Date: 3/30/2009
Dear Reader:
The idea behind Hardwick-Day’s mid-March summit, Enrollment and the Economy, was that colleges face a very different future as a result of the economic upheaval of the past 12-18 months. We wanted to quickly organize a forum to give clients access to expert advice and exchange of ideas for thriving in the long term. (Download the schedule, minus the wining, dining, and entertainment.)
In January 2007 we started warning clients that the seizing-up of credit markets caused by the subprime lending disaster and associated unpriceable securities and derivatives would affect student loans. And while government intervention as buyer of last resort staved off disaster for students and colleges reliant on FFELP lending, the contagion spread. Home values and access to home equity literally evaporated. It’s still an open question how parents will come up with the amounts they’re expected to pay for their sons and daughters to attend college.
Gas prices rose to over $4 a gallon last summer, putting a major crimp in campus visits and consideration of colleges distant from home. Equity markets and therefore endowments and family assets swooned. This alone has led to college layoffs and budget reductions, especially and ironically at the most well-endowed colleges and universities.
Many institutions have demonstrated a restraint in tuition-setting not seen in a decade.
Finally, the economy itself slowed to the point where unemployment started to rise to its highest level since the early 1980s. It became clear we had a crisis of confidence and liquidity in the financial system governing capital markets on a dimension that recalled 1929, and a recession in economic activity that rivaled the last big recession around 1980.
The combination of falling housing values, dysfunctional credit and capital markets, a bear market in stocks, and a shrinking economy is cause for high anxiety about not just the next class but about enrollment for the foreseeable future.
Not long ago we thought we knew the future—major demographic shifts. Ah, good times. Those underprepared, needy students are still coming up, and now we’ll have fewer resources with which to help them.
This summary will age and economic conditions will fluctuate, but the advice is timeless.
Best regards,
Jim
