The president of Harvard says that the financial crisis could severely damage the university’s endowment.

Drew Faust warned that Harvard “is not invulnerable to the seismic financial shocks in the larger world” in a letter to faculty, students and staff, published yesterday.

“While we can hope that markets will improve, we need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial constraint,” says Faust.

At present the endowment funds around a third of the universities operating budget, but this figure varies widely from school to school. Bloomberg notes that the Faculty of Arts and Sciences gets 52% of its income from the endowment whereas the School of Public Health depends on it for just 13%.

Harvard is just one of the universities feeling the pinch.

Last week Reuters ran an article entitled ‘US colleges punished by financial crisis’, which warned that “the global economic crisis has caught colleges and universities in a vice”.

Today the Boston Globe notes:

Last month, Boston University instituted a hiring freeze and a moratorium on all construction projects that are not already underway. Yesterday, Dartmouth College said it was trimming its budget after its endowment lost $220 million during the turmoil. The New Hampshire school’s endowment had finished the fiscal year at $3.66 billion. Brown and Cornell also imposed hiring freezes recently.

Faust notes that the Moody’s investment service suggested in October that university endowments could lose 30% of their value. At the time the Philadelphia Inquirer noted that endowment losses could combine with drops in donations, tighter public funding and tougher times for students’ families.

“If it was any one of these issues coming up, we think higher education as a business and industry is very strong and resilient, but we’re now layering on multiple problems and pressures,” it quoted Roger Goodman, a vice president at Moody’s as saying. “It will be a new test for schools and their tuition pricing.”