Student Loan Blog : Harvard University

Harvard’s $34 Billion Endowment Not Immune to Financial Crisis

Student Loan Girl — Thu, 13 Nov 2008 01:24:00 GMT

Harvard University’s whopping $34 billion endowment is declining in the current economic crisis, and the hits could keep coming, wrote university president, Drew Gilpin Faust, in a recent e-mail sent to students and employees (“A Sober Message From Harvard’s President,” The Chronicle of Higher Education, Nov. 10, 2008).

While it is not known just how deep Harvard’s endowment losses go, Moody’s Investors Service projects that the value of college and university endowments, in general, have decreased by 30 percent this fiscal year. For Harvard, the nation’s wealthiest university, that would mean an $11 billion drop.

The declines mean that Harvard will have to make tough choices in the months ahead, Faust wrote, in anticipation of continued losses to an endowment that pays for more than one-third of the university’s operating budget.

“We must recognize that Harvard is not invulnerable to the seismic financial shocks on the larger world,” Faust wrote. “Our own economic landscape has been significantly altered.”

Although markets could improve, she added, “We need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial constraint.”

Harvard Exploring Cost-Cutting Measures

To cut costs, Harvard is in the process of reviewing its compensation expenses, which account for nearly half of the school’s budget, as well as reassessing its ambitious expansion program, which includes plans to build campus additions across the Charles River.

Like fellow Ivy League schools Brown University and Cornell University, which are delaying planned projects and implementing hiring freezes due to the effects of the economy, Harvard is also considering a budget freeze on all programs and a wage freeze for administrators and faculty. The Faculty of Arts and Sciences alone — Harvard’s largest body of instructors — has lost roughly $4.5 billion of its own endowment, or $225 million in net budget losses, a Harvard official familiar with the school’s financial picture told The Boston Globe (“Harvard Looks to Tighten Its Belt,” Nov. 11, 2008).

Despite Harvard’s belt-tightening measures, the school says it still intends to implement new initiatives that expand financial aid offerings for low- and middle-income families.

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Colleges With Highest Tuition Wary of Economic Downturn

Student Loan Girl — Thu, 06 Nov 2008 00:57:00 GMT

After years of ranking among the nation’s top five most expensive schools, Sarah Lawrence College — a private, liberal arts school in Bronxville, New York with a tuition price tag of more than $53,000 a year — is now the priciest school in America, beating out George Washington University and New York University, according to a new College Board report.

With such a hefty cost of attendance, the former all girls school, like many private colleges and universities, is concerned about its financial outlook in today’s economy (“Even at Costliest College, Unease Over Downturn,” The New York Times, Nov. 1, 2008).

Unlike public schools, which receive state and federal funding, private institutions like Sarah Lawrence depend on their tuition and fees, their fundraising efforts, and their endowments to pay for the bulk of their operational expenses.

Sarah Lawrence’s endowment, which the school uses to supplement its $80 million operating budget, has shrunk 16 percent from $77 million since May 2007. Yet, Sarah Lawrence still manages to offer 53 percent of its students some sort of financial aid — an expense that makes up 21 percent of the school’s budget.

While Sarah Lawrence has yet to see an uptick in the number of requests for financial aid this year, school president, Karen Lawrence, is wary of the economic pressures bearing down on the middle-and-upper-class families who may soon be or are already putting their kids through college.

“It’s really hard to tell how much we are going to be impacted,” Lawrence said. “Some students are struggling more because family finances are changes. We are trying to help them out.”

But, Lawrence said, the school’s small $65 million endowment, which pales in comparison to the $34 billion endowment of fellow liberal arts school Harvard University, is making it more difficult to help families meet Sarah Lawrence’s rising tuition costs.

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College Employees’ Donations to Obama Far Outweigh Contributions to McCain

Student Loan Girl — Fri, 24 Oct 2008 17:38:00 GMT

College employees have given eight times as much money to Barack Obama’s presidential campaign — $12.2 million — as they have to John McCain’s — just over $1.5 million, making it the widest gap in donations by academics in the past five presidential elections, according to data from the Center for Responsive Politics.

Obama, who taught constitutional law as a lecturer at the University of Chicago, has received donations from dozens of college presidents, from professors from a variety of liberal arts disciplines, and from faculty members at business, law, and medical schools, reports The Chronicle of Higher Education (“Donors From Academe Favor Obama by a Wide Margin,” Oct. 24, 2008).

A large amount of McCain’s donations from academic sources also came from a handful of college presidents and from faculty members at business, law, and medical schools. McCain also received donations from the head football and basketball coaches at the University of Arizona, a school in his home state.

Among the top 10 academic institutions to make donations to Obama’s campaign were the University of Chicago, Columbia University, where he earned his bachelor’s degree in political science, and Harvard University, where he earned a law degree.

