Harvard University and Yale University are preparing for an extended period of austerity as U.S. colleges are forced to cut spending next year and beyond to offset the biggest investment losses since 1974, Bloomberg reports. A payout formula based on prior years of endowment returns means Yale will have to do with less money even as markets rebound, President Richard Levin said in an interview last week. Schools including Harvard, Dartmouth College and the California Institute of Technology will be saddled by payments on debt they sold after getting caught short of cash. Efforts to shrink budgets are being complicated by the unending competition for the best students, which is pushing colleges to boost financial aid and limit tuition hikes. After seven years of virtually uninterrupted growth following the dot- com bust, they have little choice except to further cut jobs, freeze salaries, scale back dormitory and laboratory projects, and jam more students into fewer classes.