America’s universities are mostly funded by private funds: tuition and donations. Yes, even private universities receive government funding, but the volume of state and federal dollars has been steadily declining. Who provides the money, and how much they give, affects the amount of non-loan financial aid available, what you get for that money, and how fast tuition goes up.
The trustees of the university are usually major donors. Even when donors are selected for political or diversity reasons, they are expected to write checks. This is standard in the non-profit world, as the assumption is that those who give the money will want to see that it is spent wisely. This doesn’t mean that their definition of wise spending is the same as the average parent’s definition. Trustees are balancing the need for scholarships, academic work, campus operations, buildings, athletics, and their own pet projects.
Donors skew heavily toward alumni, but not exclusively so. Many campuses receive funds from community members, parents, and corporations. They have different interests. A community member who wants to support athletics may not care about affordability for the average student.
University funds are sorted into different accounts, and the purposes can rarely be changed. Some donor money is restricted to a certain department or program. A donation to provide instruments to music majors can’t be touched to provide scholarships for business students or upgrade dormitories. The courts need to see public policy reasons to justify a violation of a donor’s intent.
Beyond that, money is divided between short-term funds (for current operations) and long-term endowment money (that, in theory, will allow the institution to stay in operation forever). It is divided between operating funds and capital projects, and athletic funds are usually separate from the rest of the university.
Most colleges prefer donations of either unrestricted funds or scholarship money, because that gives them the most flexibility. That doesn’t mean they will turn down other donations! Unless the donor attaches ridiculous strings (and some try), the check will get cashed.
Campuses care a lot about donors. The money matters, of course, but the U.S. News and World Report rankings measure alumni satisfaction by the rate of participation in fundraising. This is highly controversial; many campuses would rather have alumni who volunteer for them or encourage motivated high school students to apply than process a $25 check. But that $25 outweighs any other alumni involvement when it comes to the rankings. So, yes, it is important if you want your college to rank highly.
And if you are looking at the U.S. News rankings, keep in mind that high levels of alumni donation might not translate into enough money for scholarships.
As for getting your kid into college, you probably can’t buy them in with $25 donations. If you are buying buildings, maybe. But will you have to buy another building to get your kid out? Ultimately, the campus has to be a good fit for your child, and your alma mater might not be. (I don’t think mine is a good fit for my kid, and that’s okay, because there are other fine schools out there.)
But if your alma mater is a good fit, go beyond writing checks and start volunteering! That’s a better sign of your commitment, and it gives your kid a chance to learn more about the campus culture.