Harvard recently reported that the value of its endowment has dropped $8 billion between the end of June through October of this year. This news is especially troubling given the fact that fewer people will be able to afford college tuition given the market crash. Plus, fewer alumni will be making donations. College administrators face some tough decisions.
Peter Cohan of Bloggingstocks reports:
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.
With endowments shrinking, there really won't be an option of using that endowment income to make up the difference. And in order to keep from losing money on operations, colleges will need to cut their costs drastically while maintaining teaching quality. This is something that colleges have little experience doing.
Justin Pope reports for the Associated Press that a recently released independent report on American higher education flunks 49 states in terms of affordability, "an embarrassing verdict that is unlikely to improve as the economy contracts."
The biennial study by the National Center for Public Policy and Higher Education, which evaluates how well higher education is serving the public, handed out Fs for affordability to 49 states, up from 43 two years ago. Only California received a passing grade in the category, a C, thanks to its relatively inexpensive community colleges.
The problem seems likely to worsen as the economy does, said Patrick Callan, the center's president. Historically during downturns, "states make disproportionate cuts in higher education and, in return for the colleges taking them gracefully, allow them to raise tuition," Callan said. "If we handle this recession like we've handled others, we will see that this gets worse.