For many colleges, the last 15 years have been a golden age. Philanthropy and Americans' grudging tolerance for high tuition fueled an unprecedented boom — investments in everything from gyms, dorms and labs to faculty and expanded financial aid.
Now, suddenly and like the rest of us, many colleges are faced with toning down their ambitions, at least in the short term.
The financial meltdown is forcing institutions to tear up budget plans and prepare for a simultaneous hit to their three major revenue sources — government funding, donations and tuition. At the same time, they're having to find more money for one of their major budget items — financial aid — or risk seeing students drop out.
"They're coming in and saying, 'I need a little more help,'" said Jerry Cebrzynski, financial aid director at Lake Forest College outside Chicago, which cut several class offerings and froze last year's operating budget in part to make more aid available. "I think we're seeing just the tip of the iceberg."
Cebrzynski recently managed to find another $5,000 for one family where the father lost his job and the mother has cancer.
"We'll do what we can with this year's budget and, honestly, operate with a deficit, a larger deficit than we thought," he said.
In many ways, colleges have an enviable position. They can afford to invest for the very long term. Many have endowments to cushion the blow of downturns, and demand for higher education holds up or even grows when the economy goes south. That's why you hardly ever hear of an accredited college going under.
But the financial events of recent weeks have been momentous enough to shake even sturdy ivory towers. Giant Boston University and tiny (but wealthy) Grinnell College in Iowa are among those delaying big projects, while numerous schools will postpone fund-raising campaigns.
Berea College is heavily dependent on the school's endowment fund, which helps support the tuition-free institution and covers employees' salaries and the general operating budget, said Jeff Amburgey, vice president for finance at Berea College.
The school, which invests its endowment in the financial markets, has started to feel the effects of the downturn in the economy. At the end of June, the endowment was slightly over $1 billion. Preliminary numbers show that the fund has slipped to about $910 million, Amburgey said.
"It's dramatic in the sense that it's happening so soon, so fast," Amburgey said.
Berea has an operating budget reserve fund that helps cushion the school during tough times. But the school will still need to consider other measures to ensure that money is properly allocated, including constraining budget increases.
"Berea College has been through tough times before," Amburgey said. "We'll survive this, and we'll still be an excellent institution."