Top 10 Colleges With Donors Giving to Obama Campaign

University of California: $778,000
Harvard University: $496,000
Stanford University: $342,000
University of Chicago: $285,000
Columbia University: $267,000
Northwestern University: $179,000
Georgetown University: $179,000
University of Washington: $165,000
University of Pennsylvania: $162,000
New York University: $158,000

Top 10 Colleges With Donors Giving to McCain Campaign

University of California: $40,000
Harvard University: $39,000
Columbia University: $35,000
University of Texas: $33,000
University of Pennsylvania: $28,000
Northwestern University: $21,000
Stanford University: $19,000
University of Minnesota: $18,000
George Washington University: $17,000
Washington University in St. Louis: $16,000

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Citibank Suspends Student Loan Program for International Students

Student Loan Girl — Thu, 16 Oct 2008 01:04:00 GMT

Citibank announced it is canceling its private student loan program for international students in an effort to minimize its financial risk during the global financial crisis, Bloomberg reports (“Citigroup Curbs Foreign-Student Loans at Harvard, MIT, Michigan,” Oct. 15, 2008).

The lender’s CitiAssist private student loan program allowed international students at certain schools to borrow as much as $150,000 in private student loans without a cosigner; similar programs required that international borrowers have a U.S. citizen or permanent resident cosign on the loans.

Citibank informed MIT and the University of Michigan this month that it will stop making CitiAssist loans to the schools’ international students in November, just before students begin borrowing for the 2009–2010 academic year. Earlier this month, the bank also terminated its international lending program at Harvard University.

CitiAssist “did fill a very important role,” says Elizabeth Hicks, executive director of student financial services at MIT, where more than 200 of the school’s foreign students at the Sloan School of Management will have fewer borrowing options to help them meet their education costs, which total nearly $76,000.

International Student Loans Drying Up, More Banks Unwilling to Lend

In suspending its lending program to international students, Citibank joins Bank of America, one of the largest providers of student loans to foreign students, which terminated its foreign student lending program in April.

Other lenders are not likely to fill in the lending gap to international students, due, in part, to the fact that international students have a higher likelihood of default than U.S. students and because loans to “international students are not the most profitable loans,” says Mark Kantrowitz, publisher of Finaid.org, a financial aid website sponsored by Citibank’s parent company Citigroup.

Analyst Daniello Natoli, of New York-based financial firm Matrix USA, adds, “It makes sense for [Citibank] to move away from riskier products such as loans to international students, whose creditworthiness is more difficult to assess.”

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SAT and ACT Tests Not the Best Predictors of College Success, Study Finds

Student Loan Girl — Wed, 24 Sep 2008 21:12:00 GMT

The colleges and universities that use students’ SAT and ACT standardized test scores when making college admissions and financial aid decisions should base these decisions on tests that more closely reflect a student’s high school achievement and understanding of the high school curriculum, according to the recommendations made by a new commission comprised of influential college admissions officials.

The commission, led by William R. Fitzsimmons, Dean of Admissions and Financial Aid at Harvard University, recently completed a yearlong study that questioned the relevancy of SAT and ACT tests for college admissions (“College Panel Calls for Less Focus on SATs,” The New York Times, Sept. 21, 2008).

“It would be much better for the country,” Fitzsimmons says, “to have students focusing on high school courses that, based on evidence, will prepare them well for college and also prepare them well for the real world beyond college, instead of their spending enormous amounts of time trying to game the SAT.”

Admissions officers should rely instead on exams that are closer linked to high school curriculum like the College Board’s Advanced Placement tests and SAT Subject Tests and the International Baccalaureate exams when making admissions decisions, Fitzsimmons says. Unlike the SAT and ACT exams, he argues, these other tests have fewer ties to the billion-dollar test-prep industry.

Test Scores Indicate Students Who Are Well-Off Have An Advantage

Fitzsimmons’ research group, convened by the National Association for College Admission Counseling, found that the nature of standardized testing places less emphasis on students learning their high school curriculum and more emphasis on test preparation — a discrepancy that favors affluent students who can afford test-prep resources.

The commission’s report found that standardized test scores emphasized the socio-economic differences of the SAT’s and ACT’s test-taking population and were reflective of a student’s race and ethnicity, socio-economic class, and their family’s level of educational attainment.

“Society likes to think that the SAT measures people’s ability or merit,” Fitzsimmons says. “But no one in college admissions who visits the range of secondary schools we visit, and goes to the communities we visit … can come away thinking that standardized tests can be a measure of someone’s true worth or ability.”

Testing Companies, Schools Disagree on Report’s Findings

Representatives from the College Board — which administers the SAT exam, taken by 1.6 million high school students this year — and ACT Inc. — which is responsible for the ACT exam, taken by 1.4 million students this year — both disputed the report’s findings. The companies contend that their tests do measure students’ understanding of classroom material, not just their test-preparation skills, according to a Bloomberg article (“Colleges Shouldn’t Rely on SAT, ACT Tests Study Says,” Sept. 22, 2008).

“Hundreds of national research studies show that the SAT is a valid predictor of college success,” the College Board wrote in a statement. “We have long advised that the use of the SAT in the admission process is in combination with high school grades.”

Prior to the report’s recommendations, only 280 four-year schools, including Wake Forest University, Smith College, Bates College, and the University of Wisconsin, had stopped requiring the standardized tests for admissions, and the report calls for more schools to follow suit.

