College endowment returns in the United States have gone on a double-digit nosedive. For more than five months, average college endowment returns slid down by 22% after they dropped 3% in a span of 12 months, three surveys revealed.

Major universities and colleges such as Harvard, Stanford, and Yale have predicted drops in their endowment returns. However, around 77 institutions with endowments of $1 billion or more have experienced minor gains.

Last December 2009, a joint survey conducted by the Commonfund Institute and the non-profit National Association of College and Business University Officers revealed that many schools using a large portion of their endowment to fund their operating expenses have put their fund in “crisis position.” These moves were made to buffer any effects of the significant drop in their endowment returns. Both research foundations also conducted separate surveys and gathered the same results.

Throughout the country, the college system is feeling the effects. Syracuse University Chancellor Nancy Cantor, announced that the school has already laid off 48 employees after the college endowment dropped by 9%. Pennsylvania State University employees were also told not to get their hopes up for a salary increase as the school’s endowment plunged by 2.8%. University President Graham Spanier said that the school has also had a 6% reduction in state appropriations. President Shirley Tilghman of Princeton University announced that the school will take on tighter screening methods for their hiring process.

Despite the current situation of the economy and the ongoing cost-cutting measures implemented by American colleges and universities, Senate Finance Committee chairman Chuck Grassley of Iowa argues that schools must not refer to the volatility of expenditures as a reason to increase student tuition fees or put a hold on student assistance.

On the contrary, Grassley insists that the weak economy should boost the endowment spending on student aid. Most schools have also announced that they will not freeze student assistance while some even increased their budget for student aid. Such is the case of Princeton University with the school’s board of trustees’ approval of a 13% increase in its undergraduate scholarship allocation. However, Princeton announced that they will raise their tuition fees by 2.9% – the lowest percentage increase in undergraduate tuition and fees since 1966.

Undoubtedly, college endowments plunging by a large margin has become a common concern. However, quite a number of colleges and universities exceeded Standard & Poor’s 500 Index both last year and over a 10-year span. According to John Walda, president of the association for university business officers, such an achievement in a time of crisis is due to the proper management of endowments and investment of the campus managers.

Endowment policy experts believe that schools should spend more of their endowments, whether in crisis or not. Lynne Munson, a college endowment researcher, criticizes the reaction of some colleges towards the current economic downturn. These institutions, according to Munson, have double-digit growth for decades that one year of loss will not be enough to endanger them.

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