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The national credit crunch is hitting the education field from all sides, making it harder for students to secure loans and harder for institutions to ensure funding for upcoming projects.
This week, Commonfund, a nonprofit corporation that manages $42 billion for nonprofit and educational institutions, partially froze two of its funds.
Elizabethtown College and Millersville University both invest with Commonfund. Officials at Franklin & Marshall College declined to comment.
The company had to limit access to its short-term fund after Wachovia Corp., trustee of the $9.3 billion fund, announced its intention Monday to liquidate the fund and resign as trustee.
Many institutions rely on the short-term fund "for daily operating cash to fund payroll and other expenses," Commonfund said in a media release.
Initially, investors had access to only 10 percent of their assets, but that amount was increased to 37 percent Thursday. The company said it intends to find a new fund trustee as soon as possible.
Withdrawals from a $1 billion intermediate-term fund also were capped this this week at 30 percent per account.
Rick Bailey, Elizabethtown College's vice president of finance, declined to say how much money the college has in Commonfund's short-term fund, but said he's watching the situation closely.
"We're taking care of business as usual," Bailey said. "We don't have access to all of our cash now, but we are taking out money as it becomes available."Bailey said the availability of funds during the next few months will determine whether the school will have to hold off on certain projects.
"We'll see how we get through the next three months," Bailey said. "In terms of a cash-flow perspective, we're looking at delaying some purchases of big-ticket items until the new cycle of tuition payments come in."
Millersville University has $1 million invested in Commonfund's long-term fund, but no withdrawal limits have been imposed on those accounts, according to Janet Kacskos, a university spokeswoman.
Wachovia, one of many banks hard hit by the subprime mortgage crisis, had agreed this week to sell its operations to Citigroup. However, on Friday Wachovia instead announced a surprise merger with Wells Fargo & Co. worth $15 billion. Citigroup has promised to fight the new deal.
While one group of college administrators is looking at how the credit crunch will affect their schools' operations, another group is worrying about students finding the funds to attend.
Dwight Horsey, MU's director of financial aid and president of the Pennsylvania Association of Student Financial Aid Administrators, said 2,000 students at MU alone — about one in four — have been affected this semester by lending institutions shutting their doors and have had to scramble to find financing.
"This has been a big deal," Horsey said. "We don't know who's going to stay and who's going to get out."
Horsey said the lending problems started about a year ago.
(676) (664) (479) (167) (157) (148) (86) (37) (30) (27) (19) (15) (11) (7) (7) (5) (3) (2)How colleges will be affected by the recent spate of bank failures and mergers and the credit crunch, Horsey said, is anyone's guess. "That's the unknown right now," he said. "It hasn't trickled down to our level yet."
Horsey said more students will have to apply for loans through federal student aid programs that are already stretched to the limit.
"They can't handle the volume," Horsey said.
He said the situation is challenging, to say the least.
"What's happening is that we're losing the ability to give students a choice. It's frustrating because we used to know what we were dealing with. When a student came to me, I could find something for them. … I can't say that any more."
Too help offset the cost of tuition, Millersville University is planning to forgo the 5 percent of its U.S. Department of Education grant money that is earmarked to cover administrative expenses. The money — about $50,000 — will instead be used to help students cover tuition, Horsey said.
E-mail: mpennino@lnpnews.com
