Agreed. If they are, as claimed, in the business of educating students, why not use some of that endowment money to open more campuses and educate more students?
Columbia offers admittance to fewer than 3% of the people who apply. More people than those admitted have the requisite grades etc to think they'd perform well at an elite school; why not offer more of the admittance and use the endowment to make it happen? Or, use the endowment to further lower the list price of the education (approaching $500k for 4 years)?
Because endowments aren't piggy banks. They're regulated by UPMIFA [1], which states that universiteis can't draw down more than 7% of the total funds in the endowment unless they can prove that it would be prudent to do so, and the burden of proof is extremely high.
Even without UPMIFA, endowments are a mix of unrestricted and restricted funds, and donor restrictions can and do prevent universities from using money when they might otherwise want to. Even if a university desired to draw down the full 7% allowed without triggering red tape, it's unlikely that they would be able to draw it all without running afoul of donor intent.[2]
If anything, the system is to blame here, not the universities themselves necessarily (not to excuse bad apples in academic administration).
Columbia offers admittance to fewer than 3% of the people who apply. More people than those admitted have the requisite grades etc to think they'd perform well at an elite school; why not offer more of the admittance and use the endowment to make it happen? Or, use the endowment to further lower the list price of the education (approaching $500k for 4 years)?