Tuesday, December 1, 2009

Colleges Struggle to Preserve Financial Aid

by Geraldine Fabrikant
posted by Lily Mei

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.

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.

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