A Matter of Endowment
By: Michelle Adams
The downturn of the American economy at the end of 2008 has left a series of worsening and continuing consequences. A disappointing holiday shopping season has necessitated the closure of various stores and unemployment is at 7.2 percent, up from 5 percent at the end of 2007. The Dow Jones Industrial Average has fallen record amounts and is lower than it was even in 2002, in the aftermath of September 11th. The situation is expected to worsen, with unemployment predicted to reach 10 percent, before economists foresee any sort of recovery.
Many are warily optimistic that President Obama’s new administration and proposed programs will bring a radical turn-around to the present state of the economy. Only time will tell what exactly it will take for the stock market and general economy to recover completely to its previous condition of relative prosperity. Congress has been dealing with the ensuing crisis through the deliverance of stimulus packages to various industries. These have primarily been in the form of “bail-outs” to insurance companies, banks, and automotive manufacturers such as CitiGroup, AIG, General Motors, and others. The hope in this method is that pushing large chunks of money at a time into the economy via the aforementioned companies and industries will increase spending and therefore economic stability.
If bailouts are so good, then why not bail out students? I’m not a big fan of bailouts, but since everyone has their hand out, including state governors, what of poor students? Industries and businesses are being extensively evaluated from a financial perspective by Congress and the administration, but why not students and the thousands of universities they attend nationwide? Total bailouts in 2008 have added up to about $8 trillion, which is about $32 thousand per man, woman and child – a little less than a year’s tuition at Lehigh. While students’ ability to pay steep and ever rising college tuition fees is getting tougher, the economy has been harsh on universities and their ability to provide financial aid and cover operating costs as well. Financial difficulties have only been complicated recently for many universities by the fraudulent investment debacle Bernard Madoff created. Tufts University lost 20 million dollars from Madoff’s scandal. This is quite a bit of money, but was really only 2 percent of Tufts’ endowment fund. This is a trivial sum compared to up to 110 million dollars that other universities lost from Madoff alone. These losses from investment scams are in addition to already severe losses incurred by investment portfolios doing poorly, given the current economic circumstances.
Lehigh University itself has not had such ill effects as other universities, though efforts have been made to further diversify Lehigh University’s investment portfolio to make some attempt to dampen the effects of the economy on its endowment fund. Lehigh University has enjoyed the benefits of an endowment fund growing to $1.1 billion in 2007 from just $513 million ten years previous. Unfortunately, since 2007, growth of the endowment fund has stagnated with little hope for a recovery in the near future. In past years, tuition fees have increased significantly as has the number of students admitted to Lehigh University, though the rise in students hasn’t been as steep as that of tuition. With more students and higher tuition, one would expect more financial aid to be provided. Especially with the more difficult economic times, universities should be able to offer more financial aid as students’ ability to pay tuition fees lessens and the job market for college graduates tightens. Although the financial aid budget has remained at $50 million for the 2008 – 2009 school year, there is reason for concern about aid for future years considering the poor performance of the endowment fund in 2008. For now, the one bailout students do have from the job market is the increasingly popular choice of graduate school.
