College Returns on Investment Decline

The New York Times is confirming about what many people have observed about college and the so-called "investment" that is involved. The article begins with this statement.

Read: Study Confirms College Endowment Drop

On average, investment returns on college and university endowments declined by 0.3 percent in the last fiscal year, a sharp drop from the average return of 19.2 percent in fiscal 2011, according to a study by the Commonfund Institute and the National Association of College and University Business Officers, known as Nacubo.

In one of the worst economic downturns since the Great Depression, this statistic already appears to be highly problematic and troubling especially to those students who have essentially drowned themselves into decades worth of debt and financial problems along with receiving college degrees that have little to do with the jobs that they end up taking after they graduate. As one can see from this next paragraph, the businesses that are involved in college are taking a major hit as well.

The returns were dragged down mostly by the dismal performance of international equities, whose returns declined by 11.9 percent, attributable in good part to the economic turmoil in Europe and the slowdown in China. Domestic stocks had an average return of 2 percent, and fixed-income assets 6.8 percent.

Personally, I believe that this article is slightly biased towards the college industry as it then goes to mention the long-term investment returns of a college education, but it still does not change all of those are becoming indentured debt servants to the student loan industry, politicians and bankers. Here is another portion of the article explaining the long term investment that college can supposedly bring.

“Over the last 10 years, the average rate of return was 6.2 percent,” said John D. Walda, the president of Nacubo. “That’s a good number when you compare it with various indices.”

In the fiscal year that ended in June 2011, the average 10-year return was 5.6 percent.

The study, which includes large and small institutions, public and private, found that those with the largest endowments had the greatest returns last year. Among universities with endowments greater than $1 billion, the average return was 0.8 percent. Those with endowments of $25 million to $500 million had negative returns, and those with endowments under $25 million had a return of 0.3 percent.

Altogether, 71 institutions have endowments greater than $1 billion, and 145 have more than $500 million.

Based on what the study is suggesting, it seems that the colleges with a $1 billion in endowments have the greatest returns last year. I am not trying to suggest that correlation is necessarily implying causation, but usually these schools with the large endowments are well recognized brand name schools like Harvard and even many of the schools that are part of the Big 10 receive these kinds of massive endowments.

The rest of the article goes into further detail about the endowments of these institutions. From my perspective, the future for college students still seems fairly bleak.