Student Loan Blog : college endowments

Colleges Receive $70 Million in Anonymous Donations

Student Loan Girl — Wed, 29 Apr 2009 22:21:00 GMT

An anonymous donor is playing secret Santa with at least a dozen colleges and universities nationwide, but instead of giving $5 trinkets this Santa has left schools with $1 million to $10 million gifts, The New York Times reports (“Anonymous Donor Gives Millions to Colleges,” April 24, 2009).

Over the past two months the donor has given away $70 million to select schools. To remain anonymous, the donor employs a bank to contact the schools either with a call or letter that relays sentiments similar to what was written in one letter: “It is hoped that this will make a substantial difference to your students during these challenging times… enabling a more confident, sharper focus on their studies with improve career and life prospects.”

None of the school officials at the selected schools know whether the donations are coming from a man, woman, or organization, and no one seems to want to jeopardize their gift by speculating too much about the reasoning behind the donor’s selections. There’s a pretty clear consensus, however, that the schools share one common trait: they’re all led by women.

Lois DeFleur, president of Binghamton University in New York, is more than fine with this reasoning, if it is indeed the case, “The actions say, ‘I’m investing in an institution because it has achievements and I believe that with women leaders it will have future accomplishments.’ That’s pretty powerful in my view.”

The donations, which at some schools have been the single largest donation in the school’s history, have ranged from the $10 million given to Michigan State University, to the $1.5 million given to the University of North Carolina in Asheville. In return the donor has asked for complete anonymity and for the majority of the donation — 50 percent to 80 percent of the total donation in each case — to be used for financial aid.

The schools say they are extremely grateful for being chosen, particularly since higher education institutions across the country have seen an increasing demand for financial aid at the same time that state funding and endowments are drying up.

“In the best of times we never have enough scholarship money for students who have financial need,” said Susan Cole, president of Montclair State University in New Jersey. “In these difficult times, that is multiplied. The gift is incredibly important to us. I cannot adequately express the depth of our gratitude.”

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Despite Down Economy, College Student Aid Still Thriving

Student Loan Girl — Tue, 24 Mar 2009 00:18:00 GMT

In economic downturns, colleges and universities become flooded with students of all ages looking to better prepare themselves for an increasingly competitive job market. But these schools haven’t been immune to the effects of today’s recession.

Fortunately, for every recent economic downturn in higher education — tuition hikes, state budget cuts, scholarship and grant cutbacks, and a fluctuating student loan market — there’s also been a tangible upside (“Glimmer of Hope for Student Aid in a Bad Economy,” USA Today, March 19, 2009).

Tuition Assistance

Downside: Public colleges have increased tuition by 4 percent per year over the past 10 years, and many schools are set to bump up tuition even more this year as they face unprecedented state budget cuts.

Upside: Federal stimulus money should help some public colleges to better cope with the loss of state funding and to minimize any increases in tuition. The state of Maryland is hoping to go a fourth-straight year without in-state tuition increases. Other colleges are offering one-time deals to students; Kent State University in Ohio is offering laid-off workers a one-time tuition and application waiver at its Trumbull campus, and Manchester College in Georgia is offering to refund one year of tuition for students who aren’t able to secure a job or admission to grad school within six months after graduation.

Institutional Aid

Downside: Trouble in the stock market has caused colleges’ endowments to drop 25 percent in value this year, which has severely hampered schools’ ability to offer scholarships.

Upside: Despite their endowment losses, more than 90 percent of the nation’s private colleges and universities will be increasing financial aid next year by 9.8 percent to make up for 4-percent tuition increases, according to the National Association of Independent Colleges and Universities.

Government Grants

Downside: Aid for merit scholarships has taken one of the biggest hits this year, primarily due to state budget cuts.

Upside: The federal stimulus package has increased the maximum award for Pell Grants — federal financial aid for low-income students — from $4,731 to $5,350 for the coming academic year and to $5,500 for the 2010–2011 academic year. And, an additional 800,000 students are expected to receive Pell Grant funding this year.

Federal Student Loan Programs

Downside: The $50 billion Federal Family Education Loan Program — the government program that provides federal student loans to more than 10 million students through third-party lenders — has been the larger of the two federal student loan programs. But over the past two years, the FFEL program has lost business to the Direct Loan Program, the government’s other federal student loan program through which the U.S. Department of Education provides federal student loans directly to families, as hundreds of cash-strapped FFELP lenders have been forced to exit the program.

