How Will Colleges Survive? Schools Suffering In Crisis As Endowments Wither

Harvard recently reported that the value of its endowment dropped $8 billion between the end of June and October of this year. At the same time, a recently released independent report flunks 49 states in the realm of affordability. As the economy contracts, colleges and universities are struggling to find funding alternatives - and solutions.

Peter Cohan of Bloggingstocks reports:

The options for universities are dwindling. A study suggests that tuition has risen 439% since 1982 while median family incomes have increased only 137% during that period. If tuition continues to rise at that rate, few families will be able to afford college. With the student loan market in dire straits and incomes likely to fall further due to layoffs, the only way for colleges to attract top students who can't pay will be to cut tuition even more on the lower income families while making up the difference by raising tuition for the wealthiest ones.

With endowments shrinking, there really won't be an option of using that endowment income to make up the difference. And in order to keep from losing money on operations, colleges will need to cut their costs drastically while maintaining teaching quality. This is something that colleges have little experience doing.

The biennial study by the National Center for Public Policy and Higher Education, which evaluates how well higher education is serving the public, handed out Fs for affordability to 49 states, up from 43 two years ago. Only California received a passing grade in the category, a C, thanks to its relatively inexpensive community colleges

The problem seems likely to worsen as the economy does, said Patrick Callan, the center's president. Historically during downturns, "states make disproportionate cuts in higher education and, in return for the colleges taking them gracefully, allow them to raise tuition," Callan said. "If we handle this recession like we've handled others, we will see that this gets worse."