The Denver Post reports today that endowments at Colorado colleges and universities have shrunk significantly, which may mean fewer scholarship dollars for students.

Endowments pay for important aspects of college, from prestigious professor positions to millions in private scholarships and science labs.

However, there are two things worried parents should recognize before hitting the panic button.  First, most scholarships are not based on real money.  They are actually merely discounts off the price of tuition.  This is especially true at private colleges.

Second, most in-state students headed for our public universities would not be eligible for much in the way of merit scholarships, anyway.  The amount of money available from those endowed, private scholarships is small, in comparison to the tuition discounts offered. And most state universities have already discounted tuition as much as they can.  The tuition price may go up somewhat in response the market free-fall, or if inflation begins to rise, or if tax revenues fall–meaning less state support of our universities.

So while the pools of money that may fund private scholarships have shrunk, the discounts will remain more or less in effect, unless budgets become permanently squeezed.  I would worry much more about potential tuition increases at public universities over the next four years than about whether the scholarship funds have shrunk.

My advice to parents is not to suddenly abandon all hope of getting a good scholarship at a private college or university.  We may have to adjust the strategy of where to apply in light of financial realities. But private colleges will still have every incentive to discount their tuition for very attractive students.  And with deep discounts, the cost of attending a private college can be competitive with the cost of a public university.

Here’s the tally of how much the endowments of Colorado colleges and universities have shrunk in recent weeks.

University of Colorado:           12%, or $63 million
Colorado State University:       8%, or $19 million
University of Denver:              7.5%, or $22 million
Colorado College:                  no comment–but probably somewhere in the ballpark

While these figures are significant, the losses are not nearly as huge as the ones I’m staring at in my own 401K and 403B plans. Colleges and universities are relatively conservative with their investments.  While we all sometimes compare universities to businesses, the fact is that universities are not in the business of making profits–they have every incentive to save for the stormy days that we are now experiencing.

The storm still rages, but I expect our institutions of higher education in this state will weather it better than most.

Mark Montgomery

Educational Consultant

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