DeGioia Outlines New Financial Plan

Georgetown has instituted several new financial policies aimed at safeguarding the university’s economic security in the coming months, while maintaining students’ access to an affordable college education through financial aid, access to loans and a lower tuition increase than previously expected.

In a town hall meeting on Jan. 16, University President John J. DeGioia announced that these financial actions will help curb the effects of the current economic crisis, which has affected many facets of university operations.

According to a university press release, DeGioia’s plan involves an increase in fundraising efforts, an increase in liquidity and a more conservative look into university spending.

DeGioia and Chief Financial Officer Chris Augostini affirmed the university’s commitment to ensuring that students remain able to pay tuition. DeGioia said that there will be a smaller-than-predicted increase in tuition for the upcoming fiscal year, which begins July 1. Almost 60 percent of Georgetown’s operating budget comes from tuition and other fees, meaning the university will have to focus on cutting spending and remaining financially flexible in the continuing crisis, according to the release. DeGioia also said he is concerned about guaranteeing that low-interest loans remain available to students. In the current economic downturn, the release stated that 119 companies have stopped issuing loans due to subpar profit margins.

According to the press release, in an effort to increase these loan options and availability, the university will begin acting as a direct lender to students beginning in July.

DeGioia said that while the university is becoming a direct lender, Georgetown funds are not in danger of being routed towards individuals’ tuition payments.

“You should understand that being a direct lender does not mean lending Georgetown University dollars to students,” DeGioia said. “The federal government will provide Georgetown the funds ... and we will serve as the processor of the loan.”

Students are not the only ones feeling the burden of the economic crisis; several campus projects have also been affected. While the construction of the new McDonough School of Business building is expected to continue as planned, credit financing constraints have forced the university to halt construction of the new science center.

To decrease spending, DeGioia announced a salary freeze for himself and other senior university executives for the upcoming fiscal year. DeGioia said that while the university had hoped to increase faculty salaries an additional 2.25 percent above the inflation rate, it will not be possible this fiscal year.

Additionally, though the university’s endowment hit the $1 billion mark by the end of 2007, as of November of 2008 it dropped to $851 million, according to the press release.

Despite the crisis, DeGioia said that Georgetown enjoys two distinct advantages over many other universities. While several major universities have experienced large losses in their endowments, Georgetown relies on its endowment for only six percent of its operating costs, a relatively small amount compared to schools like Yale University and Harvard University, which use nearly 44 percent and 35 percent of their endowment, respectively. In addition, as of September 2008, Standard and Poor’s, an international credit and investment rating provider, ranked Georgetown’s credit as an A-, up from a BBB+ the previous year. This recent upgrade in Georgetown’s credit rating helped to reduce interest rates and increase ease of lending.

Though the university is taking steps to protect itself during the crisis, DeGioia said that no matter what policies are in place, Georgetown will continue to feel the effects of the current market.

“This is a time of almost unprecedented economic uncertainty, challenge and difficulty — a time which is leaving no institution, academic or otherwise, untouched, unaffected or untested,” he said.