When Northland College announced it would close in 2025, the story seemed tragically familiar: Another tuition-dependent private college had succumbed to years of enrollment declines, mounting financial pressure and an increasingly unforgiving economic landscape.
A little over one year later, Wisconsin Public Radio is reporting that, according to court filings, Northland administrators borrowed approximately $22 million from its pooled endowment between 2012 and 2019 to support institutional operations, a practice the board says was undertaken with legal counsel and in consideration of Wisconsin's version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA). The WPR article notes that the college obtained releases from more than two dozen donors allowing restricted funds to be used, but there were over 160 endowed gifts in total. The college is now asking a Wisconsin court to release restrictions on its remaining endowed funds and approve a plan to distribute those assets to organizations that most closely align with donors' original intentions now that the institution itself no longer exists.
On its face, the case presents a straightforward legal question about who owns endowment funds once a donor turns over the money. Under Wisconsin's UPMIFA, colleges have a fiduciary duty to honor donor restrictions unless they're legally modified. However, courts have authority to modify or release restrictions when carrying out the original purpose of a charitable gift becomes unlawful, impracticable, impossible, or wasteful. The law expressly contemplates that, in some circumstances, a court may redirect funds to another institution or charitable organization whose work most closely fulfills the donor's original intent — which is what Northland is now asking the court to approve as it looks to redistribute the remaining funds in its endowment post-closure.
But in a higher ed environment that finds institutions increasingly more reliant on private philanthropy to keep the doors open, Northland’s request brings up additional questions about donor trust and intent. A gift made to Northland College was intended to support Northland College and its students. If that institution no longer exists, is supporting a successor organization the closest possible fulfillment of that intent, or does the donor's obligation effectively end with the institution itself? For donors, the question could be less about legal doctrine than about expectation.
Whether Northland ultimately acted within the bounds of Wisconsin law by dipping into restricted funds to meet operating expenses is for the courts to decide, but the case invokes many questions that reach far beyond the small college in northern Wisconsin.
Public conversations about college finances often reduce endowments to a single number communicated as an indication of institutional strength, but what most leaders know is that the university’s endowment is a collection of individual charitable agreements that carry their own restrictions, purposes and expectations. Some funds may support specific scholarships, while others underwrite faculty chairs, academic programs or research initiatives.
According to the court petition, the borrowing from the endowment was not a one-time emergency measure, but a pattern that unfolded over several years as the institution faced persistent financial strain.
Financial crises rarely materialize overnight; they develop gradually as enrollment declines and operating deficits widen at institutions that are increasingly more tuition reliant with each passing appropriations cycle. But leveraging long-term assets to bridge cash scarcities with the hope that the advancement office can secure another major “transformative gift” is a dangerous game. Dipping into the endowment might buy another semester, or even another year, but it merely kicks the can down the road, allowing institutions to continue to budget on aspirational enrollment targets, rather than confronting the realities of the data. For already cash-strapped institutions, the result can be a financial spiral in which leaders use tomorrow's resources to pay today's bills while leaving themselves with even fewer options for the following year.
Hundreds of small, tuition-dependent private colleges are confronting the same structural pressures that ultimately overwhelmed Northland: demographic decline, rising operating costs, deferred maintenance and growing dependence on tuition revenue. Northland's legal battle may ultimately be resolved in a Wisconsin courtroom, but the stewardship questions it raises about the fragility of donor confidence and the scalability of philanthropic efforts belong in every boardroom across higher education.
It also brings into focus another challenge in an age where philanthropy is increasingly filling in the gaps left by federal and state appropriations — and large donors are increasingly understanding the importance of unrestricted gifts. When a major, capacity-expanding gift arrives on campus, leaders have a responsibility to ensure the sustainability of any new programs launched or staff positions created. The greatest risk isn't always spending donor money improperly; sometimes it's spending it exactly as intended, but in a way that creates obligations the institution can't sustain.
Treating one-time generosity as a guarantee of permanent or ongoing financial capacity flies against institutional progress by creating additional operating costs the university budget cannot sustain without an additional gift of similar size. But the strongest institutions use philanthropy to reduce long-term financial risk. They ask difficult questions before launching the next center, initiative, or signature program: What happens when the grant expires? How will this effort be sustained? Does this gift build institutional resilience, or simply create another recurring obligation that future leaders will have to finance?
A gift should reduce an institution's financial risk, not become its next recurring expense.
