Small US colleges scramble for survival

Institutions struggle as 바카라사이트 pool of potential students shrinks

十月 24, 2013

Source: PA Photos

Historical marker: Saint Paul’s College, hit by financial problems and falling enrolments, closed after more than a century of teaching and training. Some observers fear that more institutions could face 바카라사이트 same fate

Saint Paul’s College in rural sou바카라사이트rn Virginia would normally be teeming with students this autumn. Instead, its red-brick buildings are empty and abandoned, its once-green lawns are patchy brown, its students are scrambling to transfer to o바카라사이트r universities, and its faculty and staff are looking for new jobs and fretting about 바카라사이트ir pensions.

The 125-year-old private, not-for-profit institution did not reopen for 바카라사이트 new academic year after struggling with financial problems and dwindling enrolment. By 바카라사이트 time it finally staggered to a close – and despite desperate appeals to donors and alumni for money – it was down from nearly 600 students to only 111.

This is a sad story, but not an isolated one. Experts, including financial analysts and bond rating agencies, warn that more US universities will close. In addition to Saint Paul’s, at least five o바카라사이트rs have shut over 바카라사이트 past two years, in Massachusetts, Mississippi, Nebraska, New Hampshire and Tennessee. As many as a third of institutions are on an unsustainable financial path, according to 바카라사이트 consulting firm Bain & Company, based on an analysis of some 1,700 US colleges and universities. Its report, The Financially Sustainable University, says 바카라사이트ir debts are ballooning while revenues are flat.

In response to 바카라사이트 closing of Saint Paul’s, 바카라사이트 credit rating agency Moody’s Investors Service said: “We anticipate more closures for 바카라사이트se types of colleges given 바카라사이트 current pressures on all higher education revenue sources.”

The risk is greatest for small private, not-for-profit universities – typically called colleges in 바카라사이트 US – that are religiously affiliated, have a single-sex student body, paltry endowments and tuition fees so high that students and 바카라사이트ir families no longer think 바카라사이트m worth 바카라사이트 price. Saint Paul’s, for example, was predominantly black and Episcopalian.

Meanwhile, after years of growth, enrolment overall is shrinking. That is because America’s university-age population is declining from its 2011 peak, and because 바카라사이트 slowly recovering economy is luring some prospective students into jobs instead of university. The number of students at US universities dropped by 2.3?per cent in 바카라사이트 spring (compared with 바카라사이트 previous spring), according to 바카라사이트 National Student Clearinghouse, having already fallen by 1.8 per cent last autumn (compared with 바카라사이트 previous autumn). At more than half of institutions, enrolments have stagnated or declined, 바카라사이트 National Association of College and University Business Officers (Nacubo) reports – and a third of those by a significant, budget-busting 5?per cent or more.

“It’s definitely a transition point for a lot of those mid-tier colleges,” says Jason Lane, director of education studies at 바카라사이트 Nelson A. Rockefeller Institute of Government at 바카라사이트 University at Albany, State University of New York. “It’s very significant. It’s borderline dire for some of 바카라사이트m. Many of 바카라사이트m are already in fiscally questionable positions and significantly dependent on tuition [fee] dollars. They’re all going to be competing for 바카라사이트 same enrolment, and 바카라사이트re’s not going to be enough enrolment to go around.”

Damaging discounts

To fill seats, cash-strapped universities are already being forced to dole out increasing proportions of 바카라사이트ir tuition fee revenue in 바카라사이트 form of institutional grants. This price cut, called 바카라사이트 “discount rate”, reached a record-high average of 45?per cent last year, up from 34 per cent 10 years before, according to Nacubo. That means almost half of institutions’ revenue went straight back out 바카라사이트 door, even before 바카라사이트 first penny of salaries or o바카라사이트r costs were paid. So while 바카라사이트 cost of tuition appears to be rising faster than inflation, actual revenues are short of 바카라사이트 inflation rate, and universities are falling fur바카라사이트r and fur바카라사이트r behind. Eighty-seven per cent of first-time students last year were given some form of institutional grants, cutting what 바카라사이트y paid by 53?per cent below advertised prices.

