Beloit College is the sort of intimate liberal arts school depicted in films, where the college president lives across the street from the dormitories and students call their professors by first name.

That is why the announcement earlier this month that the college is eliminating 40 positions — about 10 percent of the staff — to cover a $1 million budget deficit hit the campus so hard.

In large part, the reason for the shortfall is the sluggish economy: 36 fewer students than expected showed up for fall semester and donations are not expected to pour in as usual.

Because three-quarters of Beloit College's operating budget comes from tuition, the decisions of a relatively small number of students to delay school or leave early can mean the difference between business as usual or making difficult cuts.

It's not just a problem at Beloit. Colleges and universities across the nation are confronting tight budgets in this economic downturn, and private colleges have the heavy burden of making an argument to cash-strapped students and families that attending a college with a higher price tag is possible, and ultimately worthwhile.

Close-knit campus

With 1,300 students, Beloit College is about the size of many public high schools in Wisconsin.

The close-knit community is one of the draws of the college, where the average class size is 14 students and almost the entire student body lives in brick dorms tucked along the Rock River.

"I don't know a single staff member who doesn't have a personal relationship with a student," said Mitchell Young, a junior who is head of the Beloit College student congress.

The $1 million budget shortfall the school is facing this year is due in part to the 36 no-show students, but also an expected $400,000 shortfall in donations.

The cuts reflect the delicate financial balance under which many private schools subsist.

If 36 students don't show up to the start of the semester at UW-Madison, the state's flagship public university with almost 30,000 undergraduates, it's a blip on the accounting sheets. But at Beloit College, where tuition, room, board and fees is about $36,546 per year, the loss of tuition from 36 students is felt deeply.

That's not to say most Beloit College students pay that much for their education. Almost 90 percent of students receive grants that average about $15,000.

Although college administrators are still in the process of finding out why each student left, Interim President Dick Niemiec said that for many the decision was "clearly influenced by the economic situation."

The reliance on students and donors for money can leave private colleges in a precarious situation during times of economic turmoil.

"We are purely dependent on what we can raise and the ability of our students to pay tuition," said Rolf Wegenke, president of the Wisconsin Association of Independent Colleges and Universities, a non-profit member organization of 20 private colleges.

Not just Beloit

Beloit College is not the only college to react to economic hard times.

Some of the nation's wealthiest universities, including Harvard, are announcing plans to rein in spending, freeze hiring or hold off on expansion plans.

"When places like Harvard and Williams are taking steps to reduce spending, it sends a signal that things are being watched pretty closely at every private college and university in the country," said Terry Hartle, senior vice president of the American Council on Education.

While no other private college in Wisconsin has made or is planning layoffs similar to those at Beloit, Wegenke said, many are nipping and tucking their budgets to deal with financial stresses.

Declining endowments and a pinch on big donations have led some schools to cut back on travel and postpone projects, he said.

The erratic stock market creates a trickle down effect, causing generous benefactors to rethink million dollar donations, he said.

And every university's endowment has taken a hit.

Beloit College's went from $135 million in May to less than $100 million now; Ripon College's dropped 10 percent from June to September; and Edgewood College's dipped by about $3 million.

"To put our heads in the sand and pretend it's going to be exactly the same this year as last year would be foolish," said Edgewood President Daniel Carey.

Extra effort

This means keeping enrollment steady and wooing students to the schools is as important as ever.

Administrators say the stereotype that only wealthy white students attend private colleges in Wisconsin is inaccurate: About 90 percent of students who attend private colleges in the state receive financial aid.

So private colleges are putting extra effort into making the case to parents and students that they can afford to attend their schools.

Edgewood College sent a letter to parents telling them that there are no major changes in the availability of federal, state and institutional financial aid.

"Increasing numbers of layoffs and slowdowns have also plagued our economy," the letter said. "If your family has experienced a major change in your personal financial situation ... please contact our office as soon as possible so we can work together on a financial plan for your education."

Wegenke noted that Beloit College is cutting staff, not aid to students. He said some colleges have talked about loaning money directly to students if bank loans dry up.

"We have students whose parents have lost their jobs," Wegenke said. "They can't borrow against their home equity after the mortgage crisis, so there's going to be more need. It's going to be harder for us as institutions to raise either private gifts or to expect endowment income. It's going to be tough. It's going to be very tough."

Staff in limbo 

Maintaining its community spirit even in times of woe, most of the staff and students at Beloit College took the news of the layoffs relatively well, they said.

Except for a toxic flier campaign by some students ("Hate a non-tenured faculty? Recommend them for early retirement"), students and staff members said they appreciated Interim President Niemiec's openness in sharing information about the school's economic status.

The tough decisions have fallen on the shoulders of Niemiec, a 1965 alum who is temporarily filling in as president this year while the college searches for a new president.

He was able to save about $750,000 in discretionary funding by not filling vacancies and restricting travel and conference stipends.

The 40 cuts will ensure that the budget is balanced this year and next, he said. Those eliminated positions will run the spectrum of university employees, with the exception of tenured faculty.

Niemiec will look for volunteers who were planning to retire to come forward before announcing cuts on Friday.

"I can't imagine anyone thinks there will be enough people retiring," said Teresa Leopold, associate dean of students.

The impending bad news has left the staff in limbo.

"I think everyone's kind of waiting to see if it's going to be them or who it's going to be that they know," she said.

The good news is that Beloit College has longevity on its side, said Hartle, of the American Council on Education.

It was founded in 1846, two years before Wisconsin became a state. Hartle said the reason why the school has likely lasted so long because it takes steps, like the staff cuts, to make sure revenues and expenditures stay balanced.

"Anything that has been around that long can flourish in good times and hold its own in hard times," he said. "I am quite confident that is exactly what Beloit will do."