Graduate Students

A Sober Message From Harvard's President

November 10, 2008

The current economic crisis has reached even the nation’s wealthiest university.

In a letter today to Harvard University students and members of the staff and faculty, President Drew Gilpin Faust wrote that Harvard anticipates its principal sources of revenue will be hurt by the downturn and that the university will need to make hard choices about how it spends its money.

Harvard’s endowment, which was reported last year to be more than $34-billion and pays for more than one-third of the university’s operating budget, has declined. While not specifying what Harvard’s endowment performance has been in recent weeks, Ms. Faust points out in her letter that Moody’s recently projected a 30-percent decline in the value of college and university endowments in the current fiscal year.

“While we can hope that markets will improve, we need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial constraint,” Ms. Faust wrote.

Harvard Magazine estimates that if the Moody’s projection were true for Harvard, its endowment would decline $11-billion and its annual payout, based on about 5 percent of endowment value, would be down more than $500-million.

Ms. Faust also says that donors and foundations may be financially pressed, and that federal grants and contracts for research may be vulnerable to goverment budget cuts. At the same time, the university wants to keep tuition increases moderate because families are feeling financially squeezed, too.

Her letter asks the community to think “not just about what more we might wish to do, but what we might do at a different pace or do without.”

Other Ivy League colleges are also being affected by the country’s economic problems. In recent days, both Brown and Cornell Universities announced hiring freezes. —Kathryn Masterson