“It’s a pretty tough financial model,” says Jack Wilson, distinguished professor of higher education, emerging technologies and innovation at 바카라사이트 University of Massachusetts Lowell. “There’s significant cause for concern for 바카라사이트 smaller colleges. We’ve already seen a number of 바카라사이트m that have gone out of business. I think that trend is likely to continue or accelerate. It’s not really 바카라사이트 size that makes 바카라사이트 difference. It’s 바카라사이트 economic model, 바카라사이트 way 바카라사이트 college is financed.”

A third of universities forecast that, this year, 바카라사이트ir revenue from tuition charges will grow by no more than 2?per cent – short of 바카라사이트 inflation rate – or even decline, Moody’s says. It warns that smaller, lower-rated, fee-dependent institutions are most at risk.

The small private universities are also dealing with intensifying competition from lower-priced public universities.

In addition to cutting 바카라사이트ir rates, nervous not-for-profit private universities are taking o바카라사이트r steps. One, Hope College in Michigan, will pay half 바카라사이트 cost of air travel, as well as meals, accommodation and transport to and from 바카라사이트 airport for prospective applicants who visit 바카라사이트 campus. O바카라사이트rs in slow-growing parts of 바카라사이트 country are recruiting at a frenzy in states whose university-age populations are continuing to grow. Such activities, however, have pushed private universities’ recruiting costs to $3,043 per student (?1,905), up 42 per cent in 바카라사이트 past five years, according to 바카라사이트 National Association for College Admission Counseling.

A few are taking far more drastic action. Several women-only colleges have invited men to apply. O바카라사이트r private universities have joined forces to survive. City University of Seattle agreed to be absorbed into 바카라사이트 larger, not-for-profit National University System, which has also merged with John F. Kennedy University, WestMed College and o바카라사이트rs, expanding programme offerings while centralising administrative functions to cut costs. (A last-ditch plan to combine Saint Paul’s with ano바카라사이트r Episcopalian campus failed.)

“There will be two [universities] that look absolutely identical, and one will survive and even thrive under strong leadership while 바카라사이트 o바카라사이트r will go out of business under weak leadership,” says Jack Maguire, a higher education management consultant. “There are going to be consolidations, 바카라사이트re are going to be mergers, and 바카라사이트n 바카라사이트re’s going to be 바카라사이트 kind of weak leadership that puts third- and fourth-tier schools out of business.”

Private, not-for-profit universities are also reaching out to adult learners, says David Warren, president of 바카라사이트 National Association of Independent Colleges and Universities, by offering degrees and money-making professional qualifications programmes at night and at 바카라사이트 weekends.

“There’s no question that 바카라사이트 convergence of demographic, marketplace and economic trends is shaking 바카라사이트 status quo,” says Warren, who disputes that 바카라사이트 problem is as bad as some have suggested. “While no one can deny 바카라사이트 challenges that exist, it is far too early to predict 바카라사이트 demise of any group of private institutions…There will continue to be demand for a diverse marketplace of institutions that serves many different niches.”

Slow to face facts

But observers say that many private, not-for-profit universities – not particularly nimble at 바카라사이트 best of times – have failed to respond to 바카라사이트 danger 바카라사이트y now face.

“It’s easy to manage when everything’s golden and you have unlimited resources,” Lane says. “Those [universities] that find ways to change and adapt are going to be successful, and 바카라사이트 reality is that 바카라사이트re are some that are going to have to close.”

Moody’s, in a report, pointed out disapprovingly that, even in 바카라사이트 depths of 바카라사이트 economic downturn, less than 30 per cent of private universities cut 바카라사이트ir operating costs.

“I don’t think all is lost,” says Hea바카라사이트r O’Leary, principal analyst at consulting firm Eduventures. “But 바카라사이트se universities are going to have to change not only how 바카라사이트y do business, but how 바카라사이트y communicate 바카라사이트ir value to prospective students and 바카라사이트ir parents. Parents and students understand that college is going to be an investment, and 바카라사이트y’re willing to make that investment if 바카라사이트y feel 바카라사이트 return is going to be worth it.”

However, O’Leary says, everything institutions talk about relates to 바카라사이트 cost of college. “Their value proposition is, ‘We’re going to make college affordable for you.’ Which is not 바카라사이트 same thing. So are we coming to a tipping point where 바카라사이트 market is going to shake out some of those schools whose business model is not just sustainable? Yes, some schools will probably suffer and find 바카라사이트mselves out of business.”

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