<p>Korea is in particularly desperate straights. GDP shrank by 22% over last year, the highest in Asia. And contrary to the high savings rate of other Asians, the average Korean household has debit load of over 150% of annual income. Chinese save, Koreans borrow. As incomes shrink, the leveraging will come home and hard. Korea is the next Iceland.</p>
<p>Well that's a bummer for many BD's that I know of that count on "Full Paying" Korean students. Let the "gamesmanship" begin!</p>
<p>However cruel it may sound, I believe FA $$ per student will go down as to squeeze as much $$ out of every FA student as possible. There will be cutbacks in the service staff at most BD's and even perhaps in the Admission Dept. budgets. The traveling Admissions officers will be cut back to one instead of the two usual school reps (some schools send a development/alumni officer), and per diem on the road will be reduced.
The new Trustee philosophy will be to ride out this economic downturn so that future generations will be able to attend the BD, NOT to go on 'business as usual' with the same amount of FA donations, and bi-weekly Lobster dinners for the students. The important issue for the BD Trustees of today is to insure their school survives and stays healthy into the future. Some of the more cavalier BD's of course will go on 'business as usual' expecting their benefactors to rise to the occasion.</p>
<p>I know students on this board often express concern that they won't be admitted to a bs or gripe that they won't be able to go even if qualified because they are FA applicants. I understand how they feel. But now that we are in tougher times, I think that it is important that schools balance their desire to provide aid with their responsibility to run a strong school. Based on info posted on bs review, I noticed that at the closing Conserve, annual FA expenses amounted to 12% of endowment - and I believe all the endowment numbers are from before all the endowments lost value. I don't think a school can afford to run that way. The endowment at most schools covers more than FA. By comparison, at the so-called HADES schools and Groton (and maybe others) this figure was generally about 1 1/2%, none more than 2%, again old endowment value. I found many other schools, ones with slightly less competitive admissions, where aid/endowment was between 2-3%. These schools could have lower acceptance rates if they offered more FA, but would be less stable. Unfortunately, in my few minutes, I also found schools where the ratio is like Conserve's or even higher. They typically have high admission rates and a high % of students on aid. This is a rough figure and doesn't say everything, but would have me worried. In addition to everything else, I would check out a school's finances before signing up, even if you are getting good FA.</p>
<p>Toadstool,
It is the dollar/won exchange rate that is the major problem for current and prospective Korean students. Now standing at 1370 to the dollar, it was 900 to the dollar one year ago. That represents a 50% increase in tuition for the Koreans. It is as if tuition, room and board for us went from 40 to 60k!</p>
<p>This Boston Globe article about Brandeis brought a new wrinkle to my attention. Donation</a> drop puts Brandeis in a bind - The Boston Globe Massachusetts restricts nonprofits' ability to draw upon their endowments. They may spend market gains, but they cannot spend beyond "the historic market value" of the endowment. I found a more detailed explanation of this restriction in a Brandeis publication:
[quote]
The University cannot access endowment funds that have decreased beneath their original value because a Massachusetts law only allows institutions to spend money from the appreciation or rise in value of their endowment funds. Twenty-six other states have adopted a 2006 successor to that law that removed this limitation. French said at the forum that there had been discussion among local higher education officials about lobbying to change the Massachusetts law, but "there has been absolutely no enthusiasm on the part of the state legislature" for any change. He also cautioned that having access to endowment funds that have decreased beneath their original value could be risky in the long term because "you would have no basis [upon which to sustain the endowment]."
[/quote]
French:</a> Univ endowment down 25 percent, budget gap projected to grow to $23 milion by 2014 - News</p>
<p>Before anyone panics, it seems that Brandeis was living way beyond its means, in part financing operating costs with donations. The Madoff Ponzi scheme devastated prominent donors.</p>
<p>Many prep schools are in Massachusetts, but most of them have had a long time to accrue gains on their endowments. I would assume that the older schools have sufficient reserves. Connecticut and New Hampshire have adopted the successor law, giving schools in those states more freedom to respond to short term difficulties. [url=<a href="http://www.agb.org/wmspage.cfm?parm1=1619%5DUPMIFA%5B/url">http://www.agb.org/wmspage.cfm?parm1=1619]UPMIFA[/url</a>]</p>
<p>Just wondering: would a full paying, current student, be allowed to apply for financial aid if they suddenly need it? And also, will applicants that don't need financial aid have a better chance of admission? Thank you!</p>
<p>Just to clarify this earlier comment: "it seems that Brandeis was living way beyond its means, in part financing operating costs with donations". Every one of these schools finances a significant part of its operating expenses with annual donations. The problem is when they are also overly reliant upon annual distributions from volatile endowments.</p>
<p>Yes. Most schools are now polling their existing families (including those families not currently on financial aid) to see if their circumstances warrant additional (or new) financial aid.</p>
<p>I found out that mt D's BS # of application is slightly higher than last year. It is a kind of surprising. I heard it from admission director. Full pay application is about same as last year, but FA application is higher than last year. The yeld rate is interesting to watch. </p>
<p>Their financial aspect is a lot more stable than we thought. Their endowment is down, but it is not down as much as we thought. They still can manage operating budget without too much problem. The only thing is that they will save some budget by cutting not critical item. For example, they will share ride to the airport when they travel in stead of taking taxi or limo. They said that they can save about 10% of the operating budget by doing that. Parents were relieved by the statement from the school head.</p>
<p>Smoke and mirrors.
