Spetter says students won’t see immediate impact of new money
Franklin College saw a big growth in its endowment last fiscal year, but the college won’t use that new money to pay for more student aid.
The fund that spins off interest the college uses to pay for its annual costs grew from $77 million to more than $89 million last year, a 15 percent increase.But even as tuition increases this year at a rate greater than inflation, Bryan Spetter, the college’s vice president for finance, said there are already plans for that money.
“This money is going to stay in the endowment,” Spetter said. “We have a spending policy that we stick to and essentially the rate of the return of the endowment does not affect what we do as far as spending the endowment.”
After June 30, 2007, Franklin’s endowment was valued at $89.6 million, according to the National Association of College and University Business Officers.Spetter said the endowment is also up this year to $3.8 million, or roughly 5 percent. That increase is from July 1, 2007 to this year. Franklin’s increased endowment follows a nationwide trend. According to USA Today, college endowments across the nation grew by an average of 17.2 percent during the same time period.Comparatively, Purdue’s grew to $1.8 billion, a 20 percent increase. Indiana University’s went up 22 percent, to $1.6 billion. Wabash is up to $413 million, a 14 percent increase. And Hanover’s was up 6 percent to $159 million during the previous fiscal year, according to the National Association of College and University Business Officers.
With a slow economy, the general trend of endowments’ success might come as a surprise. However, much of the downturn of the markets began in August, which will show up on the current fiscal year.
“Whenever you’re going to look at a survey like that, it’s always going to be looking in the rearview mirror,” Spetter said. “The time period between July 1, 2006 and June 30, 2007 was a time of pretty good growth in the stock market interest rates held pretty steady so bonds were returning what they returned and there was a great amount of growth in what they call alternative investments.”
Forty percent of the endowment ties into these alternative investments whose returns aren’t directly tied to stock market, Spetter said. They’re instead invested into natural resources like timberland and natural gas, as well as multiple hedge funds.
One place the extra money will go is for higher wages of the staff, which Spetter said is something the college is working on right now. He said the staff is in the same situation the faculty was in last year in terms of fair compensation, which the college increased last year.
Franklin College President Jay Moseley noted that while it grew, the endowment still gained at a rate lower than the national average.
“We were…pleased but not ecstatic about the growth,” Moseley said.
Earlier this month, the board of trustees proposed a 5.3 percent tuition increase, which is more than 1 percent of the annual inflation rate Spetter himself estimated at 3.5 or 4 percent.If approved, the 5.3 percent increase makes next year’s tuition cost $22,270, up from this year’s rate of $21,150. With room and board included, the cost to attend Franklin next year will rise to $29,190, about a 5 percent increase over this year.
Though questions may be raised on why fees rise more than inflation, Moseley said the college never gets the full tuition increase because of financial aid from the school.Using the discount rate of 40 percent, which Moseley said is the average amount each Franklin student receives from the college, he said the school itself only gains a portion of the 5 percent increase.
“It is more than inflation, but we’re getting 60 percent of the increase, not 100 percent of the increase, so what we’re getting is actually lower than inflation,” he said.
While he concedes that it would be nice not to have a tuition hike, Moseley said a year without a tuition increase means that it was a very slow economic year all around.Moseley also said the financial aid budget also increases from year to year. According to Spetter, the financial aid budget for the 2007-08 is $8.55 million, up from $7.75 million last year, which is an increase of more than 10 percent.
Applying endowment interest money to decrease tuition would hurt future aid packages, Moseley said.
“The point is the earnings from the entire endowment is about half of what we spend on financial aid,” Moseley said. “So as the endowment grows we should be able to increase the financial aid budget – that is, give more scholarship dollars to students to offset tuition.”
About 98 percent of students receive some sort of aid to offset tuition, according to Director of Financial Aid Elizabeth Sappenfield. The average aid package students receive, including need-based loans, is about $17,000.With private loans included, the average aid package jumps to an average of $19,200, Sappenfield said.
While need-based aid is determined every year, Sappenfield said scholarship amounts based on merit never increase in amount during a student’s career even though merit award amounts are adjusted for the next incoming classes.
Spetter said that while interest from the endowment won’t be directly pumped into the campus the next year, the college may see impact from “new money” which is added through donations over that year. The college’s spending policy guarantees that 4 percent of this money is automatically placed into the next year’s budget,
Spetter said.Just this past year, the college saw a $6.1 million influx of this “new money,” from a matching program funded by the Lilly Endowment, according to Vice President for Institutional Advancement Bart Meyer.
All of the money added to the budget because of contributions to this program went toward scholarships, Moseley said.The Lilly Endowment pledged $4.5 million to Franklin if the college could raise $3 million in 18 months.Franklin raised the amount in 13 months and the board of trustees designated the entire $4 million to the endowment, while $1.6 million of the private donations went to there as well.
