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Fallen on hard times, colleges wary of spending

With turbulent financial markets and a global credit crisis, many investors are expecting decreased returns - including colleges and universities. As the nation faces an economic downturn, many are taking measures to protect themselves.

At Dartmouth, for example, the fiscal year 2008 endowment return was only 0.5 percent, significantly lower than the 5 percent it had predicted, according to a press release. The University of Pennsylvania, even worse off, lost 3.9 percent of its endowment.

Most schools manage their endowments, however, in order to contend with such market fluctuations, Susan Howitt, Brown's associate vice president for budget and planning, told The Herald earlier this month.

Many colleges and universities, furthermore - especially those with large endowments - have had strong investment returns in the past few years, providing them something of a cushion. (Brown earned a relatively strong 6.3 percent on its endowment in fiscal 2008, but 21.7 percent the year before.)

Even so, many schools are taking some immediate steps to respond to the added strain of diminishing returns and to steel themselves for future losses. Last week, President Ruth Simmons said at a faculty meeting that the University may need to hold off on some projects. Other schools are also scaling back.

Boston University, for example, has frozen hiring for all "non-critical positions," exempting only staff such as security guards, said a spokesman for the school, Colin Riley. The university has "adequate resources and access to capital," he said, but the school's president and senior administrators nevertheless thought it would be prudent to stop hiring for the approximately 200 non-critical positions.

Even schools that have taken no specific steps are proceeding cautiously. The Yale Daily News reported earlier this month that the university's trustees had discussed scaling back the school's $2.6-billion campus construction and renovation effort, though no official decision was reached.

Joe Wrinn, a spokesman for Harvard, wrote in an e-mail to The Herald that "the fluctuations in the market have underscored the importance of planning and priority setting" at that university.

"While we undertake these activities in the ordinary course of our work, they take on added importance during these extraordinary times," he wrote.

However, much of the fallout for private schools has yet to be seen. Changes in financial aid, for example, can be expected as unemployment rises and the economy does poorly, but the full extent of the damage to individual students' savings is largely unknown until students apply for aid.

"A lot of people's college savings got quite badly hit," said Professor of Economics David Weil. If the economy enters a recession, he added - as he himself predicts it will - students and their families will have a tougher time making ends meet.

Wrinn wrote in the e-mail that Harvard has already been working with students who are being affected by the crisis.

"Financial aid officers across the schools have been talking to and meeting with students and families with questions or concerns, or with changes in circumstances," he wrote.

In her comments to faculty earlier this month, Simmons said that Brown would remain focused on its financial aid commitments.

Some schools are also preparing themselves for a potential decrease in giving as alumni and other donors see their portfolios shrink.

However, private schools like Brown, BU, Dartmouth and Harvard, who all boast billion-dollar endowments, are hardly the ones hit the worst. Public schools, which depend on tuition and state funding for their operating budgets, are less protected.

According to an article earlier this month in the Chronicle of Higher Education, the state of Michigan has even discussed the possibility of closing one of the campuses in its university system.

Ricardo Vazquez, a spokesman for the University of California system, which encompasses ten schools and serves more than 150,000 students, said that the UC system's operational budget, which was set before the credit crisis, has not been changed, though he added that he did not know what could happen in the future.

Ultimately, though, no one knows what the next months and years hold for the economy.

"It's a little to soon to tell where the crisis will lead," Weil said. "But from a lot of different directions, it's going to be tight."


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