<p>As a follow on question to the Forbes article, what kind of financial figures should raise red flags about a school? What is a comfortable endowment dollars per student ratio? What is not?</p>
<p>Talking to myself here, I noted in an article posted in another thread that 136 schools have endowments that exceed $500 million, which represents 3% of the roughly 4,300 colleges and universities in the country. But 18% of all two-year and four-year schools have no endowments. (!!!)</p>
<p>Also here is a list of colleges and universities by endowment (on the high end, I might add):</p>
<p>List</a> of U.S. colleges and universities by endowment - Wikipedia, the free encyclopedia</p>
<p>I'm interested in this as well. That's a very interesting list. I did not know that public schools had endowments, I thought they were only for private.</p>
<p>I checked the endowments of the schools to which my d is applying, and the public schools have much lower endowments (per student) than the private.</p>
<p>nacubo is the organization that collects endowment data. their public tables can be found here: NACUBO</a> Home - Research - NACUBO Endowment Study - Public NES Tables. the 'all institutions listed by...' link for 2007 will bring up a pdf of participating schools endowments from before the crash. </p>
<p>the schools that may be in real trouble are those at the bottom of the list (somewhere south of ~$50 million) that have been spending significant amounts of money on new construction this decade. their endowments have shrunk, they possess limited means to raise money (hence their limited endowment), given their typical profile they are most likely to see reduced enrollment numbers... and yet they have fairly high fixed outgoing costs from all that construction. in other words, they have a lot of loan payments to make and are going to have MUCH less money available to make those payments. you can only axe so much of your staff and faculty and keep your school open.</p>
<p>schools a bit higher on the list, mostly being more selective schools, are going to be in the position of simply enrolling some less qualified applicants to fill their classes. and, in a pinch, they have sufficient unrestricted funds in their endowments to make ends meet. theyre also better historical fundraisers, hence their larger endowments. there might be a dip in perceived quality in the process (due to lower average sat scores and perhaps faculty hiring freezes), but theyll be fine.</p>
<p>where this downturn impacts (nearly) ALL schools, however, will be in financial aid. it is EXPENSIVE. and it is something that not all institutions will address in the same way (which will create even bigger deviations in packages among schools). do you continue pulling at a high rate from the endowment and push for significant annual giving money directed to finaid in order to offer the best packages possible and maintain selectivity? or do you maintain the financials of the school as best as possible, let finaid slip and consequently accept decreased selectivity? either way, a lot of schools are going to be developing strategies for extending now-very-limited financial aid dollars as far as possible. again, different schools will likely reach different conclusions.</p>
<p>as a result of all of this, my advice for those applying to privates other than those at the very top of the spectrum (those with endowments per student approaching $1,000,000): apply far and wide... and be wary of those schools with very limited endowments.</p>
<p>erica, thanks for the link.</p>
<p>Per this list, most schools discussed on this board have endowments comfortably over $50 million.</p>
<p>Some private schools which I've heard of and which have less than $50 million are Western New England College, High Point University, Warren Wilson College and Mercyhurst College.</p>
<p>
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What is a comfortable endowment dollars per student ratio? What is not?
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</p>
<p>That's all relative. It's like asking, what's a comfortable monthly fuel bill? For your Honda Civic or your Gulfstream jet? </p>
<p>The majority of US colleges and universities operate essentially on the basis of tuition revenue with no meaningful endowment earnings at all. These college are obviously vulnerable to declining enrollment and/or student revenue.</p>
<p>At the other end of the scale, the top LACs had endowments in the range of $1 million per student. Even with conservative endowment spending policies, these endowments have been throwing off $30,000+ per student towards the yearly operating budget. Obviously, "comfortable" in that context includes more luxury touches (student faculty ratios, etc.)</p>
<p>Trying to define a cut-off point along that continuum is impossible in the same way it is impossible define what is a "good" college along that same continuum.</p>
<p>BTW, the changes to endowment figures are starting to trickle in. They are all over the board, both in terms of performance during the year ending June 2008 and the subsequent market freefall. The deck is being shuffled.</p>
<p>Well, interesteddad, I was really looking to see what would be earmarks of a school in danger of going under.</p>
<p>I would say that the number of schools at high risk is actually pretty small, and probably does not include schools most CC posters are considering.</p>
<p>
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I was really looking to see what would be earmarks of a school in danger of going under.
