Schools Suffering In Crisis As Endowments, Donations Wither

Harvard reports that the value of its endowment has declined $8 billion between the end of June 2008 through October 2008. That would make Harvard's endowment worth 22% less than at the end of June, or $26.9 billion -- but it probably has further to fall thanks to illiquid assets like private equity interests. Meanwhile, Harvard and its peers could be in trouble because fewer people will be able to afford college given the market crash. That will mean college administrators are facing some tough choices.

Harvard is responding to the decline in its endowment by taking a "hard look" at staffing levels and compensation. It is forecasting a 30% drop for its endowment ending in June 2009, which would bring it to $25.8 billion, down another $1 billion. While this strikes me as optimistic, it does suggest the extent of the damage and the challenges Harvard and its peers face.

The options for universities are dwindling. A study suggests that tuition has risen 439% since 1982 while median family incomes have increased only 137% during that period. If tuition continues to rise at that rate, few families will be able to afford college. With the student loan market in dire straits and incomes likely to fall further due to layoffs, the only way for colleges to attract top students who can't pay will be to cut tuition even more on the lower income families while making up the difference by raising tuition for the wealthiest ones.

Read the whole story here.

Comments

[dandypuddin]

Gee, Harvard, if only you'd spent part of that endowment before the market went bust. Oh yeah, it wasn't to use for students, professors and classrooms, it was to invest. Sorry, forgot.

[avraamjack]

The only interesting aspect of this story is that the Ivy League Masters of the Universe were not prescient enough to get out of the market before the bubble burst.

One would expect otherwise, given their reputation.
.

[lilpeg]

Those endowments are used to fund scholarships for low and middle class students, like my kid. She is applying now in hopes of getting one. We could not afford it otherwise.

[KillTheMessenger]

You could consider sending her to Europe. There are plenty of European universities which are far cheaper and offer just as good an education.

[hollybork]

Since no one but venture capitalists or scholarship football players can afford to go to top flight schools anymore, perhaps these endowment managers will have to do the unthinkable: spend more of their money to pay tuition and fees for students to get an education. When the endowments of these big institutions are hundreds of millions and even billions of dollars, they have not spent even 5% of their monies yearly on tuition grants. Instead, they have hung onto their money, shaken every tree to get more fruit from their long suffering alumni, and have gambled the trust res in the market on derivatives and other fancy financial inventions.

[satyriasis]

Harvard and and the Ivy Leagues spit on working people with their outrageous tuition rates. Looks like the economic crash has hurt so many of their fat cat oligarch alums that it's gonna be hard times. Then again, hard times for these snobs just means a little less caviar than usual.

[lisakaz2]

A lot of those elite institutions practice a bit of wealth redistribution. Sure, ppl who are wealthy pay the full price and it is expensive. But a lot of ppl who cannot afford it do not. Indeed, those hurt with loss of endowment/donations could be those receiving financial aid. I never once paid full price to attend Northwestern. There was a formula that determined what my family contributed and how much loan/grant I would have and how much work/study I needed. My parents did have to up their contribution every year but as a senior I didn't work, so it wasn't that huge a burden. And my undergrad loans are paid off (grad school is a different story; I owe over $40K).

The ppl who had trouble with the elite schools were often those in the middle -- too poor to afford the full cost and too rich to get significant help. With donations potentially hurting, the ripple effect could be that diversity at such schools dries up -- unless you count foreigners.

[brooklyncitizen]

The Ivy League schools really are not elitist......however it is unfortunate that private universities have become a luxury since many of the brightest have attended these universities. I was fortunate that my parents scraped together what they could and I received scholarships and was able to get away with only a couple of loans....but even this combination is tough to achieve for many....if people do not have access to a good education we certainly can't claim we are advancing as a society.

[hellboundtrain]

My dear Madam or Sir: You, indeed, are somewhat correct. We have switched to Sturgeon from Beluga. Everyone must sacrifice.

[franklin opt]

Oh, Harvard is suffering. Give me a BREAK!

[BlueZoo]

Wait just a minute here... Harvard announced last year that they no longer would ask for tuition to attend Harvard. Several other schools followed suit. Their endowments are so huge they can afford to do this. I don't believe you're in dire straits when you have billions in endowments despite the economic downturn. This whining seems to me a ploy for the alumni to up their donations. I'm not buying their sob story.

[KillTheMessenger]

According to their own website here is the cost for attending Harvard:

http://www.fao.fas.harvard.edu/cost.htm

$50k/term. Better start saving now!

[lisakaz2]

Geez, I bet the 4 years at Northwestern 20 yrs ago was maybe $60K.

[brooklyncitizen]

Endowments are not kept in a CD account...everyone including institutions, keep their money in the market....and you know how that is faring .

[MovingtoNorway]

Perhaps if half of the graduating classes from Harvard College hadn't been heading to Wall Street like lemings over the past several years, donations would not be withering. Reep what you sow.

[harriettubman]

Who has any sympathy for these universities where the presidents can make up to $500,000/yr? Higher education is already becoming out of reach for working people. These colleges charge high students fees and ridiculous parking fees. Enough.

[noamjunior]

kind of Ironic considering they gave George Bush, the d-bag responsible for this mess, a degree - serves them right

[KillTheMessenger]

For $8 billion China can educate 300,000 students from K to doctorate.

For $8 billion the only thing Harvard can do is to whine.

What's that noise? That's the sound of a superpower flushing itself down a giant drain.