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Harvard Professor Urges Students to Consider Public Service Over Wall Street

Student Loan Girl — Wed, 25 Jun 2008 19:53:00 GMT

A Harvard University education professor is challenging undergraduates at elite colleges to forgo high-paying consulting and finance jobs, for careers in public service.

The professor, Howard Gardner, is leading seminars at Harvard and, Amherst College in Massachusetts, and Colby College in Maine, to encourage undergraduates to reflect more seriously on the connection between their education and their aspirations, according to an article in The New York Times (“Big Paycheck or Service? Students Are Put to Test,” June 23, 2008).

“Are Ivy League schools simply becoming selecting mechanisms for Wall Street?” Gardner asks.

Gardner’s question has college officials at these schools contemplating whether too many of their top students, some of whom might otherwise choose to enter professions that aren’t measured by financial success, are choosing money over their ideals.

“We’re in the business of graduating people who will make the world better in some way,” says Anthony Marx, president of Amherst College. “That’s what justifies the expense of the education.”

Corporate Jobs Hold Big Appeal for College Graduates With Student Loans

Some universities, like Amherst, Harvard, Tufts University, and the University of Pennsylvania, are so concerned about corporate America’s hold over new graduates, that they have expanded their public service fellowship and internship programs.

This year Tufts announced it would pay off college loans for graduates who choose to work in the public-service sector. And officials at Harvard, Penn, Amherst, and a number of other colleges tell the Times that one reason they have begun offering financial aid packages that offer more grant money than student loans, is so their students don’t feel pressured to pursue lucrative careers just to be able to pay off their college debt.

While colleges and universities are taking steps to give graduates more freedom in choosing a career path by offering expanded financial aid, some students still prefer the safe, financially secure route.

Akshay Ganju, who wanted to become a doctor when he enrolled at Harvard four years ago, recently accepted a full-time job with Bain & Company, a global management consulting firm. The generous salary, he says, will make it possible for him to pay off his college loans.

“I don’t think the point of our education is to make us rich,” Ganju said. “We all feel we want to do something meaningful beyond just accumulating wealth.”

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Controversial Saudi Prince Funds Islamic Centers Abroad

Student Loan Girl — Tue, 13 May 2008 23:34:00 GMT

Prince Alwaleed bin Talal bin Abdul Aziz Alsaud, a member of Saudi Arabia’s ruling family, has endowed $31 million to Britain’s Cambridge and Edinburgh universities to create research centers devoted to Islamic studies.

The two academic centers will focus on projects designed to encourage understanding between Islamic and Western cultures. The prince has also financed the creation of two centers for American studies in the Arab world, at the American University of Beirut and the The American University in Cairo.

Yasir Suleiman, director of the Centre of Middle Eastern and Islamic Studies at Cambridge, told The Chronicle of Higher Education the prince’s donation has not yet raised any concerns about each centers' scholarly independence, as the prince’s similar donations to Harvard and Georgetown universities did three years ago (“2 British Universities to Benefit From Saudi Prince’s Gifts,” May 9, 2008).

In 2005, the prince donated $20 million to each Harvard and Georgetown to further the schools’ long-standing traditions of scholarship in Muslim and Arab cultural studies.

At the time, some U.S. lawmakers expressed their concerned that the prince, who completed his undergraduate and graduate degrees in the United States, would attempt to use his donations to exert influence over the academic direction of the centers. But John Esposito, director of Georgetown’s Prince Alwaleed Bin Talal Center for Muslim-Christian Understanding, said the prince has been hands off in his endeavor.

The prince has been attempting to foster intercultural dialogue with the United States since the terrorist attacks of Sept. 11, 2001, the Chronicle reports. However, his $10-million offer to the Twin Towers Orphan Fund — an educational and welfare assistance program for children orphaned after Sept. 11,2001 — was rebuffed after Rudolph Giuliani, then mayor of New York City, learned the prince said the United States’ policies in the Middle East were among the “issues that led to such a criminal attack.”

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Rockefeller Gives $100 Million to Harvard

Student Loan Girl — Tue, 29 Apr 2008 23:59:00 GMT

Recently, Harvard University alumnus David Rockefeller, announced that he will be giving his alma mater the single largest gift from a former student ever, writes Stephanie Strom of The New York Times, (“Rockefeller Gives Harvard $100 Million,” April 25, 2008).

The $100 million gift will be added to the school’s $35 million endowment, the largest among all universities.

Roughly $70 million of the award will help fund the school’s undergraduate international study programs, which have more than doubled in participants over the last four years, and, according to a university survey, have been financially inaccessible for many more Harvard students.

The remainder of the gift will be earmarked for the expansion of the school’s arts education programs.

In a telephone interview with The Times, Rockefeller commented that Harvard played an important role in his life and that the school’s study abroad program helped inspire his passion for studying art. In the summer of 1936, Rockefeller took his first art courses in Germany, where he chose to study to fulfill his foreign language requirement, Strom writes.

Although Harvard will not receive Rockefeller’s $100 million gift until after his death, he has agreed to give the school $2.5 million annually, resulting in the school receiving more than the promised $100 million.

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