Upside: The FFEL program has still managed to increase its student loan volume this year, and some lenders are returning to the student loan market now that the federal government has bought nearly $25 billion in lenders’ student loan securities, providing them with the capital to make new loans. The Direct Loan Program has picked up the slack, providing an additional $7 billion in lending this year.

Private Student Loans

Downside: The overall supply of capital for private student loans is estimated to have decreased by one-third — a decrease of between $6 billion and $7 billion — due in large part to the fact that lenders have made it harder for families to qualify for private student loans.

Upside: Increased government funding for federal Stafford student loans has helped to reduce students’ reliance on private student loans. And more students are maxing out their federal financial aid before turning to private student loans, which the USA Today suggests has helped students avoid over-borrowing in private student loans.

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College Scholarships Dry Up Along With Endowment Funding

Student Loan Girl — Tue, 17 Mar 2009 21:17:00 GMT

For the six-month period ending in December, college endowments nationwide lost an average of 24 percent, according to the nonprofit Commonfund Institute of Connecticut, forcing a handful of small regional universities to make significant cutbacks to their scholarship funds for the upcoming fall semester (“More Bad News on Campus: Scholarships Drying Up,” Associated Press, March 12, 2009).

This year, Eastern Washington University in Cheney, Washington, provided half a million dollars for 500 scholarships, said Mike Westfall, vice president for university advancement. After experiencing a 20-percent drop in its endowment, the school will only be able to provide $100,000 in scholarships for the coming academic year, which, Westfall said, will significantly impact its student population.

“Over 50 percent of our students are first-generation students. First-generation students tend to be more dependent on financial aid. To take that away is troubling,” he said. To make up the difference, Eastern has increased its fundraising efforts and created a new scholarship website.

Rhode Island College, which saw a 22-percent drop in its endowment this year, has decided to suspend all scholarships for the upcoming school year, largely because the college’s endowment scholarship fund is “underwater” after dipping below the amount the fund started with.

The University of Wisconsin-Superior will have to offer approximately $100,000 less in endowed scholarships next year based on the decline in value of its endowment.

And with only $200,000 available for scholarships next year — after distributing about $900,000 this current year — Western Washington University in Bellingham plans to increase scholarship fundraising for the fall to cover its 30-percent drop in endowment funds.

The school would also like to increase funding for its $800,000 annual scholarship campaign to make up for endowment losses, said Stephanie Bowers, vice president for university advancement and executive director of the university foundation.

Bowers characterizes next year’s scholarship prospects as bleak, but said that she remains hopeful about the future, “When you work for a foundation, you take the 100-year view.”

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Note to Families: Financial Aid More Competitive, But Not Out of Reach

Student Loan Girl — Tue, 27 Jan 2009 00:09:00 GMT

With more families applying for financial aid — applications are already up 10 percent above last year’s record — and lending for private student loans drying up, families’ ability to find available financial aid is becoming more difficult, reports the Associated Press (“College Financial Aid System Facing Stiff Test,” Jan. 25, 2009).

Traditional sources of college funding are no longer available: Home values are dropping, making it difficult for families to get a home equity loan, college savings accounts are dwindling, and private lenders are leaving the student loan market.

Currently, only 21 of the 60 third-party student loan lenders who issued $19 billion in federal and private student loans last year are still lending, and most of the lenders still issuing loans have severely tightened their credit criteria, according to Finaid.org, a college funding resource site.

Families face limited financial aid options at a time when state funding shortages have forced numerous state colleges to cut their financial aid budgets and replace grants and scholarships with student loans in their financial aid offers. Colleges are also increasing tuition, in some cases, by double digits.

“There are no sure answers because we’re in new territory,” said Bruce Hammond, a college admissions consultant based in Washington, D.C. “But students with high need and lesser credentials are going to have to brace themselves for less aid.”

Financially Needy Students Should Know Their College Funding Options

While the financial atmosphere for college students and their families may seem more dismal this year, things “are not as scary as people might think,” says Lauren Asher of the non-profit California-based Institute for College Access and Success.

Students and parents can take advantage of expanded federal financial aid offers. The U.S. Department of Education has already made $95 billion in grants, loans, and work-study assistance available to nearly 11 million students and families and Congress has increased annual borrowing limits for unsubsidized Stafford student loans, which are not tied to financial need, by $2,000. And President Obama’s proposed stimulus package could offer families even more financial aid.

