They have endowments.

The colleges/universities that aren't managed by complete idiots use those endowments to hedge exactly this sort of risk.

There were a lot of articles over the past few years about various teeny tiny colleges investing their entire endowment in funds and yelling from the rooftops that they out-performed Harvard's endowment.

The bill is going to come due. Over the next two years, a lot of small colleges that were investing for annual returns instead of for ensuring institutional survival are going to collapse under the quadruple whammy of refunds, lawsuits, decreased enrollment, and decimated endowment.

The best way to treat an endowment is like a retirement fund, except the goal is for the institution to never die and therefore to never exhaust the endowment. If the endowment is invested and makes gains, the institution can grow the endowment (which is necessary for it not to be devalued by inflation over time) and also spend some of the returns.

While I wouldn't argue leaving endowments completely untouched in this situation is necessary, I think saying that "the colleges/universities that aren't managed by complete idiots use these endowments to hedge exactly this rot of risk" and criticizing them for investing their endowments is a dramatic oversimplification of the situation.

>> They have endowments.

A small minority of colleges have endowments worth discussing.

In addition to the other replies to this comment, I'd add that the value of endowments has shrunk significantly due to collapses in economic markets.