WHY THIS MATTERS TO YOU

Because of the drop in the stock market last year, endowments are making negative earnings. This results in less scholarship money overall available to students.

Students were awarded less scholarship money this year and the amount may likely stay lower for at least the next five years.

“The market dropped and prohibited Kent State from funding scholarships,” said Mike Strebler, director of financial administration for the University Foundation.

The university’s endowments went “underwater,” meaning that they did not earn money, Strebler said.

As of July 1, 2008, the investment pool for the endowments was just less than $92 million. As of February 28, 2009, the endowment dropped to just over $61 million.

Strebler said the pool lost about a third of its value because of the stock market drop in October.

He said endowments make a 16 to 18 percent earnings in their best years.

“The suddenness of the market drop caught us flat-footed,” he said.

In response, the foundation is individually reviewing the 700 perpetual funds to see whether they earned or lost money since October, said certified public accountant Brad Woods. He is also reviewing the donor contract agreements.

When a contract is drafted, donors have the option of allowing part of the initial donation, called the principal, to be disbursed to their specified purpose even if the endowment is losing money.

As of the end of last year, a total of 308 financial aid endowments were underwater. Of those, 112 scholarships can still be given.

Sharon Marquis, senior secretary for the School of Journalism and Mass Communication, said scholarships are still being awarded, but some are offered in smaller amounts or are given to fewer recipients.

Last year, the school gave away $50,000 in scholarships. This year, the school awarded $30,000 in scholarships.

Most of the Honors College scholarship money comes directly from the university’s budget, Dean Don Williams wrote in an e-mail. Only a small number of scholarships are funded directly by endowments.

Those endowments have decreased.

“We were able to cover our scholarships for this year by shifting some amounts between funds and from additional donations from alumni,” Williams said. “We will, of course, honor all renewable honors scholarships.”

Williams expects the college may have less scholarship money available for some special honors support, such as study abroad and thesis fellowships.

Colleges across the nation are also seeing shrinking endowments. Last school year, endowments earned an average return of minus 3 percent, according to the Chronicle of Higher Education. This year, endowments showed a minus 22.5 percent return.

For example, Harvard University’s endowment of about $37 billion dropped $8 billion this year.

Strebler said to bridge the decline in scholarship money, there’s not much that can be changed on the investment side, but fundraising efforts can be increased.

“The pressure is more on fundraising to fill in funds the endowment can’t provide,” Strebler said.

Scott McKinney, associate director of stewardship for the Office of Institutional Advancement, wrote in an e-mail that the office sent a letter to all donors in January informing them of the market value of their endowments.

The letter explained the language in the endowment agreement, noting whether the donor specified disbursement of the principal, he wrote, adding that the office received inquiries to change the agreement.

“Some individuals requested that the language be changed to allow for distribution while others requested that the language be changed to not allow distributions of principal,” he wrote.

Mark Evans, director of financial aid, said the scholarships awarded by the university from Fall 2008 to Fall 2009 remains constant.

“The goal is to continue awarding scholarships to students who have received them in previous years,” he said.

Strebler said it will take about five years for the endowment to fully recover from October, provided we have “a healthy and vibrant economy.”

“In order to get back to where we were, we need to have the market make a tremendous return,” he said.

Contact student affairs reporter Kelly Petryszyn at [email protected] and administration reporter Nicole Stempak at [email protected].