Colleges Learn to Navigate the Credit Crunch

Given all that, it's no wonder those 36 no-shows felt like such a punch in the gut. Tuition covers an average of 60% of operating costs at private baccalaureate colleges. At Beloit, where students' families supply three-quarters of the school's $55 million annual budget, two budgets have been drawn up for 2009: one for 1,250 students and another in case enrollment drops to 1,200.

Over the past decade, Beloit has experienced a surge in popularity, with enrollment rising nearly 15% since the school was featured in the 1996 best seller Colleges That Change Lives. But administrators are bracing for a drop in applications this spring, knowing that many candidates will view state universities and community colleges as more prudent choices. (The University of Wisconsin system saw record enrollment this fall.) And Beloit is not alone. A September NAICU survey found that nearly 20% of private schools reported fewer students returning to campus this semester. At the same time, three-quarters have seen increased demand for financial aid. (See TIME's special report on paying for college.)

To date, Beloit officials have promised not to cut the aid that supports nearly 90% of students through grants, student loans or work-study. Quietly, however, the school has moved from a need-blind admissions approach to a less inclusive one that enrollment director Nancy Benedict calls "need sensitive," which probably means granting admission to fewer students who need large aid packages. Meanwhile, current students are skeptical that Beloit will be able to keep its aid promises. "It's hard to imagine scholarships will go untouched," says junior Shanna Dell. "That would be a disaster for me and my parents. I don't know if I could come back."

Beloit is working hard to calm such fears by conducting regular town-hall meetings with students, staff and even some parents. Interim president Dick Niemiec has stressed to the Beloit community that the impending cuts will not include tenure-track professors and will be "as far away from the student experience as possible." He adds that students may even get a higher-quality education as a result; classes taught by adjunct professors who retire or are laid off will be picked up by tenured professors.

Despite such reassurances, there's still much unknown about the financial future of Beloit and other schools. The U.S. Treasury Department has allocated a decent chunk of change to shore up student loans nationwide, but the effects of that move may not be evident for some time. Nor is Beloit counting on its alumni for a bailout. Niemiec has launched a fundraising push, but officials expect giving to be down at least 14% this year.

So for the time being, Beloit will have to buckle down. The school has halted new construction and will work to trim $750,000 in discretionary spending. One creative solution: eliminating trays in its cafeterias. The move is designed to cut down on dishwashing as well as food waste since students are less likely to get an extra course if they have to carry dishes separately. Sometimes belt-tightening can be a win-win.

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