Friday, February 15, 2008

Graham's Legacy May Not Be the Buildings, Rather It May Be the Crushing Debt

The Chronicles of Higher Education News Blog has an item up which should be of interest to all Penn Staters.
As the subprime-mortgage crisis emerged over the past few months, colleges and universities have feared that the tightening of credit might hurt their ability to finance construction projects.

It’s now happening.

Examples being reported today include Brandeis University, which borrowed $62-million last March — with a variable rate — to build a new science center and a dormitory. Weekly borrowing costs on the bonds have risen from $40,000 last year to $80,000 this past month, The Boston Globe reported.

And the University of Pennsylvania Health System, which refinanced $557-million in borrowing in 2005, is troubled by the fact that the amount includes $196-million of auction-rate bonds that reset weekly, according to a report today in The Philadelphia Inquirer.

A University of Pennsylvania spokesman, Ron G. Ozio, declined to comment for the article. But Brandeis’s chief operating officer, Peter B. French, told the Globe he’s stunned by the degree to which the subprime-mortgage crisis has affected his institution. “It’s amazing how this has penetrated to the schools,” Mr. French said
Penn State has a huge debt load, it was close to $1 billion the last I checked, and, again the last time I looked, some of it was borrowed at variable interest rates. Anyone want to speculate what impact this will have on your tuition? Anybody else want to speculate on whether there might be layoffs when the shit hits the fan?

Someone at the Collegian or CDT should do some research-the debt stuff is in the yearly audit which Penn State posts on line-and then go interview Graham and V.P. for Finance Gary Schultz. Ask them if the sword of Damocles hangs over the collective head of the University.

Update: There are details from the audit in my next post.

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