As part of a broad-reaching plan to close a projected budget gap of $100-million, Dartmouth College announced on Monday the layoffs of 76 people and a return to including loans as part of the financial-aid mix for some students. No faculty members will lose their jobs, officials said, and all of the layoffs will come from the ranks of managers and hourly workers.
The financial-aid change will affect students from families with incomes above $75,000. Dartmouth eliminated loans from all financial-aid packages two years ago and replaced them with scholarships. But the college's president, Jim Yong Kim, said on Monday that "financial realities" had dictated the end of that policy.
During more flush times, Dartmouth was among about 40 selective colleges that enacted no-loan or limited-loan student-aid programs. But Williams College last week nixed its no-loan program. Dartmouth is the first Ivy League institution to scale back its policy, with changes going into effect for students who enter in the fall of 2011. Observers wonder if other colleges will make similar moves.
In a conference call with reporters, Dr. Kim said he was committed to keeping Dartmouth affordable. Admission will remain need-blind at the college, where 52 percent of this year's freshmen receive some form of aid.
When they were created, no-loan and limited-loan financial-aid policies were seen as a way for wealthy colleges with hefty sticker prices to let lower- and middle-income students know they could afford to attend. They were also an answer to public criticism of how colleges spent their endowments, particularly that of U.S. Sen. Charles E. Grassley, Republican of Iowa.
Dr. Kim said Dartmouth's no-loan policy seemed reasonable two years ago, but the "simple fact is that we couldn't afford it anymore." He was confident that Dartmouth would not miss a beat when competing for students with universities that still have similar policies in place. "Our competitiveness has to be based on something different than the no-loan policy," he said.
The $100-Million Hole
Plummeting endowments are behind the budget problems at Dartmouth, Williams, and other top colleges, which have long tapped investment returns to bolster ambitious programs. At Dartmouth, the endowment was down 22.8 percent in the fiscal year that ended June 30, 2009, falling to about $2.8-billion from $3.7-billion.
Last year the college cut $72-million from its budget, and it has eliminated about 200 jobs. More than 105 employees accepted retirement buyouts. But the trimming was not enough, and Dartmouth saw its bond rating downgraded last May. The college's long-term debt levels doubled over five years, hitting about $946-million as of last June.
To balance the budget by 2012, Dartmouth needed to find $100-million in savings and new revenue. The plan announced on Monday, which was approved by Dartmouth's Board of Trustees after lengthy meetings over the weekend, included a 4.6-percent increase in undergraduate tuition, room and board, and fees, to $52,275. That increase was partially offset by a 10-percent increase in the budget for financial aid.
Students from families making $75,000 or less a year will still have their full need covered up to the cost of attendance without the use of loans. Students whose families make more than $75,000 a year will also have their financial need met, but their aid packages will include loans of $2,500 to $5,500 a year, with students from higher-income families receiving higher loan balances.
Current Dartmouth students and the class entering this coming fall will not be affected by the financial-aid policy change.
No More Layoffs?
Dr. Kim said the cuts, although painful, would keep the college on sound financial footing without harming academic quality or student access. He was also confident that the reductions would prevent further budget cuts in coming years.
"We feel we have to act now," he said. "Instead of thinking about layoffs year after year, we want to be done."
The first of two waves of 38 layoffs begins this week, he said, with the second coming in April. As of Monday, Dartmouth officials were still working on the specifics of the April layoffs. But Dr. Kim said 60 percent of the eliminated positions would be administrative or managerial, with the remaining 40 percent coming from hourly workers' ranks.
He stressed that the cuts were not across the board and that "every single layoff was thoughtfully done."
The reasons no professors were laid off, Dr. Kim said, were mostly strategic. Dartmouth has frozen some faculty positions that are vacant, and it needed to protect its professors to maintain academic quality. However, Dr. Kim also said that administrators would not have been able to fire tenured faculty members even if they had chosen to do so.
In all, the layoffs will represent the loss of about 2 percent of Dartmouth's nonfaculty work force of 3,400. They include both union and nonunion jobs. In addition, 33 other managers and staff members will be asked to work reduced hours.
In anticipation of the layoffs, students and faculty and staff members held a candlelight vigil last week. Student leaders said the event was not a protest but was intended to show solidarity with staff members.
In attempting to right the budget, Dr. Kim said Dartmouth's leaders tried to "leave no stone unturned" while also "trying to treat the entire university with compassion."