February 2, 2013

HIGHER EDUCATION BUBBLE UPDATE: Underperforming Investments Squeeze Higher-Ed. “American colleges may be going broke faster than we thought. According to a recent New York Times report, investment returns on university endowments fell by 0.3 percent last year. This could be the beginning of a major funding crisis at many universities. . . . Given that, as one person quoted in the piece said, the average rate of return over the past ten years has been about 6.2 percent, this poses a major problem for schools already facing steep declines in philanthropic giving, alumni donations and government funding. Ordinarily, schools would raise tuition, but students and parents are beginning to balk at higher fees and annual tuition hikes. There’s no way out: Schools should be looking for ways to cut costs. Fortunately, there’s plenty of low-hanging fruit.”