The $400-Million Question

When John A. Paulson gave $400 million to Harvard University last week, many people complained that he hadn’t picked the neediest recipient for his largess. Though the gift is Harvard’s biggest ever, it amounts to only about 1 percent of the institution’s endowment. But that amount would be truly transformational in other areas of higher education.

Of course, for a donor as wealthy as Mr. Paulson, who is a Harvard alumnus and founder of a hedge fund that manages $19.5 billion, there are myriad options for bestowing a megagift. But the reasons big donors choose their targets is complicated, explains Noah D. Drezner, an associate professor of higher education at Columbia University’s Teachers College who specializes in fund raising. “You have to think of the purpose behind the gift,” Mr. Drezner says. “Based on what the donor wanted to do, was this the right place?”

Here’s a look at what else $400 million could do:

Pay the Way of an Entire College’s Students for a Decade

Berea College, in Berea, Ky., is an outlier in higher education. While the cost to educate a student at Berea is about $23,000 a year, the college charges no tuition to its roughly 1,600 students.

If Mr. Paulson had made his gift to Berea, he could have covered the costs for nearly 11 years of Berea students.

But Richard W. Trollinger, vice president for college relations at Centre College and a 40-year fund-raising veteran, says that when donors are choosing where to give, they usually aren’t thinking of how to make the most practical use of their gift. Rather, Mr. Trollinger says, donors choose an area that they care about and a college to which they feel a connection.

“I’ve often said if need determines where gifts are made, then the neediest causes would receive the most money, and that’s really not how it works,” Mr. Trollinger says. “Connections make a difference, and it’s an expression of his values and his interest.”

Dot a Campus With New Buildings

The Texas Legislature approved 14 new construction projects across the Texas A&M system last month, ranging from a dental facility to an engineering building. A gift like Mr. Paulson’s would cover nearly the entire cost of the six most expensive structures.

Donors to colleges are becoming more likely to choose areas other than construction, though, and giving to research or financial aid can still lead to a naming gift. Mr. Trollinger says donors think about what they want their name to be associated with when making a gift. He adds that donors are often thinking of their legacy and “what they want to have been known for.”

Put Many Fund-Raising Campaigns Over the Top

A $400-million gift would complete current fund-raising campaigns at 20 colleges, according to the most recent data available from the Council for Advancement and Support of Education, or CASE.

Washington University in St. Louis began a $2.2-billion fund-raising effort in 2012, and had raised $1.83 billion toward that goal as of May, according to CASE data. Officials would probably welcome a Paulson-size gift, which would wrap up the campaign, with money to spare, three years before its announced end date.

Cover Thousands of Professors’ Salaries

A $400-million gift at Illinois State University would have covered salaries for all ranked professors about seven times, according to data from the 2013-14 academic year. That year, the university spent more than $56.7 million paying professors at all three ranks.

After paying those professors, the university would have had plenty left over from a gift of that size to pay its more than 630 lecturers that year.

Help Cure a Disease

That kind of money could support plenty of biomedical research aiming to cure cancer and other diseases. In fact, a $400-million contribution would cover the entire research budget of the Scripps Research Institute, according to National Science Foundation data for the 2013 fiscal year.

The institute’s research spending ranks No. 55 on a list of the most recent data available from 645 colleges. In comparison, Harvard’s research expenditures totaled more than $1 billion that same year.

Richard K. Vedder, director of the Center for College Affordability and Productivity, says despite the controversy following Mr. Paulson’s donation, for a donor looking to advance world-class research, “I wouldn’t say the worst place to give money is Harvard.” Though there are “poorer schools in the U.S. where at the margin the dollar would work better,” he adds, “there is something to be said for giving money to schools where there is a tradition of excellence in research.”

Save Higher Education in Wisconsin

The University of Wisconsin system’s state appropriation could be cut by $250 million when the Legislature votes on the budget. A $400-million gift would clearly help ease the budget crisis there, says Nicholas W. Hillman, an assistant professor in the education school at the University of Wisconsin at Madison.

But donors have their own motives for giving, and helping poorer institutions probably wasn’t Mr. Paulson’s intent, Mr. Hillman says.

“You could have donated anywhere, and it probably would have helped immensely,” Mr. Hillman says. “That’s not what philanthropists are in the business of doing. They’re in the business of promoting an agenda.”