<p>hmm...now what about financial aid for c/o 2014?</p>
<p>Again…</p>
<p>again what?</p>
<p>Yale has repeatedly said that despite the drop in its endowment, it will not reduce financial aid.</p>
<p>welcome to “financial crisis 2008-?”</p>
<p>Yale said so… but can we trust it? To me it sounds a bit fake</p>
<p>When Y announced its dramatic FA increase 2-3 years ago, it said it required an approx $30M per year increase in its budget, I think. Since the endowment drop, Y has directed all its departments to cut back and some capital expenditures have been put on hold.</p>
<p>But you have to know this. Yale’s endowment was at only $7 billion a decade ago. It shot up to $22B and now has receded back to $17-18 Billion. </p>
<p>Guys: Yale has spent BILLIONS over the last 10 years on various upgrades. I’d say 80% of US universities don’t even have ONE BILLION in their entire endowment. Yale SPENT this amount in its recent history.</p>
<p>Yale (and some other sister institutions) has declared that its new generous FA will not be back-tracked. It’s a point of pride for them and for the alumni. If and when they ever do decide that, they’ll face a lot of scrutiny from the entire Yale community.</p>
<p>Your “mistrust” of their veracity is nothing compared with what the alumni worldwide would bring to bear on Yale if they altered course. </p>
<p>If you want to believe in conspiracies-- go right ahead. I don’t see Yale holding back in terms of FA at all. As a matter of fact, other colleges who have had to scale back are shaking in their boots because HYP haven’t and now are killing them in terms of cross admits due to HYPs’ great FA packages.</p>
<p>ALL of Yale’s undergraduate financial aid represents something between 0.1% and 0.2% of its current endowment, annually. Making Yale tuition-free for all undergraduates would only cost a little more than 0.3% of endowment. Given that normal endowment spending rates are in the 4-4.5% range (Yale and Harvard haven’t come close in a long time), and given that maintaining current financial aid levels is a top priority for the university and a very public commitment, it’s hard to see why the recent endowment losses should make any difference.</p>
<p>
</p>
<p><a href=“http://www.nacubo.org/documents/research/NES2008PublicTable-AllInstitutionsByFY08MarketValue.pdf[/url]”>http://www.nacubo.org/documents/research/NES2008PublicTable-AllInstitutionsByFY08MarketValue.pdf</a></p>
<p>Fiscal 2009 NACUBO figures are not yet available, but based on the above and projecting average losses, its fair to estimate that about 735 of these 791 schools finished the spring with under $1 billion endowments, or about 93%.</p>
<p>I am not as optimistic as some of you here in viewing financial conditions for HY, (I dont know that much about Princeton, I never really paid that much attention to Princeton). </p>
<p>Apparently, HY have a lot of similarity in their investment allocation for the endowments based on what I read on the parents forum. I am sure HY will be committed to support those undergraduate students on financial aid. But I do believe that HY are very stressed on cash. Most of the HY endowments are in illiquid investments (private equities), which cannot get an accurate valuation and both HY are facing cash calls on those investments. They cannot unload these investments, no buyers/ not be able to sell even at a huge loss. My understanding is these private equities are similar to toxic assets. Both HY sold taxable bonds after financial crisis in late 2008, to raise cash to run their daily operation and to fulfill the cash calls. H just paid near 500 million last Friday to get out of some kind of SWAP (I am pretty illiterate on those financial terms). One poster said something like H also put its 3.2 billion (its the checking account) into that type of investments. Just service the debts, H has to pay about $500 million per year for next 30 years. I dont know how much Y has to pay for the debt service. HY both lost similar 30% in their endowments. I believe H borrowed a lot more cash. </p>
<p>So the problem is not how much HY still have in their endowments, which they really cannot get a real valuation. They cannot get any cash out of endowments to supplement their operation budget, whether it is 0.1% or 4%. Most of their endowments are not in stock market, (which is quite liquid), so they actually missed the upswing of the stock market (since March DOW is up 50%). </p>
<p>My understanding is HY are supporting their students on financial-aid on borrowed cash, which HY have to pay tax and interests. But how long can they live on borrowing if the private equity market would not recover soon. Many schools are in the same situation. Yale is definitely not alone and certainly is not in any situation worse than other universities.</p>
<p>susan4, I think you have it partially right and partially wrong.</p>
<p>You are right that too much of Harvard’s and Yale’s endowments are in illiquid assets – I think everyone would agree with you on that. It might not have been too much when they had more liquid assets, but it is now.</p>
<p>Of course, the illiquid assets themselves are not a greater percentage of endowment than they used to be, because they have lost value, too. But the future cash commitments for private equity funds are too high relative to the value of everything else. However, those future cash commitments are not coming due anytime soon – they aren’t being drawn down now, and fund managers are going to be very gingerly about putting the screws to Harvard, Yale, and other university endowments and cash-strapped public pension funds, which together have been the fund managers’ gravy train for the past 20 years. The cash commitments are a problem that can and will get worked out over a period of years.</p>
<p>Second, private equity values reflect stock market values. Not instantly, and liquidity discounts matter, and the financing environment widens the spread. But ultimately the value of private companies is closely related to the value of public companies, and if the public market rebound is permanent then it will be reflected in the value of private equity investments over time. (And note that no one has lost any money yet on the future cash commitments. That money will buy into new companies at much lower valuations than were paid for investments a couple of years ago.)</p>
<p>Third, a separate aspect of the cash crunch is the historically low interest rates being paid on high-quality debt. Harvard and Yale have enormous endowments, but they can’t earn more than a pittance on their most liquid, most secure holdings. No one expects that situation to continue much longer, however. Eventually, the Fed is going to start raising interest rates to keep the stimulus from turning into the hyperinflation.</p>
<p>Before the deluge, Harvard’s endowment was contributing about $1B annually to the university’s operations. That was a very low payout based on the then-value of its endowment; but it is well within traditional bounds of prudence as applied to today’s endowment values. And – precisely because of the cash squeeze – I don’t think they are planning to have it contribute as much as $1B for several years to come. So belts are definitely going to be tightened. But financial aid is such a core mission of the university, and such a small component of its overall spending projects, that it’s hard to imagine that the university can’t make good on its pledge not to reduce funding.</p>