America's (and the world's) economic woes are having a direct impact on some of the weathiest colleges and universities. College endowments cover a multitude of purposes, not the least of which is financial aid.
Before the "crash," a number of top schools in the U.S. moved to a no-loan policy, where they would not require certain students to incur loans as part of their financial aid packages. One of those top schools is Williams College in Massachusetts. Well, things have changed there.
Williams is abandoning its no-loan policy. Here's a statement from interim president Bill Wagner:
Making a Williams education available to students from all financial backgrounds has long been among our deepest values. That is why our expenditures on financial aid have tripled in the last ten years (from $14.6 million in 2000-01 to $43.7 million in 2009-10) and why financial aid was the only item in our budget to increase this year as it will be in the next. The continuous review of our aid policies is among the most careful of the College's long-term deliberations. In recent years a focus of those discussions has been on determining appropriate loan levels.
Our loan expectations were already among the lowest in the country (and zero for the lowest-income students) when we eliminated them for all aided students beginning in 2008-09. It now seems prudent to reintroduce modest loans for some aided students, beginning with the class that enters in the fall of 2011. No current students will be affected; neither will those who enter this fall. As before, families below a certain income, and with typical assets, will not be expected to borrow at all. Others will be offered loans on a sliding scale up to a maximum size that will again be among the lowest in the country. After four classes have entered through this program, it will make available about $2 million per year.
Our financial aid program will continue to be one of the most generous anywhere, as it should be, and we are convinced that Williams will remain financially attractive to aided students at all levels of income.
The obvious question is: Will this cause a domino effect among other no-loan schools?
There is an interesting discussion thread on the Williams situation on the College Confidential discussion forum. All this leads to wondering what is at the core of the problem. The answer is simple: fundraising.
The trickle-down consequences of the economic downturn have put the squeeze on almost everyone's wallet. The fallout has made for some semi-sensational headlines and stories. Example:
Stanford Tops Harvard as College Donations Fall Most Since '69
Donations to U.S. colleges and universities fell by 12 percent, the most in at least four decades, as a result of the recession, the Council for Aid to Education said.
Contributions totaled $27.9 billion in the year ended June 30, down from $31.6 billion the year before, according to the report released today. The survey used data from 1,027 colleges.
The nationwide drop in donation revenue, the largest since at least 1969, hurt colleges already suffering from investment losses and pressure to moderate tuition increases, said Ann E. Kaplan, the survey director. Companies, foundations and alumni had less capacity to give, she said. With the economy and equities doing better this year, colleges now may see a recovery in donations, Kaplan said.
“If the relationship between the stock market and gifts continues to follow historical trends, then 2010 should be a better year and giving should start to rebound," said Kaplan, whose employer is a nonprofit organization based in New York.
Stanford University topped Harvard University in fundraising for the fourth year in a row. Stanford's donations declined 19 percent to $640.1 million, while Harvard's fell 7.5 percent to $601.6 million, according to the survey. Stanford raised the most of any university and Harvard was No. 2 in all four years.
Cornell University posted the biggest fundraising gains in percentage terms among the 20 schools that raised the most money. Contributions to Cornell, in Ithaca, New York, rose 9.1 percent to $446.8 million, according to the survey. The money included a $170 million gift from Sanford Weill, the former chief executive officer of Citigroup Inc., and his wife, Joan.
Donations to Yale University in New Haven, Connecticut, declined the most, falling 26 percent to $358.2 million, according to the survey.
Gifts to the University of California, Los Angeles, dropped 23 percent to $351.7 million. Duke University in Durham, North Carolina, raised $301.7 million, down 22 percent, the council reported.
Stanford stayed on top of the list because of the relationships it has built with donors, Martin Shell, vice president for university development at Stanford, near Palo Alto, California, said in an e-mail.
“The continued strong support from our alumni, parents and friends is the direct result of years of engagement with the university," Shell said. “These long-term relationships transcend temporary economic fluctuations."
Tamara Elliott Rogers, vice president for alumni affairs and development for Harvard, in Cambridge, Massachusetts, declined to be interviewed.
“The global economic downturn has affected giving, of course," said Tom Conroy, a spokesman for Yale, in an e-mail. “The year, however, was still the fourth-highest cash year in Yale's history, which indicates strong and continuing support for the university in spite of a more challenging economic climate."
Falling donations and record declines in endowments have delayed campus construction projects and forced cuts in faculty hiring and pay.
The endowment at Harvard, the richest university, fell to $26 billion in fiscal 2009 as investments declined 27 percent. Yale's fund, the second largest, fell to $16.3 billion after investments lost 25 percent. Stanford, tied with Princeton University, in Princeton, New Jersey, for the third-largest endowment, saw the value of its fund sink to $12.6 billion after a 26 percent investment decline.
To fight the national decline in giving, colleges are changing fundraising tactics.
If donors to Cornell couldn't make capital gifts as planned, David Skorton, Cornell's president, asked for a smaller amount equal to the interest the gift would have generated, Charlie Phlegar, vice president for alumni affairs and development, said in an interview. That money was earmarked for financial aid.
One such gift came from Bill Kay, who graduated Cornell in 1951. Kay had planned to make a commitment of $10 million to be paid after his real estate business in Drexel Hill, Pennsylvania, is sold -- an event delayed by the economy.
“He asked for some money for scholarships and I gave him an extra $50,000," Kay, 82, said in a telephone interview.
The economy and the stock market were behind the drop in college giving last year. The U.S. economy contracted for four consecutive quarters, from June 2008 to June 2009, for the first time since at least 1947, according to data compiled by Bloomberg. The Standard & Poor's 500 Index declined 28 percent in the 12 months ended June 30.
Ivon Rohrer, an alumnus of Davidson College in Davidson, North Carolina, said he cut his annual gift to $1,000, from $12,000 a year earlier, because his business slowed. Donations at Davidson, a liberal-arts college founded in 1837, dropped 40 percent to $24.9 million, according to the institution.
The recession “precluded me from giving as much in 2009 as I will give in the future," Rohrer, 66, a commercial real estate developer in the Carolinas and Virginia, said in a telephone interview. “Hopefully, I'll go back to a lot higher gifts as soon as my cash flow rejuvenates."
So, you can see that the times they are a changin' at the top of the elite college pile. As if high schoolers and their parents needed another complication in the high-pressure struggle of trying to get into--and pay for--America's best schools.
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