updated 5/22/2005 5:02:52 PM ET 2005-05-22T21:02:52

The first billion is the hardest.

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America’s richest colleges — the 47 with endowments over $1 billion — have a combined $160 billion, on par with the gross national product of Hong Kong. And they are going all out to get even more.

Last year, they raised $7.2 billion, or just under one-third of all the money donated to American higher education. Harvard alone raised $540 million.

Having money means having the resources to raise more of it, and to invest it shrewdly.

Development officers still use the old tricks, like making the rounds at football tailgate parties, and calling on elderly alums who may be thinking about their wills. But these days, they also use direct-mail software, host alumni golf tournaments and organize cruises.

At Boston College ($1.15 billion endowment), the fundraising staff numbers 150, not including the Rev. William Leahy, a Jesuit who has taken a vow of poverty but estimates he spends up to 40 percent of his time raising money for the school. Last year, BC took in $65 million.

Three staffers do nothing but work to get young alumni in the habit of giving annually, even though it may be years before the donations they solicit even cover their salaries.

“It’s a long-term investment,” says James Husson, BC’s vice president for university advancement.

The billionaires’ greatest resource is rich alumni with fond memories of college.

“I think part of it is American students bond with their universities more than anywhere else,” said David Ward, the American Council on Education president.

But school spirit isn’t the only ingredient.

U.S. law is extremely — even uniquely — generous to colleges. Congress makes contributions tax-deductible and gives schools a break on patent royalties for their researchers’ inventions. It also declines to tax the investment earnings of colleges, and allows them to raise money through tax-exempt bonds.

When a big project comes up, wealthy colleges usually don’t tap their endowments. Instead, they use their gilt-edge bond ratings to borrow money at low interest rates.

That allows them to continue to earn investment returns on the endowment, which usually more than covers the bond payments. They can keep the extra and plow it back into their endowments.

Harvard, despite its $22.6 billion endowment, has borrowed more than $3 billion over the last decade, according to Thomson Financial.

Wealthy colleges such as Harvard also can afford the most sophisticated financial advice, and can invest aggressively.

Harvard pioneered investing in nontraditional assets such as timber. It caught flak for paying money managers as much as $35 million per year, but those managers consistently beat performance benchmarks and Harvard is billions the richer for it.

Figures from the National Association of College and Universities Business Officers show billionaire colleges earned 12.5 percent annually on their investments over the last decade, compared to 8.8 percent for colleges with endowments under $25 million.

Some experts think it’s fine that money flows heavily to schools that have a track record showing they can use it well.

Colleges “that do a good job, that get better, tend to do a better job at finding resources,” said Richard Spies, an economist and executive vice president for planning at Brown University. “Those that for whatever reason miss the mark tend to fall away. That’s a good thing.”

Others see the rich getting richer as a cause for concern.

“What’s going on in private education is what’s going on in the rest of society,” said Ronald Ehrenberg, a Cornell University economist who has written extensively about higher education. “We’re just becoming a more unequally distributed society.”

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