When it comes to the economy or anything financial, it seems like the bad news just keeps getting worse. For students looking to find money to pay for college, the situation can be quite difficult to keep up and cope with.
Its bad enough that jobs are being lost at record rates and the general employment picture remains bleak and uncertain, but now many scholarships and financial aids that rely on corporate & institutional investments could be in big trouble as well. Not only were many schools invested heavily in banks dealing in toxic assets like mortgage derivatives, but the banks themslves have been – up until now – substantial philanthropic contributors to higher education.
While the editorials and public perceptions generally see AIG as a central villain in the current financial crisis (they made a lot of financial insurance deals that they couldn’t really afford to back up) they have also diverted a part of their profits into funding education through scholarships and summer academic programs. Similarly, Wesleyan University is the beneficiary of an endowment fund set up and established originally by AIG’s founder, but the disproportionate reliance on AIG stocks have decimated the value of that trust fund over the course of the last few months.
Of course, Wesleyan University and other education funds linked to AIG aren’t the only ones losing big value in a big hurry.
Carnegie Mellon and Harvard Universities have not been immune, despite (or perhaps because of) their reputations as top-tier trainers in high finance education. Harvard is particularly well-known for graduating high ranking financial consultants (ex-Treasury Secretary Henry Paulson and current Federal Reserve Board chaisman, Bernanke, are both graduates of Harvard) but they’re also announceing budget cuts of $220 million as well as warning that total losses to their endowment portfolio could be as high as one-third of its current value. At Carnegie Mellon University, endowment losses are currently around $300 million – and this may result in job cuts and/or financial aid limitations.
While the economic drama is still unfolding, the signs are clear that students are facing an even tougher time finding money for college. Even the ivy leagues are feeling pressure from high profile banking investments, and public universities are witnessing a steady decline in state & local tax revenues.