Worries About Economic Downturn Spread to Higher Ed
October 3, 2008
by Emily So far colleges and college students have been weathering the credit crunch and financial troubles on Wall Street fairly well. Students have been able to get student loans and pay for school, and colleges have been able to raise money for projects and provide students with needed services and even additional scholarship money in many cases. However, events of the past few weeks appear to be starting to take a toll on colleges and universities.
Earlier this week, many universities saw their investments held in the Commonfund, which was run by Wachovia, frozen after the bank announced that it would sell its operations to Citigroup this week. Schools were initially given access to only 10 percent of Commonfund funds in order to prevent a run on the bank. While the amount has increased and crisis has largely been averted for universities depending on this money for regular operating costs, there was initial concern this week that some schools might not be able to make payroll.
Boston University announced a freeze on future hiring and construction projects earlier this week, and the University of Memphis announced a voluntary buyout plan for 115 positions within the university. Other colleges are beginning to struggle financially, as well, as they face the prospect of smaller donations and less state funding. The economic downturn may lead to more staffing cuts, fewer resources available to students, higher tuition, and even smaller or fewer financial aid awards (especially in the case of scholarship awards that rely on alumni donations for funding each year).
While students typically flock to colleges and universities when they can't find employment, the impact of the economic downturn and the continued (though still entirely theoretical) threat of a lack of student loan or federal aid funding for students may cause some students to decide against attending college, or to make their decision based entirely on which option is cheapest. The Chronicle of Higher Education, in addition to offering a thorough description of the impact of the economic downturn on higher education, also gives a list of prospective winners and losers if the situation continues to worsen. The top of the list of losers? Middle class families.