Higher-ed not immune from economic downturn

Like homeowners who borrowed beyond their means and are now struggling with escalating mortgage payments, many colleges are confronting rising debt payments as higher interest rates kick in on variable-rate loans that once looked so enticing.

Simmons College in Boston ranks among the hardest hit, and it has been forced to cut spending and borrow millions from its endowment to pay off loans that have become far costlier than expected. Earlier this month, Moody's Investor Service lowered the Fenway college's credit rating because of concerns about the debt.

A new report from Moody's released last week found that colleges and universities have increasingly turned to riskier volatile loans to finance projects. Last year, 73 percent of Moody's-rated private colleges and universities issued variable-rate debt, and 29 percent of those institutions issued at least 50 percent of their bonds in a variable rate mode.

"Over the past few months, disruptions to the credit market and municipal bond market have demonstrated the risks that colleges and universities assume when they utilize variable rate debt structures, including volatile interest rates, failed remarketings, and unwillingness of banks to extend liquidity," the report stated.

The report said that most colleges were well-positioned to handle the increased costs, but warned that schools with lower credit ratings may face a tougher road.

Across town, Suffolk University leaders continue their vigorous defense of President David J. Sargent's controversial $2.8 million pay package, which drew national attention (and some local criticism) when it became public last month. In a letter to alumni, Nicholas Macaronis, chairman of Suffolk's board of trustees, wrote that Sargent "has worked tirelessly over these five decades to advance the interests of this institution and its students, with little regard for his own compensation or benefits."

Sargent has worked at the Beacon Hill university since 1956, the past 19 years as president. His lucrative salary, which topped a national survey of presidential compensation in 2007, consisted largely of one-time payments he will receive after he retires. His yearly salary, as part of a five-year contract reached in 2006, is $436,000, which is in line with salaries of presidents at comparable universities.

College officials have said the bonuses were designed to keep Sargent from retiring and to rectify years of below-average wages. In the letter, Macaronis stated that Sargent has never taken a sabbatical during his time at the university or received university housing, and had pledged more than $1 million to the school.

Referencing a Boston Globe story on financial ties between trustees and the university, Macaronis wrote that Sargent had asked the board to appoint independent experts to review Suffolk's conflict-of-interest policy and his compensation package.

"I want to assure the Suffolk community that any inadvertent reporting oversight that may have occurred is inconsistent with our standards and practices," he wrote.

Bad news for families already getting sticker shock looking at tuition prices: Brace yourself.

More than two-thirds of private colleges plan to raise tuition next fall in the wake of heavy financial losses, according to a new national survey of private college and university presidents. Just 5 percent said they have frozen tuition or were considering doing so, the National Association of Independent Colleges and Universities found.

Colleges have instituted a range of cost-cutting to offset endowment declines, with nearly half planning to freeze hiring, slow down construction projects, and restrict travel.

The survey found near-universal economic anxiety among college presidents, who cited potential declines in fund-raising, endowment value, and enrollment as major concerns. Other fears included high debt burdens and reduced availability of student loans.

College presidents expect the recession to dampen immediate enrollment, with nearly half predicting a decline of up to 10 percent for the spring term. Seven percent expect to see a decline of 11 percent or more. Thirty-one percent of respondents projected no change in enrollment, while 13 percent anticipated an increase.

The association's president, L. David Warren, reassured families that private colleges planned to do their best to provide sufficient financial aid, and urged families not to rule out colleges because of their listed price.

"Our institutions are well aware of the financial pressures facing families, and are doing what they can to help," he said. "Private colleges are redoubling their efforts to offer a quality education at an affordable price to students from all backgrounds."

To submit tips to Campus Insider, contact Peter Schworm at schworm@globe.com and Tracy Jan at tjan@globe.com.