| | Ouch: Harvard endowment loses $8 billion
 If you think your 401(k) is suffering, try losing $8,000,0000,000.
Harvard University's endowment plunged $8 billion, according to figures released in today's Wall Street Journal.
The loss itself -- representing a decline of 22 percent of the university's $36.9 billion endowment -- is more than the entire endowments of all but six colleges in the United States.
Harvard told the paper the actual loss could be even higher, once real estate and private equity are factored in.
The sinking value of college endowments is a one-two punch for soon-to-be college students and the institutions themselves. Colleges generally rely on their endowments to meet some of their annual operating expenses, and when endowments decline at the same time they need to be tapped for annual budgets, the drop accelerates. In good times, the endowment's gain can be used to pay expenses without a loss of principal funds.
Moreover, because the preservation of institutional assets is generally a priority for long-term planning, such declines have an outsize effect on university spending.
Across the country, colleges are slapping students with steep tuition hikes -- with some at community colleges in excess of ten percent in a year.
Yesterday, the New York Times reported that the accelerating cost of college tuition, even before the current financial crisis, may put college out of reach for most Americans.
According to a report published by the National Center for Public Policy and Higher Education, college tuition and fees have risen 439 percent from 1982 to 2007, while median family income has risen just 147 percent. Student borrowing has doubled in the last decade.
"Students from lower-income families, on average, get smaller grants from the colleges they attend than students from more affluent families," the Times added.
Endowments are plunging across the country.
"The University of Virginia Investment Management Co. said it lost nearly $1 billion, or 18%, of its endowment over the four-month period, reducing it to $4.2 billion," the Journal reports. "In Vermont, Middlebury College says its endowment fell 14.4%, to $724 million. In Iowa, Grinnell College's endowment dropped 25%, to $1.2 billion. In Massachusetts, Amherst College says its endowment, $1.7 billion as of June 30, also fell by 25%."
Harvard's endowment income funds about 35% of Harvard's $3.5 billion budget. President Drew Gilpin Faust blamed "severe turmoil in the world's financial markets" for the endowment loss.
Adds the Journal, "The 30% fiscal-year loss Harvard is planning for would eclipse the loss of 12.2% in 1974, its worst over the last 40 years." It marks a sharp U-turn from the university's marked success in endowment growth -- partly as a result of diversification into the higher risk investments that produced such growth.
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