The "normal number of FP apps accepted this year will not matriculate into the same number of FP sophomores their second year. "ie the "Gamesmanship" by the parents mentioned in this thread. Maybe they feel a "deal with as it happens" attitude is best. Who knows?
The number of honest FA apps going up makes perfect sense, though I think sharing limo rides to the airport to make up for rise in operating costs is a myth. Sounds cavalier though.</p>
<p>"Pay no attention to the man behind the curtain!"</p>
<p>I would encourage everyone here to link to Trustees</a> Anticipate Endowment Losses | News | The Phillipian because I would assume that the case is similar for many other boarding schools. Andover say they will try to keep admission need-blind, but if the financial situation gets any worse, they may reevaluate the school's need-blind status.</p>
<p>Interesting article. Thank you for posting.</p>
<p>Is it business as usual for colleges and boarding schools to use a trailing 3 year average for budgeting endowment income?</p>
<p>
[quote]
Andover’s endowment runs on a trailing three-year average, which means that the percent of the endowment used by the Trustees for the fiscal budget has not yet been factored into the endowment’s percent loss.</p>
<p>“The amount we take from the endowment is not immediately changed by a drop, but at some point in the future there will be a 22 percent decline and the amount that we get from the endowment will be significantly lower,” said Tang.</p>
<p>“We’re trying to adjust our spending patterns before the whole effect of this 22 percent decrease hits us,” said Carter.Budget Cuts
[/quote]
</p>
<p>Yes it is usual for colleges and boarding schools to use a trailing 3-5 years average for budgeting endowment income since they invest the endowment in a very conservative way to avoid volatility. For example, 5 year US treasure bond or 10 year bond is the safest bond and those are the place they put endowmnet into.
or they invest in a long term bonds. Of course they invest in stock market as well. That is why the endowment asset loss is not as big as stock market. Their investment is very diversified and they try to stabilize as much as they can.</p>
<p>The article is true and that is why it is a good idea to save 10% of their opearting budget for next 2-3 years
to prepare for the forthcoming endowment loss. So 10% saving makes a lot of sense. Of course it takes longer than 2-3 years to recover, BS will be in more trouble. however, economy recovers this year or next year, the impact will be even less.</p>
<p>With all due respect erkybk, well endowed institutions have lately invested in commodities, hedge funds and other relatively illiquid, difficult to value assets; they are by no means invested in treasuries and stocks alone. Since these assets are not easy to value, the extent of losses is a great unknown. Please refer to the plethora of articles about the losses incurred by Harvard Management Company. They do not yet even have any idea of the magnitude of the loss.</p>
<p>Thank you Pan.
Anyone want to cut and paste a HADES School's portfolio here to end this debate?</p>
<p>I don't have access to such information, but a few posts back neatoburrito posted a link to an article that referred to Groton in particular and that alluded to the fact that the preps had imitated the Ivies in the sense that they started dabbling in hedge and private equity funds. This diversification of assets to commodities, real assets, hedge and private equity is known as the "Yale strategy" and the article that I refer to makes clear that the preps were following the lead of the universities. So the extent of the losses are not known; what that means for admission policies, I can only speculate. What I do know is that it is a shame, because there are so many very talented and ambitious young posters on this website who are very enthusiastic about going to BS and who also need FA. I hope tht they are not being misled.</p>
<p>Sarum, if you are interested, you can look up a school's form 990 through Guidestar, for free, with registration. GuideStar</a> nonprofit reports and Forms 990 for donors, grantmakers and businesses The forms from 2007 are now available. From a cursory look at a few schools' forms, they vary widely in their investment approaches.</p>
<p>I am thank you Peri, but it might be a bit premature considering we are a month off admissions notifications, and my little guy might be passed over altogether.
Just kidding!! :)</p>
<p>Trustees</a> Anticipate Endowment Losses | News | The Phillipian</p>
<p>Incase anyone wants to hear more from the schools.</p>