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<p>Enrollment headed to zero is what ultimately kills a college. </p>
<p>It's really hard to generalize. I mean, Randolph Macon Women's College had significant endowment reserves and was headed for extinction because enrollment was dropping so fast. They opted to enroll men.</p>
<p>If I were trying to look at likely candidates for extinction, I'd be looking at endowment and endowment spending, enrollment trends, per student net tuition revenue (after aid discounts) trends, and debt.</p>
<p>I actually think quit a few private schools will go out of business. White high school graduates are expected to decline in the northeast and mid-Atlantic regions over the next decade. This will put pressure on the ability of schools to attract their traditional base of paying customers. Many of the schools at risk haven't invested in attracting minority customers.</p>
<p>Here's a good op-ed from the Los Angeles Times: </p>
<p>Don't</a> judge a college endowment by its wealth - Los Angeles Times</p>
<p>Any endowment that has lost less than 20% this year to date (excluding inflows and outflows) has done a great job.</p>
<p>Publics don't rely on their endowments nearly as much as privates, since publics traditionally have a steady stream of income from state gov't subsidies. It will be interesting to see what happens when many states see their tax revenues plunge and are forced to make budget cuts. Although I highly doubt a state would let it's flagship univ go under, some programs may be cut and some smaller state colleges may be closed.</p>
<p>edit: the NACUBA link is helpful, I'll divide the 2007 endowment by the enrollment of the colleges D is considering. The numbers will have certainly changed since the crash, but the colleges that started with a higher/more secure figure should still be higher than those who had less money to start with.</p>
<p>One person's very general opinion, LACs in the Northeast and Midwest outside of the top 5 or 6 are about to be challenged because of (1) demographics and (2) economic forces.
Demographics- lower numbers of affluent white kids in their traditional markets graduating high school. The bread and butter of these schools' support.
Economic forces- payers seeing declines in their home values and in the value of their investments, including college savings plans. College honors programs and schools with the policy and wherewithal to provide merit aid will provide increased competition.
For admissions, students dreaming of and having the ability to pay for Smith, Haverford, Skidmore, Bard, Vassar and others have the opportunity to access schools that may have been out-of-reach before.</p>
<p>^
There are so many LACs in the Northeast. I think the top third will survive nicely --- I don't see Colgate and Hamilton merging with Syracuse University for example. But once you get below the top hundred or so, I think Danas' observation holds. DW's college/university has greatly benefited from both demographics and economic forces over the past fifteen years. SAT scores of incoming students were up over 100 points during this period. Those scores are likely to regress going forward, resulting in a less-competitive student body paying high tuition. Not a happy combination.</p>
<p>Barrons:</p>
<p>Swarthmore reported this week that their endowment had lost about 15% between the start of the fiscal year on July 1st and last Friday's estimate (October 17th).</p>
<p>They seemed to be feeling pretty good about things, in part because they had pulled virtually all of their money out of the Common Fund last year before it froze and they had finished coverting all of their bond debt out of short term variable into long-term fixed rates in April.</p>
<p>Endowment spending for the fiscal year that just ended was 3.7%, below their low target of 3.75%. </p>
<p>This year's budgeted endowment spending will increase by $5 million or so and be right at the targeted mid-point of 4.25%, based on a slightly smaller endowment (2% shrink after spending from June 2007 to June 2008).</p>
<p>Based on Friday's market close, they can spend the same $57 million next year and stay within the upper limit target of 4.75% despite a 15% reduction in the endowment since June.</p>
<p>So, according to the VP of Finance in today's Daily Gazette story, their plan is to stick to the approved budget for the current fiscal year (thru June 2009) and then model a range of alternatives for the Fiscal Year beginning next July. If the market stabilizes at current levels, the only belt-tightening will be to forgo the usual increase in endowment spending and to offset whatever shortfalls might occur in annual giving and tuition revenue and that is without exceeding the max endowment spending limit of 4.75%.</p>
<p>Bully for Swarthmore for giving out such a current report on the status of there endowment. I'm not used to seeing this. I'm guessing this would not have been an easy thing to do if their endowment position weren't so strong.</p>
<p>Just did the math - S's school has endowment of approx. $180,000. per student. Is that good? Excellent? Shaky?</p>
<p>Instead of focusing on endowment per student, I'd focus more on endowment EARNINGS per student. Most colleges try very hard not to tap into endowment principle, but rather balance the books from endowment investment earnings. Even colleges with "huge" endowments per student, like Grinnell, have expressed some concern in trade publications about how a drop in their endowment earnings will affect their operating budget.</p>
<p>I would also pay close attention to the bond rating of various colleges. Moody's and Standard & Poors both rate colleges. If a college's rating has been downgraded recently, or if it has a less than premium rating, I'd want to learn more. A lower bond rating might mean that the school will have trouble raising capital in a prolonged downturn.</p>
<p>Finally, if you're walking around campus and noticing lots of new buildings, I'd ask some questions about how those were financed -- by donations, or borrowing, or a combination of both? Some schools are seeing promised donations being rescinded; others may have overextended themselves in terms of borrowing. Both could be problematic if combined with a big drop in investment income.</p>
<p>Finally, be careful of reading too much into reports of certain colleges making cut backs. Don't assume that necessarilly indicates the college is about to merge or go out of business. In this environment, I'd worry more about colleges that AREN'T adjusting their spending in some way. Doing so is wise business.</p>
<p>I did some digging on my daughter's college's website. I found the Office of Finance and downloaded a report there. It covered their current bond rating, effect on investments, etc.<br>
You might be able to do the same on schools you are interested in. (Sorry for ending that sentence with a preposition!)</p>
<p>orjr, as others have said, there's more to the numbers than just endowment per student.... but based on some numbers I ran, $180k/kid is well above average. I was looking at some schools D is interested in, and they came up at: $63k, $33k, $29k, $64k $67k and $306k/student. These are all fairly well-established and well-regarded schools. I knew the last one had really deep pockets, but I was surprised it was that far beyond the rest on the list.</p>