When the “Great Recession” struck in 2007, colleges and universities were not spared. Endowments everywhere declined, and institutions were forced to make budget cuts in order to properly respond. Even now, as the economy is recovering, colleges are still announcing budget changes to cope with decreased finances, some which affect financial aid. Wesleyan University, for example, just announced that starting this year, admissions would no longer be need-blind. Williams College and Dartmouth College have both reintroduced loans into their financial aid packages.
Swarthmore, in spite of its sizable monetary resources, was not exempt from the difficulties facing colleges. The college experienced a decline in endowment, instituted a temporary hiring freeze to cope with decreased financial resources, and re-did the way it distributes tenure.
According to the recently released 2011-2012 financial report, the school’s finances are beginning to look better. But just as the economic recovery has been slow, so has Swarthmore’s.
“The endowment since June 30, 2011 has recovered to the level it was before the downturn. However, it is not yet back on the trend line,” said Suzanne Welsh, Vice-President for Finance and Treasurer.
According to the report, the endowment generated a positive 2.2% investment return and remained above its highest pre-recession level. The college also received $24 million in gifts and grants, $5.8 million more than what was received the year before. However, the value of the endowment dipped slightly because budget spending exceeded the return on the investment and new gifts.
But overall, the college’s finances are in a better place, and the school is managing well. “Giving has increased in fiscal 2011 and 2012 and thus far, this year is running well ahead of last year,” said Karl Clauss, the Vice-President for Development and Alumni Relations.
Welsh agreed. “Our current year budget is in balance and spending is an appropriate amount from the endowment given its current size,” she said.
Indeed, the report indicates that the school now feels it is in a place that it can begin implementing plans that were previously tabled due to the economy. “This fiscal year we were able to restore budgets for maintenance to pre-recession levels,” said Clauss. As a result, the college was able to renovate Worth Health Center.
Many such projects are outlined in the college’s Strategic Direction plan, which was approved in December of 2011. “Strategic Directions frames a broad vision for Swarthmore outlining a series of initiatives that will impact almost every area on campus,” said Klauss. “Comprehensive in nature, the plan addresses challenges facing the college and builds upon our strengths by bolstering existing programs central to our unique educational mission,” he added. The plan calls for, among other things, the renovation and remodeling of the resources allocated to the biology, psychology and engineering departments. Some projects, like the newly formed Institute for the Liberal Arts, are already underway.
However, the college’s financial aid resources are still being tested. Total scholarships given by the school, excluding external grants, increased by 7.8 percent, and the percentage of students on financial aid rose to 54 percent, with a record 57 percent of last year’s freshman class qualifying for aid.
But Welsh stressed that the school was not planning on moving in a similar direction to what Wesleyan and Williams have done. “Sustainability of the college’s financial aid program is a high priority and will be a central goal in our fundraising efforts,” said Welsh. “We have no intention whatsoever to cut back,” she added.
“I think given what has been demonstrated it is feasible to continue the college’s commitment to having strong financial aid,” said Natalia Choi ’15, the financial policy representative on student council and a member of the college budget committee. Choi felt that given the circumstances and the way that the recession impacted other schools, Swarthmore has done a great job maintaining aid. “The college has been able to do an impressive job in spite of the recession,” she said.
Still, the school has not ruled out changing financial aid policies. According to the Strategic Direction Plan, which created a Committee on Admissions and Financial Aid to review current practices, need-blind admissions “should continue, assuming continued support from our donors and from the endowment.”
“The sustainability of it long term is a real worry, and that’s something we have to watch every year,” said Welsh, speaking about the college’s policy of being need-blind and not using loans in aid packages. “If the need for financial aid starts to escalate rapidly, that will be a concern,” she added.
But for now, the college has been able to handle the increased demand for aid. “It’s been the fastest growing item in the college’s budget overall, but so far, we’ve been able to build that into our budgeting,” Welsh said. And the school hopes that as the economy slowly recovers and families’ personal financial situations improve, the demand for aid will be reduced.
Furthermore, the numbers are still no cause for great celebration. Prior to the recession, the college’s endowment and financial resources grew at an incredibly strong rate. And though they are beginning to recover, they are not expected to return to near those levels. The school has already made changes originally implemented to cope with reduced resources, like the shift in the way tenure is allocated, permanent.
In fact, according to Welsh, the current budget does not allocate much room for developments beyond what was deferred. “We’ve been able to restore our existing budget. But we don’t have money for a lot of new things,” said Welsh, who added that the school would be looking for new sources of revenue. “We will be looking to a capital campaign to provide funds for new initiatives.”
Thus, though the school’s finances have recovered, it is clear that Swarthmore will have to adapt to a post-recession world. “The investment and finance committees of the board expect endowment return for the foreseeable years ahead to be below our long-term trend,” said Welsh. As a result, she said, the school will continue to have to act with caution. “This will require us to be very careful with the budget.”