Washington College’s endowment is just $200 million, yet the Maryland school spends almost 60 percent of its annual payout on scholarships.

About 75 percent of the operating budget for Berea College, a private school in Kentucky that serves only low-income students, comes from investment earnings of the $1.1 billion endowment.

Leaders from both schools and three policy experts are scheduled to testify before a U.S. House Ways and Means subcommittee today about endowments and their tax-exempt status. The hearing, which has started, is expected to show examples of how some schools use their funds to help lower the annual cost of college.

Posting Losses

“The committee is right to be looking at college endowments,” Sheila Bair, president of Washington College and the former chair of the Federal Deposit Insurance Corp., said in a prepared statement to the committee. “I can think of no better purpose for endowment income than scholarships. I would love to have a $1 billion endowment.”

The scrutiny over endowment spending comes at a time when many large funds including University of Virginia and Ohio State University are reporting investment losses.

Separately, two congressional committees are reviewing responses to a joint inquiry to the richest 56 private schools, as they examine policies that don’t tax endowment investments and give donors to universities a tax break.

Schools defended their endowments in their responses, telling the Senate Finance and the House Ways and Means committees that they must abide by gift agreements with donors and can’t redirect funds.

Immense Wealth

One speaker will argue that the billions of dollars amassed by the richest private schools leads to further disparities among colleges and students, and the subsidy to the private nonprofit colleges is “far greater” than to public two-year and four-year schools.