For years, colleges have operated with the cushion of sizable endowments reaching into the billions from various donors for several specific purposes. These endowments or donations are fashioned and invested for a prescribed period of time only to be used up in percentages with the principal untouched. By investing these funds, universities are able to supplement operating budget costs and costs not afforded by the tax-base income.
Endowment spending covers anything from portions of faculty salaries and student scholarships to construction projects on campus. On average, universities, large and small, spend between 4.6% and 5% of their endowment assets each year. (National Association of College and University Business Officers and Commonfund Inc.)
Given the sharp, treacherous economic decline, college endowments have seen the biggest drop since 1974. (WSJ) According to the Wall Street Journal, “investment losses of at least $94.5 billion” have pummeled institutional pocket-books. (National Association of College and University Business Officers and Commonfund Inc.)
As far removed as this may sound to a student, the affects of this pecuniary drought can impact students in different ways:
Universities will be forced to either lay off faculty or enact hiring freezes. More sought after professors will be inclined to seek employment at wealthier schools, and there will be limited staff per department.
With lay-offs and hiring freezes creating a shortage in staff, classroom sizes will increase. This piece pours directly into most college ranking systems. A low student to staff ratio is more attractive on paper, not to mention a large classroom limits the possibility for student/professor relationships.
Many schools have made known recently their intentions to pare down any plans for construction projects. Constant growth and refurbishing are apart of the appeal and essential for the progressing times and needs for each campus.
Scholarships and fellowships for grad students also make up endowment spending. Some experts predict that endowment spending will increase, thus drying up money pools.
The danger to panic-induced spending is that it comes near the edge of tapping into reserves that may be allotted for other specific purposes such as student scholarships. Students need financial assistance now more than ever; however, the probability of receiving a scholarship if endowment spending increases will lessen.
With economic down-turn, it’s only a matter of time until its abysmal affects trickle into the lives of the common citizen. If you are a student intended for higher education, now is the time to become aware of the current happenings in the world and government. Arm yourself with knowledge so that you can be better prepared for a future that might just be precarious at best.
An important stimulus for our country’s economy is a growing number of a highly educated citizens who can pour into a free market and work to maintain our freedoms and lifestyles.
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