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Archive for November, 2008

Colleges Struggle to Preserve Financial Aid

Posted by gradefund on November 20, 2008

Colleges Struggle to Preserve Financial Aid

Published: November 10, 2008

FOR years, as the stock market roared, educational endowments swelled, helping private secondary schools and colleges provide more financial aid, expand and attract better faculty. But with the financial markets in crisis, those days are over.

Jodi Hilton for The New York Times

BELT-TIGHTENING At Amherst College in Massachusetts, the endowment has fallen 25 percent in four months, says Anthony Marx, the president, center, speaking with parents and alumni. Financial aid will not be scaled back, he said, but a renovation project has been delayed.

Today educational institutions are cutting spending, delaying projects and holding off on hiring. While many schools and colleges say their commitment to helping families pay the costs of education will not waver, some experts maintain that as investments shrink and donations fall, some institutions will be forced to cut back on financial aid.

Morton Schapiro, president of Williams College in Massachusetts, which has long had a commitment to accepting students without considering their financial situation, said he doubted that all colleges with such full need-blind policies would be able to hold to them.

“The major dial you turn for most financial crises is that you admit more students who can pay, as a way of increasing revenues,” Mr. Schapiro said. “With the tremendous decline in wealth, I think fewer people will hold on to needs blind.”

Molly Corbett Broad, president of the American Council of Education, a group of 1,800 public and private colleges, said the problems would be worse where endowments are smaller and enrollments larger, like at some public universities. “The farther down the food chain you go in terms of endowment per student,” she said, “the harder it will be to sustain need-blind admissions.”

One of the few college presidents speaking publicly about making some adjustment is Douglas Bennett of Earlham College in Indiana. About 18 percent of its students are from families with less than $60,000 in income and receive financial aid.

“If you are truly need-blind, you can go broke,” Mr. Bennett said bluntly during a telephone interview. “It is like writing a blank check to the world.”

The relative share of financial aid that is picked up by the government is declining as well, he added. As the burden is shifted to families and institutions, Earlham is trying to figure out what to do. The college is particularly concerned about students that it accepts and enrolls but whose financial needs it may not be able to meet.

Mr. Bennett said Earlham, which had a $350 million endowment at the end of June, was considering limiting its need-blind admissions policy to three-quarters of the class. The college would then know how much it had committed in financial aid and would be able to take that into account in admitting the remaining 25 percent.

Endowment management at most colleges involves a “smoothing strategy” that tries to blend spending over good years and bad in the hope of avoiding abrupt layoffs or other cuts if the endowment falls precipitously.

Though endowments generally pay out about 5 percent of their assets annually, they often calculate the amount on an average of the previous three years, or other formulas. So in a rising market, colleges appear to be giving away less than 5 percent of the current endowment value; in a falling market, they appear to be giving away more.

A prolonged bear market would be likely to depress returns or even create more losses. Contributions from alumni might also decline, putting even more pressure on endowments just as the colleges need more financing from them.

For the moment, colleges with heftier endowments say they can weather the storms. In late October, Anthony Marx, president of Amherst College, posted a letter on the college Web site that said the endowment had fallen 25 percent since June 30, the end of fiscal 2008, when it stood at $1.7 billion. Still, Mr. Marx wrote, the commitment to financial aid would not be scaled back, although Amherst would postpone a renovation project and would review plans for new hires more stringently.

But the new financial realities mean that “every school is looking at what they can cut and what they can reallocate,” said Steven Rattner, a managing principal of the Quadrangle Group and acting chairman of Brown University’s investment committee.

“Nobody thinks the market will turn around and go back to do what it did before,” he said. “That means everyone is having to plan for a more difficult and turbulent financial environment to bring our expenses in line with resources.”

Everywhere, the goal is to keep entry to colleges accessible. “Just as schools have less money, the families need more,” Mr. Rattner said. “While they are all looking to trim fat, the needs-blind issue is seen as muscle.”

As part of a $1.4 billion fund-raising campaign, Brown is seeking $400 million for financial aid. Ronald Vanden Dorpel, senior vice president for advancement, said the university tells potential donors that such gifts let Brown admit the best and most diverse students — “whomever we want without looking at their ability to pay.”

During freshman weekend at Williams last month, Mr. Schapiro told families that if their financial circumstances had changed, the college wanted to know and would try to accommodate their needs.

The college has 2,000 students, and “I got about 12 calls from families that told us they might need more help,” said Mr. Schapiro, who is also president of the 568 Presidents’ Group, 30 colleges that have agreed to admit all American students on a needs-blind basis.

