Fewer than 700 colleges in total—public or private—have endowments larger than $25 million. Since colleges typically spend about 4.5 percent of their endowments that means the vast majority of colleges get less than $1 million a year from their investments.
While private colleges without big endowments didn't have to slash their budgets when the investment markets declined, many of them are nevertheless struggling with a demographic decline in the number of teenagers and many families' growing preference for more affordable colleges, says John Nelson, who heads the education rating teams at Moody's Investors Service.
Nelson especially worries about the hundreds of small private colleges with fewer than 1,000 students and unimpressive reputations, saying "A lot of them are under stress."
And even the big, elite, and well-endowed colleges are adjusting to a new reality in which their endowments aren't enjoying the dizzying gains of the mid 2000's, Nelson says. That means many colleges will likely ratchet down the amount they take from their endowments, which will constrain future budgets, he predicts.
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