Finance crisis reaches UNC-CH

The university's $2.5 billion endowment has lost 13 percent of its value, about $320 million, since July

CHAPEL HILL -- A few indicators of the lousy economy: Tuition is going up at state universities; the value of their endowments is going down; more students are asking for financial aid.

A report to the UNC-Chapel Hill Board of Trustees on Thursday revealed that the endowment, worth $2.5 billion in July, had lost 13 percent of its value, or about $320 million.

"It's certainly the toughest time I've experienced," Jon King, president of the UNC Investment Fund, said Thursday at a meeting of UNC-CH trustees. The fund manages private money donated to UNC-Chapel Hill and the investments of some other UNC-system campuses. "The economy is going to be in for a tough go for a while."

The university's investments performed well until recently, ending fiscal 2007-08 about 8 percent richer than the previous year and 16.7 percent larger over three years.

King said the fund's continual and steady increases over time prior to the economic swoon of the last few months provide cushion. At the end of the last fiscal year, for example, UNC-CH's endowment fund's performance ranked second only to Harvard among the top 30 university endowments, all with values topping $1 billion.

"We are entering this very choppy period in much better shape than our brethren," King said.

October was a particularly miserable month for investors. Though the final numbers aren't yet available, UNC's fund probably lost about 7 percent of its value in October, King said. By comparison, the average loss by the top 30 university endowments was 9.8 percent, King said.

Most years, about 5 percent of the endowment's value goes to the university for scholarships, professorships and other uses. In the last three years, the university has received $228 million from the endowment, King said.

No university appears immune. Harvard University is by far the big boy on the block with an endowment that at the end of June was valued at nearly $37 billion, according to written reports. Its subsequent loss in value isn't known, but is apparently severe enough that Harvard leaders have in recent weeks raised the possibility of cutting spending.

Tuition hike of 6.5%

While clearly aware of the lagging economy, trustees at UNC-CH nonetheless approved a series of tuition and fee increases Thursday to raise money for student aid, faculty pay raises and academic support services. Trustees approved a 6.5 percent tuition increase for in-state undergraduate students that, when coupled with a fee increase, would bring next year's tab to $4,019.67. Out-of-state undergraduates would pay $21,827.67 in tuition and fees next year under the plan, which must still be approved by the UNC system's Board of Governors.

That governing board will face a slew of rate hike requests from campuses in the coming months. Earlier this week, N.C. Central University's trustees approved a series of tuition and fee increases, and at N.C. State University, trustees are expected today to consider a 3.6 percent tuition increase -- or $140 -- for in-state undergrads and $280 for non-residents.

In Chapel Hill, trustees acknowledged the difficulty the rate increases may cause students, but they emphasized that 35 percent of revenue raised would be used for need-based financial aid.

"These are obviously serious issues in normal times," said Roger Perry, the UNC-CH board's chairman. "They're exacerbated in tough times."

But JJ Raynor, UNC-CH's student body president, said students were OK with the increased costs. Student government supported the plan because it would provide money for faculty pay and academic support services such as advising and the campus learning center.

UNC-CH's tuition plan included larger rate increases for some professional schools. The pharmacy school, for example, would raise tuition $589 for in-state students and $1,406 for out-of-state students. At the Kenan-Flagler Business School, tuition would rise $600 for in-state students and $1,600 for out-of-state students.

Requests for aid jump

Even before the tuition increases go into effect, universities are getting more requests for help in covering the costs of going to college. This year, UNC-CH's scholarships and student aid office has seen a 13 percent jump in aid applications, an indication that more students and their parents are looking for help. But just 2 percent of those qualified.

Shirley Ort, who directs the scholarships and aid office, expects an even bigger surge in aid requests next year.

"People are aware of budgeting pressures," she said. "Given this economy, there is a high level of anxiety and concern."

Students who have not previously qualified for aid may now do so if their family finances have changed. Ort's office is seeing a trickle of students from families where a parent recently lost a job. Even in the middle of the school year, the aid office can re-do a student's financial aid formula.

"We encourage students to go to our financial aid office as soon as they see a change in their parents' circumstances," said Alston Gardner, a UNC-CH trustee.