Saturday, February 21, 2009

How Quickly Things Change

With its endowment down an estimated 30%, Harvard is evidently "short on cash":

The school relies on its endowment to generate a third of the money for its operations, and the endowment is on the verge of posting its biggest loss in 40 years. With much of its money tied up for the long term, it is scrambling to meet some obligations. Harvard has frozen salaries for faculty and nonunion staff members, and offered early retirement to 1,600 employees. The divinity school has warned it may not be able to cover tuition for all its students with need, the school of arts and sciences is cutting its billion-dollar budget roughly 10 percent, and the university president said this week than the unprecedented drop in the endowment was causing it to delay its planned expansion, starting with a $1 billion science center, into the Allston neighborhood of Boston.
Similarly, Yale's endowment is down about 25%. Bradeis University is in such dire straits that it's actually liquidating a prized art collection valued at $350 million. A mere 14 months ago, Fay Vincent was musing in the Wall Street Journal that university endowments' spectacular performance might soon lead to the end of tuition, or very close to it, at elite universities:
[T]hese powerful investment returns will change tuition pricing and financial aid -- and not just at Harvard. A scholar who follows these matters closely recently told me that he anticipates that the elite private colleges and universities will, in the not-too-distant future, stop charging tuition to any student whose annual family income is below the top 5% of all American families -- currently around $200,000.
Vincent's op-ed was titled, "Harvard for Free." Last week, Harvard announced a 3.5% increase in tuition. How quickly things change.