Mr. Schapiro has already alerted the Williams community about other cutbacks. In a letter several weeks ago, he said the endowment budget had been predicated on an annual increase over the long term of 8 percent; last year, Williams’s endowment was down one-tenth of 1 percent. He also warned that Williams would have to think about the impact of the roiling economy on giving.

Williams has decided to delay the completion of a sports field and a library. That will save money, Mr. Schapiro said, and avoid the need to borrow. In the current credit crunch, he noted, “the preferential interest rates once afforded to schools are temporarily gone.”

“We have invested in things such as housing and psychological services,” he said. “And we are going to have to allow attrition to give up some staff. The days of adding lots more staff for these purposes are over.”

In California, Stanford University is looking at 5 percent cuts across the board, slashing $45 million from its $800 million basic operating budget, according to Lisa Lapin, a campus spokeswoman. She said that Stanford was planning on modest and selective salary increases next year but that its commitment to financial aid was firm, even as requests for it rise.

Roughly half of Stanford’s $120 million in financial aid, which helps 77 percent of the undergraduate body, came from the endowment in fiscal 2007, Ms. Lapin said, and maintaining access to Stanford for top students, regardless of costs, remains a top priority.


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Governor, citing economy, urges delay of new Oregon graduation requirements

Posted by gradefund on November 20, 2008

Gov. Ted Kulongoski said Friday that he wants to delay Oregon’s new graduation requirements, giving a pass to this year’s high school freshmen, who are supposed to prove their skills in reading, math, speaking and writing to get a diploma.

The more rigorous requirements were enacted by a unanimous Oregon Board of Education in June after nearly three years of study. Joining 26 other states, the Oregon board said schools need to get all students up to par in so-called essential skills before sending them to college and careers.

But Kulongoski, citing the sharp economic downturn, told hundreds of local school board members Friday that he doesn’t think he will be able to find millions of dollars to hire more teachers and upgrade schools to get students to higher standards.

So he will push the state board to delay the higher graduation requirements rather than give schools what he called an “unfunded mandate.”

School board members applauded his remarks, saying they will need more time and money to get the job done.

“It makes sense to me,” said Craig Prewitt, a Phoenix-Talent School Board member and president of the school boards association. “He believes in flexibility, and this will buy us more time.”

However, state school board Chairman Duncan Wyse said the board is unlikely to drop the new requirements entirely.

“We are not going to lose course here. We have to keep this moving at the fastest speed we can with the resources available,” said Wyse, who heads the Oregon Business Council. “We want to encourage schools to do everything they can to keep kids on this trajectory ”

Wyse agreed that the state’s money woes will make it difficult for schools to get their least-prepared students to meet the new exit standards. He said the state board will probably seek a way to delay or scale back some elements of the new graduation standard but to hold others high.

“There are a lot of ways to be creative about how we do that,” Wyse said. For instance, Oregon could delay the new test for math but require students to meet the new reading and speaking standards.

This fall, every public high school in Oregon distributed brochures to every freshman detailing the new requirements they will have to meet to graduate.

Ron Naso, superintendent of North Clackamas schools, said lowering academic requirements to accommodate a budget downturn could lull students, parents and schools into thinking the higher standards will never take effect. State insistence on high standards is a big motivator, he said.

“It’s like what the Gilda Radner character on ‘Saturday Night Live’ used to say: ‘Never mind.’ When you say that enough times, it does start to challenge your credibility. That’s an unfortunate consequence.”

California, Washington and 24 other states require students to pass state exams to get a diploma.

A panel of Oregon educators convened by the state estimated it would cost about $266 million in 2009-11 to equip schools to get all students to meet the new graduation requirements.

The primary costs would be to hire more math, science and reading teachers and to provide more training for teachers already on the job, said Brian Reeder, assistant state superintendent who headed the project. Oregon schools would also need to hire more counselors and provide extra tutoring time — the equivalent of six weeks of summer school for the one-tenth of students at greatest risk of not graduating — to get the job done, his panel found.

Kulongoski cautioned school board members that coming up with that kind of money, given the national economic collapse, “is probably not in the cards.”

He said schools should continue to plan for higher standards and get ready to implement higher levels of teaching once money becomes available — but he said he can’t predict when that will happen. The 2009-11 budget will be the last of his eight years as governor.

“When the money is available to raise the bar on earning a high school diploma, preliminary planning should already be finished so that implementation can begin immediately,” said Kulongoski, who acknowledged that his half-hour speech to the school boards conference was “an exercise in lowering expectations.”

– Betsy Hammond;

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