Why Restricted Giving Is the Way Forward for Higher Education

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According to National Philanthropic Trust, Americans gave over $373 billion dollars in 2015 (a more than four percent increase since 2014). Fifteen percent of those philanthropic dolla­­rs, or $55 billion, went to education—some of which landed at your institution!

What isn’t tracked in this data, however, is the percentage of total giving that went to educational institutions as unrestricted dollars. Or more importantly, how much of that $373 billion you may have missed out on because of higher ed’s insatiable need for unrestricted dollars.

As the behaviors and expectations of our donors change, we need to evolve and adapt as well. Higher education fundraising has come to a crossroads, and I believe that we need to shift away from unrestricted giving in favor of restricted support.

 

Many Nonprofits Have Adapted…

The National Center for Charitable Statistics reports that there are over 1.5 million nonprofits registered in the United States. On GoFundMe alone, there have been over one million projects funded in the past few years for over $2 billion.

All of this to say: there are a lot of people, projects, and organizations out there competing for your donors’ dollars.

In order to capture donor mindshare in such a crowded market, the newest and smallest nonprofits have had to adapt. Unlike many of our institutions, they can’t rely on years of developed relationships and trust. They’ve realized that they need to communicate clear goals and direct impact to win over donors.

And many have excelled at this. Organizations like charity:water let you see the real-time flow of your gifts from project creation to implementation. GoFundMe projects let you see the individual or group of individuals that your gifts will directly affect. Savvy nonprofits like these are setting the expectations of our newest philanthropists, equipping them with choice, transparency, and a one-to-one correlation between gift and impact.

…But Higher Ed Hasn’t

Unfortunately, this trend hasn’t caught on in higher education; institutions have stuck to their unrestricted support models with varying levels of success. According to Ruffalo Noel Levitz, higher-ed institutions saw a record-breaking total dollar count in 2015—but since 2007, nearly two-thirds of institutions have seen a decrease in total donors.

 

Sure, our oldest and most supportive donors are giving at higher rates than ever. But we are failing to connect with our youngest alumni, aka our next generation of major donors.

The generations who prefer to give unrestricted support are becoming smaller. Your newest philanthropists are waiting to be cultivated, and the days of stating, “make your gift and we’ll decide where it goes” are gone. Institutions that stick to the unrestricted model will continue to see donor decline or flat participation. To grow, we need to find creative ways to demonstrate impact to donors and to convince them that their investment is worthwhile.

That could mean creating fungible funds to appease your CFO and donor, finding specific budget-related projects, or creating collateral that speaks to the specific events and individuals who have benefitted from smaller gifts. Think about how you can create a program that revolves around your donors’ interests and affinities.

For example, at Hobart and William Smith Colleges, we implemented a choice-based giving program in fiscal year 2015 that offered our donors a more direct route to give to the area they cared about most. Since its implementation, we have seen an 11 percent increase in donors, and our youngest cohort has grown in donors by 12.5 percent.

Shifting the Model

Your constituents do care about your institution, but they care more about making a direct difference. In order to continue to see their support, we need to change the model we have operated under for decades. Forbes put out an article in 2014 titled “Let’s Put An End To Restricted Giving.” With all due respect to author Felix Oldenburg, I politely disagree.

Let’s instead put an end to declining donor numbers and outdated tactics. It’s time to embrace the donor-centric model of restricted giving.

Interested in learning more about these trends? Check out EverTrue’s whitepaper, “Dollars Over Donors: Is Higher Ed’s Reliance on the Wealthy Minority a Sustainable Strategy?”


Josh Foladare is the senior director of alumni relations and annual giving at St. John Fisher College and formerly the director of annual giving at Hobart and William Smith Colleges. When he is not helping raise money to make the colleges great, you can find him brainstorming new ways to explain what he does at work to his friends and playing with his two rescue dogs. Connect with him on LinkedIn.

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