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In this time of economic challenge, colleges and universities everywhere are coping with scarce resources. Much of the discussion has centered on the economic catastrophe that characterizes public higher education with plunging state aid and skyrocketing student fees. It is no wonder when about 80 percent of American students attend a four-year public college or university or two-year community college.

How have hundreds of small private colleges with smaller enrollments and lower endowments coped?

Enrollment

Student fees (tuition, instructional fees and room and board) at small colleges usually account for two-thirds or more of revenue. As admissions offices watched enrollment for spring 2009 and worried about fall 2009, the fear was that rising unemployment and access to student loans made precarious by the looming bank failures might well lead to massive enrollment shortfalls. Students would either postpone college plans or switch to less expensive public institutions.

On the contrary, colleges that responded to a survey by the National Association of Independent Colleges and Universities reported enrollment gains last fall. Even many institutions with lower enrollments did better than they expected. Guilford College set an all-time enrollment record for fall 2009 with financial aid discounting lower than budgeted, and summer school enrollment far surpassed our goals. More recently, we set a head count record (2,797 students) for the 2010 spring semester, including an all-time record (1,322) for adult enrollment in any semester.

What happened? While unemployment continued to rise, many families made the decision that a small-college education with small classes and close student-teacher relationships was worth the investment. Independent colleges made the case that the chances of graduating in four years or less was about 20 percentage points higher than at their public counterparts. Guilford also strategically and successfully targeted retention with new staffing and programs because it is more cost-effective to keep current students than try to replace them. In talking with parents of our traditional-aged students, another factor was that many of their sons and daughters were too advanced in their college choice process by early 2009 to be switched easily.

At every opportunity, we inform students and families that the total cost of education exceeds what they pay in tuition and fees by thousands of dollars, whether or not they receive financial aid. And we try to help them see higher education as a long-term investment as well as a current cost.

Financial aid

Using financial aid strategically has been important in maintaining enrollment. Until falling stock markets eroded endowment market values, wealthier institutions could abolish or limit loans, cap expected parental contributions and provide special incentives for students committed to careers in public service. Many of these institutions trimmed their financial aid programs and borrowed money to replenish endowments, including those used for financial aid.

Other institutions have financial aid programs "funded" less by restricted scholarship gifts and endowments and more by their operating budgets, or "unfunded" aid. They were terrified that unfunded aid would have to skyrocket in order to maintain the enrollment that supports most of the budget. While there was some upward push on financial aid due to the economy, most institutions did not see huge increases in financial aid and, as we have seen, enrollment was stable in most places.

What did change in places was the strategic use of financial aid dollars. There was new appreciation for the many variables that financial aid officers consider when awarding aid to new and current students. Because students want to know their aid packages when they are admitted, and in most cases less than half accept your offer of admission, most colleges and universities award double or triple their financial aid budgets. They hope that the yield rate holds and that the expected proportions of high-need and low-need students enroll.

At Guilford, we targeted home state North Carolina students by increasing grant aid to a level that allowed them to take out one loan and not two. That partly explains the surge in North Carolina students to half of the first-year class. Guilford and other institutions competed for out-of-state students by promising to match the grants they would have received if they had enrolled in a private institution in their own states.

Nationally, financial aid increased at more than twice the rate that student fees increased. That partly explains why enrollment has been stable. Guilford's financial aid discount rate -- the proportion of student fees discounted by institutional financial aid -- increased four percentage points in two years. That is about $1.2 million. Our experience was not unique. Moody's Investor Service says nearly 30 percent of private institutions are projecting a decline in net tuition and fee revenue for fiscal 2009-10.

Attention was also paid to replenishing or even increasing scholarship funds. A generous donor also created a fund to Guilford to help retain current students who were high risks to leave because of reduced family income and other circumstances.

Fundraising

For the fiscal year ending June 30, 2009, charitable giving in the United States dropped 5.7 percent, only the second time that giving dropped since the 1960s. While some institutions had stable or increased giving, the number of donors often fell. That was the case at Guilford, where we shattered the all-time fundraising record but with fewer donors than the previous few years.

Institutions raised more money when they were able to make the case that donors could add to excellence and serve their passions rather than come to a financial rescue. It also helped if the college or university had a strategic plan or capital campaign statement that showed donors how they could help the institution meet its goals in concrete ways. A history of deferred giving from charitable remainder trusts and bequests shored up some college and university budgets. Guilford received almost $1 million in a bequest from an alumna at the same time we were considering massive budget cuts.

This is not an easy time for any organization, corporate or collegiate. Whether we are sustainable will depend not only on prevailing economic conditions but also whether we can prove the value proposition that our costs are worth the benefits. As far as I am concerned, the answer, when it comes to North Carolina's colleges and universities, is a resounding "yes."

Kent John Chabotar is president and professor of political science at Guilford College and a faculty member at the Harvard Institutes of Higher Education.