Harvard seeks to eliminate 1,600 jobs

I always thought Harvard had closer to 30,000 employees??? Im not sure where I heard that number though so its most likely wrong.

If folks are wondering why this is happening at universities with large endowments, here's an explanation behind much of it: Most schools base their budget projections in part on a percentage of endowment income. Over the years, the standard figure in non-profit circles has been to use a figure of 4-5%.

So, if a university has a $100m endowment (of course, Harvard's is much, much larger), it will figure on using roughly $4-5m in endowment income towards its annual operating budget. And when the endowment is yielding high growth rates, it will continue to build even as some of that income is counted on for the annual budget.

But what happens when the market crashes? Let's say that $100m endowment loses 30% of its value. It's now at $70m, and it's yielding considerably less income -- if anything at all -- that can be applied to that annual budget.

This is a big reason why so many of the most prestigious universities are announcing cuts, freezes, and cancelled projects. They understandably don't want to spend down endowment principal.

Private colleges with lower endowments are much more dependent upon tuition income. Ironically, so long as students continue to enroll, they'll be less affected by drops in endowment income. That's not a great place to be in either, because it forces them to take in x number of students even if the applicant pool is weak, and a sudden drop in enrollment leaves little cushion to fall back on.

So.......colleges and universities of all types are going to be struggling through this economic crisis as well.