowments they’re often playing a losing hand and can’t stop themselves from gambling their last few dollars.

“It’s like the guy who’s going broke and decides he’s going to take his last $1,000 and go to the racetrack,” she said, “because he believes he’s going to win and then he can make everything better.”

Notre Dame

Notre Dame was founded in 1922 as a Catholic women’s college and run by the Sisters of Notre Dame, who declined to comment for this article. Through the 1990s, enrollment hovered around 500 but in 2001 it began admitting men, expanded its sports program and boosted enrollment to nearly 2,000. In 2008 the school borrowed $20 million to build a new dormitory and improve sports facilities.

The school was so central to the community that in 2017 the city of South Euclid buried a time capsule on Notre Dame’s lawn, containing predictions from area children about their futures.

City leaders chose the campus as the site because it was “the one most likely to be in existence when the capsule is scheduled to be opened in 2067,” according to an article in the Plain Dealer.

The Notre Dame College campus showing paths, a baseball field and buildings.

The Notre Dame campus. Dane Rhys/Bloomberg News

That confidence in the school’s outlook began to shake during the pandemic. Notre Dame brought students back to the classroom in the fall of 2020, but enrollment still fell and the college’s financial outlook weakened.

Peter Corrigan, a former business professor and retired auto-industry executive, conducted his own analysis of the school’s finances and criticized leaders for adopting “a laissez faire attitude.” He urged Notre Dame to close scores of courses with tiny enrollments and suggested students be required to live on-campus because about 25% of the dorm rooms were vacant.

Mark Chamberlin, the school’s controller between 2021 and 2023, said he was startled by how weak financial management was, with few internal controls, poor record-keeping and few consequences when overspending came to light.

“It was the single most poorly run operation I have ever seen,” Chamberlin said.

The collapse

By 2023, enrollment had fallen 32% from 2016 and the school was losing $4 million a year, according to federal data and the college’s financial tax filings.

Michael Canty, a business owner who had joined the board the prior year, began to suspect that the school was improperly borrowing from restricted endowments. He confronted the then-president, J. Michael Pressimone, telling him the practice was improper and had to end. Pressimone defended the practice as necessary and commonplace, Canty says.

“I was flabbergasted,” Canty said. “I threw a civil fit.”

In an interview, Pressimone said Notre Dame did regularly dip into the unrestricted endowment to cover costs toward the end of the semester when cash flow was tight, but he says he never authorized the use of restricted funds. He adds that he and Canty “did not see eye to eye.”

Soon after, the board held a meeting. Pressimone made a motion to officially reclassify $1.2 million of restricted endowment funds for other uses, the Ohio Attorney General alleged. No one seconded the motion, according to the suit.

The next day, the board asked Pressimone to leave, the attorney general says. A week later, the interim president advised the executive committee that $2.8 million would need to be returned to restricted endowment funds, according to the complaint. Pressimone denies $2.8 million had been taken from the restricted endowment prior to his departure.

The school’s financial woes were spreading. The baseball coach discovered his card was declined when he tried to pay for team travel expenses. The card was tied to a restricted account with money raised for the team’s use, according to interviews and a 2024 lawsuit.

The suit was dismissed for lack of standing, but last year Ohio’s Attorney General filed its own suit, alleging 14 trustees and officers had spent more than $2 million from restricted endowments outside the donors’ wishes without permission.

The defendants have denied allegations that they breached their fiduciary duties.

In May, an Ohio hospital bought the 48-acre campus for $8 million. A week later, the school’s possessions, including furniture, science equipment and athletic gear, had been organized, stacked in neat rows and put up for auction.

Science equipment up for auction on lab tables.

Science equipment up for auction at Notre Dame College. Douglas Belkin/WSJ

Strouse, 65 years old, said she wasn’t contacted by the AG and didn’t think to reach out to him because she considered the relatively diminutive size of the scholarship irrelevant.

Still, she is upset by both the closing of the school, where she started teaching in 2001, and the loss of the scholarship. Her husband worked at a paint store and the couple lived frugally, she said.

“We cooked at home, we didn’t go out to eat, I bought maybe Starbucks five times in my life, that’s it,” Strouse said. “The idea of spending $5 or $10 for coffee, that just to me, was wrong.”

She attended Notre Dame sporting events with her husband and had great respect for student athletes who practiced their sport, studied hard and often held off-campus jobs. When he died, several students who knew him from his support at their games came to the funeral.

After she set up the scholarship in 2019, Strouse helped to pick the recipients—accounting majors who were also athletes. The scholarship generated a few thousand dollars a year.

“Even a little bit can help,” she said.

https://www.wsj.com/us-news/education/colleges-restricted-endowments-financial-trouble-247c7d3c

(http://www.autoadmit.com/thread.php?thread_id=5889061&forum_id=2)#50042538)

They don’t give you $ after the fact.

(http://www.autoadmit.com/thread.php?thread_id=5889061&forum_id=2)#50042562)

theyre idiots

(http://www.autoadmit.com/thread.php?thread_id=5889061&forum_id=2)#50042582)