Sheepskin sticker shock
Colleges feel the economic pinch
By JIM GORDON
Even ivy-covered walls can’t keep out economic worry.
A college campus seems a world apart in many respects,
especially on campuses of three elite private colleges
in Dutchess County, at Vassar and Marist colleges in
Poughkeepsie, and at Bard in Annandale-on-Hudson. But
the economic woes of the world at large loom especially
close to home at institutions that charge tens of thousands
of dollars in tuition and costs.
The question is: Will such tuition costs become essentially
unaffordable?
“The economic situation affects us in a number of ways,
obviously” said Paul Mutone, chief financial officer
at Marist College. “But we are most worried whether,
as families feel the cost of the economy, are they
going to be able to afford the cost of higher education?”
“I’m very concerned,” said David English, the director
of budget and planning at Vassar College. “Over half
our students are on financial aid, and if the economy
gets worse that number can increase dramatically.”
There is good reason for concern. Financial aid is
a major part of a private college’s operating budget.
At Vassar for example, it amounts to nearly a quarter
of annual operating costs. The college projects spending
of $34.5 million in Vassar scholarship grant funds
for students for the 2008-09 academic year, more than
a 50 percent increase over the amount spent for financial
aid five years ago and more than double the amount
spent a decade ago. This current commitment to financial
aid represents more than 23 percent of the college’s
annual operating expenses.
Vassar charges $49, 500 for tuition room and board.
Marist charges $34,000 for tuition room and board.
Figures from Bard were not available, although costs
are clearly substantial. The college’s Web site noted
that about 65 percent of the incoming class received
financial assistance with an average aid package totaling
$23,704.
Information about Bard in general was difficult to
find. Repeated e-mails and phone calls to the college,
including a call to the office of the college president
Leon Botstein were unsuccessful in finding a person
to discuss the college and its financial situation.
Bard usually ranks among the nation’s most expensive
schools with tuition, fees, room and board in the $47,000
range this year, according to the annual U.S. News & World
Report survey.
Private colleges are not only a source of information
and culture, they are large businesses, as evidenced
by the basic financial data from Marist and Vassar.
The annual budget at Marist is $127 million, of which,
about 93 percent comes from tuition costs, according
to Mutone. The college has 800 full-time employees
and an annual payroll of about $50 million of whom
220 are full time faculty.
Vassar College has an annual operating budget of $150
million, of which $91.6 million is paid for by tuition,
room and board charges. Vassar employs about 1,000
people, of whom 280 are faculty members, accounting
for $93.1 million in payroll expenses, or 62 percent
of the operating budget.
Costs are rising in all areas and a college has many
cost centers besides staff salary. “The cost of utilities
is very high, the cost of oil and natural gas is very
high,” said Mutone. “So we are dealing with the rapid
rise of utilities, where prices are going up at a much
more rapid rate than we could increase tuition by.
And similarly the cost of food, that is also rapidly
rising,” he said, noting that part of a college’s obligation
is the thrice-daily feeding of thousands of young and
hungry students.
An endowment is a useful trump card for any business
to have in hand, but Marist, a relatively young institution
at 60 years old, has a relatively modest endowment
of $21 million. While that sounds like plenty, it pales
behind the $869 million endowment enjoyed by Vassar,
which was founded in 1861. On average, Vassar spends
about 5.5 percent of its endowment each year, currently
about $38 million.
And endowments cannot make up for a staggering economy
and concerned consumers worrying about how to pay costs
for their children’s higher education. Mutone said
that a traditional route to paying for college has
always been a home equity loan or second mortgage,
a route he said is now being noticeably less traveled.
Not long ago, the cost of home heating fuel was $1.25,
versus $4 per gallon now. “So as disposable income
becomes less abundant for families paying the cost
of higher education become more difficult,” said Mutone.
“Home equity loans was a the most common way families
go about paying cost of higher education ,but with
the subprime mortgage problem, a lot of institutions
are getting out of the student loan industry. So those
sources of funds to pay for education are drying up.
All of these factors could come to affect us.”
He said Marist is exploring cost control options such
as joint ventures in bulk purchase of utilities, but
he said no arrangements for such a program could be
put in place before next year.
English, of Vassar, said the college is already making
bulk purchases of heating oil but said officials are
open to any feasible methods of cost sharing, such
as joint utility purchases. Both colleges are developing
enhanced conservation programs and planning on incorporation
of energy-saving technology in new buildings or renovations.
“Anything we can do as we build new buildings, even
if it may cost money now, but has a payback, we are
going to do that, and continue to look for ways to
be more efficient in our consumption of utilities,
because those costs are out of control,” said Mutone.
But he said even the most efficient college still has
concerns about the economy. “The biggest piece is the
financial aid piece,” Mutone said. “How are parents
are going to come up with their share?”
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