Wachovia ices college funds

The dwindling economy showed no signs of improving in the past weeks with the stock market crashing, the unemployment rate rising and confidence disappearing. The repercussions on higher education are beginning to come to light, starting with the Wachovia Commonfund being frozen.

The Commonfund is a nonprofit organization that runs $41 billion worth of endowments and short-term funds for 1,900 universities, hospitals and other institutions nationally, according to the Washington Post. It is about 35 years old.

Colleges use the fund as an account where they can put their money and tap into it whenever needed. Types of additions can range from tuition to fees, and colleges could use it for anything from payroll to construction.

Announced on Oct. 1, Wachovia put a freeze on about 1,000 college accounts that invest in this fund. Wachovia is the trustee of the Commonfund for colleges and universities, according to The New York Times. They have also relinquished their role with the fund.

In hopes of strengthening their balance sheet, Citigroup attempted to buy Wachovia's banking operations at the beginning of last week. Throughout the course of the week, a legal battle ensued between Citigroup and Wells Fargo over the legitimacy of the purchase. As of Thursday, Oct. 9, Wells is poised to acquire the majority of Wachovia's stock and Citi plans to claim damages from both of the others.

This is not the first time this year Wachovia has made cutbacks on their loans for higher education. On Aug. 5, the company announced that they would increase the credit score requirements for loans, making it more difficult for students who have yet to build up their credit to acquire a loan.

According to The New York Times, on Sept. 29, not only did they resign as trustee, but they also restricted many colleges' access to their investments, letting them use no more than 10 percent of its value.

The next day, Commonfund announced that they would be selling some of their government bonds and assets to help them raise their liquidity to 26 percent.

Although this may seem minor compared to the economic crisis, it is causing colleges and universities to fear the ripple effect headed toward them. "Wachovia's announcement sent shock waves through higher education, sending hundreds of college presidents rushing to check their financial vulnerability on every front," according to Sam Dillon and Katie Zezima of The New York Times.

Once the news broke on Oct. 1 about Wachovia's actions with higher education, a blog was started on the nytimes.com Economix section.

Due to Wachovia's actions, this could mean cutbacks in universities, like the firing of staff, building onto the crisis caused by Wall Street hitting Main Street.

The University of Vermont, a college in the tri-state area, has invested about $79 million in the Commonfund. Although universities' money is secure, the problem is their inability to access it.

The next problem the Commonfund faces is the search for a new trustee to take their place, according to The Washington Post. However, this problem will seem much worse to students and teachers as opposed to the Commonfund. This event is significant evidence of the crisis' affect on education. Loans will become less of a possibility for students as times worsen. College accounts and funds that were invested in by companies like Wachovia that are being extremely affected will cause hiring freezes, tuition and cost increases and other financial drawbacks. At a time when students will want to draw out their education to delay facing the jobless market, costs will be rising, forcing them out.