Cash-strapped families and students could consider attending lower-cost public schools and community colleges to avoid taking on large amounts of debt. On average, tuition and fees at a two-year public school cost about $2,300, while tuition and fees at a four-year public school cost about $6,000, according to the College Board.

And while a number of the nation’s top colleges and universities, including Harvard , Yale, and Duke, have seen their endowments take a huge hit this year, none of these schools have gone back on their commitment to offset their high tuition costs by extending financial aid offers to a greater number of low- and middle-income families.

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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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Princeton Review to Rate Colleges on Eco-Friendly Initiatives

Student Loan Girl — Fri, 11 Jul 2008 00:53:00 GMT

In addition to categories like tuition and fees, and campus life, colleges and universities are now being rated on just how green they are, according to an article in The Christian Science Monitor (“Now, ‘Green’ Report Cards for U.S. Colleges,” July 8, 2008).

Sustainability has become such an important issue for college students that six out of 10 college applicants and parents say the environmental factor would affect their decision to apply to or attend a school, according to a survey this year by Princeton Review.

The for-profit test preparation company will include a “Green Rating” of 600 colleges in several of its popular college guides this summer in an effort to help students find environmentally-friendly schools. Colleges and universities will be rated on their building and transportation policies, food sources, recycling, and the availability of environmental courses, The Christian Science Monitor reports.

Julian Dautremont-Smith, associate director of the Association for the Advancement of Sustainability in Higher Education, said her organization is seeing more schools “look at sustainability as a strategic priority and a way of distinguishing themselves.”

“There are many schools that are striving to be … the ‘greenest’ campus,” she added.

Students can check out whether their campus is eco-conscious by looking at the College Sustainability Report Card, which gives letter grades to at least 200 public and private schools with the largest endowments.

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Senator Proposes Penalties for Colleges That Hoard Endowment Funds

Student Loan Girl — Thu, 15 May 2008 18:58:00 GMT

In a recent letter to the U.S. House of Representatives Committee on Ways and Means, Rep. Peter Welch, D-Vermont, proposed restricting IRA rollover contributions to colleges that don’t use their endowments to help low and middle-income students pay for college, according to an article in The Chronicle of Higher Education (“Proposal Would Restrict Certain Gifts to Colleges That Hoard Endowments,” May 13, 2008).

Welch said wealthy colleges, which are among the biggest beneficiaries of those IRA distributions, should be ineligible to receive the perks if schools’ endowments aren’t used to contain college costs for needy students.

He urged the House Ways and Means Committee — which is currently drafting a new tax bill — to include penalties for schools that hoard their endowment assets.

Another proposal by Welch, that would require colleges to spend at least 5 percent of their endowments every year and to annually report how much of their endowment funds have been spent, is part of current House legislation to reauthorize the Higher Education Act.

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Wesleyan University Student-Pioneered Endowment First of Its Kind

Student Loan Girl — Mon, 05 May 2008 17:25:00 GMT

The student government at Wesleyan University in Middletown, Connecticut, has established an endowment that it hopes will eventually eliminate the $270 activity fee required of all students, writes Charles Proctor of The Hartford Courant (“Wesleyan Students Pioneer Endowment Fund,” April 27, 2008).

This endowment may be the first in the country where college students will be solely in charge of making the investment decisions — college administrators will serve in an advisory capacity only, offering guidance on what companies or funds to invest in.

The Wesleyan Student Assembly members hope that in successfully managing the endowment, the student organization will be able operate fully off returns on investment and do away with the student activity fee, which currently pays for the student government’s operations and helps fund other student organizations, Proctor writes.

Wesleyan Assembly President Matthew Ball, the endowment’s brainchild, admits it may take quite a long time to accumulate sizeable returns, but he says that putting the money to use is much better than allowing unused funds to languish, as they have in the past.

Ball hopes that using the endowment to help reduce students’ costs will send a message.

“If we create a way for us to be sustainable without the students having to pay money, it might suggest that universities can do the same thing, or at least look into ways for students to save money,” Ball told The Courant.

The endowment’s creation comes after tuition increases at the school of at least 5 percent for each of the past three years. Tuition is set at $38,364 next year, not including $10,636 to $12,088 in fees for room and board.

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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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