<li><p>Harvard will have to take a hard look at hiring, staffing levels, and compensation, the university president, Drew Faust, and the executive vice president, Edward Forst, wrote in a letter informing deans of the losses.</p></li>
<li><p>Reduce Financial Aid or need blind admissions</p></li>
</ol>
<p>I didn't read the article so here's my ignorant opinion of this issue:</p>
<ul>
<li>I don't think either of those suggest plans of action should take place. </li>
<li>I think they need to wait at least another year to see how the economy goes. Only then should they take any action.</li>
</ul>
<p>If Harvard's endowment is down from $37M to $29M, it's still half again the size of the next largest endowment in the history of higher education. Financial aid and need-blind admissions are safe.</p>
<p>I'm not sure it is that easy. We won't come to know of this until next June but I would be surprised if the FA is going to be as good as it was last year.</p>
<p>A $8 billion fall in 4 months means a wipe out of $400 million for actual college programs which is a huge sum.</p>
<p>Cuts are going to be there everywhere and hoping that it some how bypass FA which is the first place colleges will be looking to cut.</p>
<p>The real news in the article is that Harvard is being forced to issue **taxable **bonds to raise cash. I've never heard of a well-heeled school borrowing money except for tax-exempt bonds that are issued to pay for specific building projects.</p>
<p>The cash calls on all the private equity, commodity, real estate, and hedge funds must be putting a real squeeze on cash reserves. It's really stunning news.</p>
<p>Harvard should spend a bigger percentage of its endowment this year than it has in past years. It was criticized in the past for not spending enough of it. THIS is a "rainy day." Now is when the funds are needed. Worry about building up the balance when the economy improves, investments rebound, and alums are able to donate generously again.</p>
<p>whatever4: That is what the problem with our education system; we don't teach simple economics.</p>
<p>What you do in "rainy days" is to cut expenses. If Harvard was going to use 5% of $36 billions i.e. $1800 million then it should now only use $1500 million which will still going to be 6% of its present endowment.</p>
<p>So even though it increases its % usage it still need to cut down its expenses. If it tries to still use $1800 million then it will need to take ~7% of its endowment. </p>
<p>We've been promised that FA will not be affected at all. I have every reason to believe that Harvard will continue to offer some of the best FA in the country. Hiring will go down a little I imagine, but I also see Harvard moving in on some really big name scholars as other schools are not able to compete for them. What will be cut back is random expenses like lunches for smaller classes and parties for departments. However, things like Study Abroad are actually seeing funding increases. Harvard will also put on hold the expansion into Allston and the new building projects for the Law School.</p>
<p>Actually, as I understand recent Congressional criticism of college endowments like Harvard's, a very, very small percentage of college endowment funds have been spent annually to keep tuition afffordable while the endowments were growing at incredible rates, thanks to the tax-exempt status. I believe community foundations, for example, are required to spend at least 5 percent of the endowment's value annually on community betterment projects/programs as part of the tax-exempt status requirement. Does anyone know what percentage of its endowment Harvard has spent, on average, over the past 10 years?</p>
<p>That seems to be the mind set of most of the applicants too and that is why there seems to be increase in the number of early applications to the colleges that announced liberal FA including Yale and Dartmouth.</p>
<p>But I will be surprised if any college will be able to meet the FA to the same levels as shown in the last year.</p>
<p>Harvard has traditionally used only 5% of its endowment.</p>
<p>From the Jan. 9, 2008 issue of Chronicle of Philanthropy:</p>
<p>January 09, 2008</p>
<p>Harvard Follows Yale in Increasing Endowment Spending
Following the announcement that Yale University next school year will increase by 37 percent the amount it spends annually from its endowment, to $1.15-billion, Harvard University officials took a similar step, reports The Wall Street Journal.</p>
<p>Harvard plans to increase spending next year from its $35-billion endowment to 5 percent of assets, up from its current 4.3 percent.</p>
<p>Congress has recently been pressuring wealthy institutions to make tuition more affordable, saying that elite colleges are hoarding their endowments despite significant yearly gains. According to a survey last year by the National Association of College and University Business Officers, 62 colleges had endowments exceeding $1-billion.</p>
<p>Sen. Charles E. Grassley, the senior Republican on the Senate Finance Committee, has considered requiring these institutions to spend a minimum amount of their endowments each year, similar to the 5 percent that private foundations are required to spend annually on charitable purposes. He said the announcement by Harvard and Yale will “set an example for all other well-funded schools to do the same.”</p>
<p>"Harvard plans to increase spending next year from its $35-billion endowment to 5 percent of assets, up from its current 4.3 percent."</p>
<p>This is of more concern now if they were planning to increase the spending to 5% because of increase endowment then there is a very good possibility that it will decrease even beyond 4.3% this year becuase of 30% decrease in its overall endowment.</p>
<p>I think come June we will be in for a big surprise.</p>
<p>H's financial aid policies, which have had major impacts on its institutional peers, aren't driven solely by a sense of justice for the middle class. They made a conscious decision several years ago to go after and claim their share of future leaders who were in socio-economic groups that were previously underrepresented on campus. It's made a huge change in the student body - the students are incredibly diverse, both ethnically and socio-economically. To go back on those policies would not just inconvenience students, it would forfeit their key recruitment strategy and cede leadership in the pecking order for many applicants to their peers. I can't imagine any scenario in which they'd abandon the direction to which they've committed.</p>
<p>There is no possible way they're going to cut back on need-blind admissions or guaranteed FA.</p>
<p>One thing Harvard knows better than anyone else is how to protect its brand. Cutting back would be like announcing that they're leaving the major leagues to join the farm team. Never going to happen.</p>
<p>Hanna: Why the applications ask up front whether or not the applicant applied for FA; if it is not going to make any difference in admission. If Harvard is truly a need blind institution then it won’t ask applicant to even apply for the FA until the decisions are out.</p>
<p>If you want to live under this impression well and good but the fact is FA is a big part of the admission process and with direction of economy as it is now it will be more prevalent come April.</p>