<p>I was told that the cost of going from $60k to $180k for finaid cost the university around $60 million, but I don’t know where that person got her figure. She also said that the Corporation had pushed hard for the expansion of finaid, so there was little chance of curtailing it.</p>
<p>I agree that there is huge administrative bloat.</p>
<p>DH & I got an interesting insight into how some elite schools fund things - in this case it was Yale, not Harvard. DH was a finalist for an administrative position at Yale, one that oversaw a 10 person staff. After an extended meeting with that staff, H said he was amazed at how frugal the operation was - the staff was relatively poorly paid, and their computers were older and slower than his staff’s at their chronically underfunded public university in Colorado. I’m sure there is administrative bloat at Yale, and at Harvard. But I wouldn’t be surprised if there were far less of it than we suspect ;)</p>
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<p>For the most part, the financial aid stuff that Harvard announces are thing they are already doing and/or extensions that are really merit aid discounts disguised as need based aid. For example, Harvard was already loan-free for low-income families, so the only change is that a wealthier student gets $4 grand in discounts rather han in loans. It’s pure competition with merit aid schools.</p>
<p>And, what none of these school want to remind us is that it’s easier to offer great need-based financial aid when you start off knowing that half your students don’t need any aid at all and will write you a $50,000 check each year.</p>
<p>To answer the specific question, Harvard’s financial aid policies are market-leading, especially at the top end of the income bracket, but not drastically so.</p>
<p>Here are Swarthmore’s aid statistics:</p>
<p><a href=“http://www.swarthmore.edu/Documents/administration/ir/FAStats.pdf[/url]”>http://www.swarthmore.edu/Documents/administration/ir/FAStats.pdf</a></p>
<p>49% of the students received need-based aid, 51% paid full-fare. Of the 49% qualifying for aid:</p>
<p>20% had incomes above $150,000 a year
17% from $120k to $150k
10% from $100k to $120k
14% from $80k to $100k
12% from $60k to $80k
12% from $40k to $60k
15% below $40k</p>
<p>You can see how going “no-loan” had signficant impact in the upper income levels because at $150,000 a year, many “need” students would only have been getting smaller, mostly load-based need packages before (loans being the first slice of financial aid, followed by price discounts or “grants” as they are called).</p>
<p>Think it terms of the airline pricing model with the goal being to sell each seat at the highest price, but adjusting the mix of prices to maximize revenues. If you give $10,000 aid to a kid whose family makes $200,000, he’s still writing a check to you for $40,000 a year cash money which goes straight into your revenue stream. The pressure for the need-based colleges has been merit aid schools siphoning off paying customers with ego-gratifying Presidential Scholarships and the like. No-loan is a way of playing the merit aid game with middle class students. Before the market crashed, experts pondered what would happen to the merit aid schools if Harvard simply stopped charging tuition. All of these changes, including ending tuition, would be highly regressive in the sense that they provide the biggest benefit to wealthier customers – poor customers have already been getting a full-ride deal.</p>
<p>To get an idea of where some University endowment funds went please watch Tuesday evening at 10pm eastern of all places the Golf Channel. Pretty eye-opening-although its sad to think that some of the best investigative reporting is being done on the Golf Channel.</p>
<p>Not many posts here for a while but Endowment results are trickling in. Brown University said their endowment was down 27% to around $2billion. And they were going to borrow another $125million leaving them with over $600million in debt. When the debt number starts getting close to the endowment number that is not a good sign.</p>
<p>numbers are rolling in pretty fast now and they are not pretty. Harvard and Yale both down 30%. Yale $1billion worse than they had forecast. I dont think this even includes their borrowings. Only decent number came from Penn that didn’t go all in to the private equity/hedge fund gamble. Big cuts are a coming. interesting though that all their press releases say they are doing better than everyone else. Who is this everyone else?</p>
<p>Swensen looks rather foolish now. He spent the last six months running from TV show to TV show telling the world how brilliant his investment strategy is and how other schools just don’t know what they are doing. </p>
<p>He loses 30%, worse than any other school in the country from what I can see, even worse than Harvard, and – if that’s not bad enough – Yale has to borrow $1 billion in taxable debt to pay the light bill because Swensen mismanaged the endowment so badly, he ran the school out of cash.</p>
<p>Why there have not been resignations in disgrace by investment managers, board memebers and college presidents, I have no idea.</p>
<p>So who do you hire when all the other advisors and money managers made the same bet but differ only in the amount of the bet? </p>
<p>Harvard should have paid the guy (Dr. Mohamed Abdulla El-Erian) who left for PIMCO for more money and when the college balked at his bonus.</p>
<p>Is there a link for colleges other than HYPS? What is the average school (or even the well above average school ) looking at?</p>
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<p>Very few colleges and universities have mismanaged their endowments as badly as Swensen. He has admitted that he paid no attention to liquidity, despite the fact that the primary purpose of an endowment is to provide a steady stream of operating cash. Yale’s asset allocation is so tilted to non-liquid investments and their cash-call commitments so high that they had to borrow money to pay the light bill. That’s pretty astonishing considering that Swenson started the year with a $22 billion endowment (or whatever it was).</p>
<p>I have nothing bad to say about the endowment managers who lost money in a down market, but to run their schools out of cash is another issue, especially while jumping from self-serviing interview to interview on a book tour. What Swenson did is the endowment equivalent of an 80 year old couple with millions in assets putting every last dime in 20 year CDs and ending up on the street because they can’t get at any of their money.</p>
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<p>The median loss on investments for a billion dollar endowment was 17%. Middlebury (managed by Investure down in Charlottesville) was down 16%. Swarthmore was down 17.5% (just under 22% after factoring in endowment spending and endowment gifts). Williams was down 18% (right at 22% after spending and gifts).</p>
<p>Williams and Swarthmore were MUCH LESS invested in illiquid private equity, real estate, commodities, and hedge funds than Yale. Neither is experiencing ANY liquidity issues. Neither is borrowing to cover operating expenses. In fact, Swarthmore now projects that endowment spending for the new year will be 4.2% of their current endowment – right in the middle of their long-term target range. Williams is projecting 5.6% – above their targets, but not catastrophic.</p>
<p>Generally speaking, the larger endowments did worse in this market collapse because of their asset allocations. Private equity and real assets (like timber) just got clobbered. It’s not all a matter of size. Amherst made the same mistake as Yale and has now had to borrow heavily to cover operating expense. They have $300 million in debt and $500 million in outstanding cash-call commitments on a $1.3 billion endowment.</p>
<p>Don’t overlook the new debt when evaluating losses. In addition to an endowment decline of $9.7 billion, Harvard borrowed $1.5 billion to cover cash calls on endowment investments and interest rate swaps gone bad. Yale lost $7 billion and borrowed $1 billion.</p>
<p>In the meantime, they’re missing out on a 50% runup in the equity markets.</p>
<p>Holy mackerel. Last week I changed the mixture of my investments in the Federal employee Thrift funds from 100% in the G Fund (a money market fund) to 50% in that fund and 50% in the C Fund (a stock market fund) and it went up about $5,000 in a week. Wow. This is gravy money for us since we are Civil Service retirees, but wow.</p>
<p>Interest, I very much agree with you about the situation at Yale. Reading between the lines I get the impression that only recently has the President and the Board come to understand really how bad things are with their endowment. Don’t get the impression there are happy campers there. It really sounds like they have very few liquid assets still which is even more troubling when you really don’t know what those might be worth. The thing I think to watch is who still has to borrow money to keep operating-those are the schools in the most trouble.</p>
<p>I don’t have a link, but today’s NYT has a story on the losses on H and Y’s endowments – in the 30% range, IIRC.</p>
<p>Where’s the complaint?</p>
<p>We lost 30-40% in our retirement accounts from their peaks. They were in balanced portfolios over many MF. They were also unmanaged by us. Hopefully they are up, but for the past year I have been afraid to look or track.</p>
<p>Pretty grim at Yale. Here are excerpts from a recent letter to faculty and staff (cc’ed to alums) by President Richard Levin:</p>
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<p>Yeah, I got that letter and heaven forbid they actually spend more of the nearly $20B they have to make things better for real people now. </p>
<p>I’ve come to the belief that these endowments for the biggest name schools are huge trophies they use to signal “We’re the best! See! We have the most money!” </p>
<p>The usual arguments about spending are about prudence. Funny that they left prudence behind when they went into illiquid assets by the ton and can only find the word when it comes to using the money.</p>
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<p>ITA. 10 chars</p>
<p>“only a small fraction of our endowment is invested in publicly traded securities”–there is your problem right there. In other words all our endowment is in private investments and we really have no idea what it is worth.</p>