No News Is Bad News for Struggling Colleges

No News Is Bad News for Struggling Colleges

One of my Google Alerts searches for the term: 'freshman enrollment'.

As the new college year begins, I have seen many college PR machines crank out headlines like: "largest enrollment ever".  While some have clearly grown their numbers, reading between the lines suggests that there is some obfuscation taking place for some.

Knowing the intense pressure on tuition discounting in higher education today, I also wonder if these colleges with enrollment growth had to 'give away the store' with high tuition discounts to grow their enrollment.  Interestingly, none report on the discounts they had to offer to entice students to enroll.  I sincerely doubt that 'new marketing strategies' were a substantial factor - unless those new strategies were associated with high discounts.

What is even more important are the large number of colleges not reporting anything about their Fall 2019 enrollment.  This has to be bad news - especially for those small to medium-sized private colleges.  It is reasonable to assume that these colleges engaged in substantial tuition price discounting - and STILL did not grow their enrollment.

Sadly, there are no timely reporting mechanisms that provide this information to students and many other stakeholders.

As the process starts to enroll the freshman class of 2020, interested students and their parents should make sure to ask about the size of the class of 2019 and what the average tuition discount was.  While good for the students, tuition discounts that are too high put these colleges and universities at risk of not being financially viable.

Private Colleges Have Still Not Publicly Released Their 2018 Financial Results

Eleven Months Later:  Private Colleges Have Still Not Publicly Released Their 2018 Financial Results

It is generally accepted that higher education is in the early stages of a shakeout.    Private college closures have become more common - and certainly are gathering more attention when they happen.

 Most private colleges end their fiscal years on June 30th of each year.  The only readily available financial data is published through a national data center about 15 months later - during the Fall of the following year.  It is a case of:  "this is always the way we've done things".

The uncertainty about the financial viability of small to medium-sized private colleges and universities has created a need for more timely release of these financial reports by the colleges.

As I have researched the finances of private colleges for the past three years, it has taken me to countless news stories, blogs, and other media.  These stories have many similar themes, but the one that is most alarming is that the current financial status of these private colleges is not readily available.

The hashtag: "ReleaseIn90" is now being used to encourage private colleges to make their audited financial statement pdf's  (Here is an example.) readily available on their website within 90 days of the end of each fiscal year.  While many would not be able to easily read and understand these financial statements, there are numerous resources that could provide easy-to-read and understand analysis.

There is a trust factor involved here.  One can reasonably wonder if the most troubled of these private colleges are playing a legitimate, but less-than-ethical shell game with their students, parents, faculty, staff, and communities.  The finances are bad, but they are released so long after the fact that it is too easy to rationalize that things are being fixed.

Reporting sources consistently post stories from these colleges that they have new marketing, or new branding, or new enrollment strategies to fix their financial issues.

Maybe.

There is also much literature to suggest that the demographic trends and tuition discount pressure cannot be fixed with marketing and new logos.  Everyone is doing it.  There is no substantive differentiation - just more costs for these struggling colleges to pay for services that probably won't bring the needed results.

It is time for these private colleges to stop continuing this historically slow releases of their audited financial statements.  As I write this in June 2019, there are very few private colleges who have posted their financial statements from their fiscal year that ended in June 2018.  The National Center for Education Statistics will not post the financial data from 2018 until the Fall of 2019.

The risks and trust that students, parents, faculty, staff, communities and others place in small and medium-sized private colleges should be rewarded with more timely updates of the finances of these institutions of higher learning.

Financially Troubled Private College Accreditation Notices, Warnings, and Probation

Financially Troubled Private College Accreditation Notices, Warnings, and Probation

Higher Learning Commission

(On Notice, Probation, Recently Removed, Resigned)

Middle States Commission on Higher Education

( Non-compliance & Adverse Actions)

New England Association of Schools & Colleges

(Commission Actions & Statements)

Northwest Commission on Colleges & Universities

(Recent Commission Actions)

Southern Association of Colleges & Schools

(Accreditation Actions & Disclosure Statements)

Western Association of Schools & Colleges

(Commission Actions)

What Does An 18-Month Closure Warning Look Like for Struggling Private Colleges?

What Does An 18-Month Closure Warning Look Like for Struggling Private Colleges?

In response, the Massachusetts Department of Higher Education convened a working group to study the issue. Its recommendations, which were released in a report earlier this year, centered around a new system for screening nonprofit colleges’ finances and warning students at least 18 months before a college is at risk of closing.

The group hopes the recommendations will be implemented by this fall, but details of the plan still need to be ironed out. The group did not advise which entity should actually carry out the screenings, what metrics would be used to determine which schools need closer monitoring, and how an 18-month warning would be put into practice.

College Viability Commentary: 

There is a difficult and delicate balance needed to warn students, families, faculty, staff, and communities.  While financial data is available on private colleges, it is not timely - nor easy to read and understand.  

A good first step would be to require private colleges to post their audited financial statements no more than 90 days after then end of each fiscal year.  Currently, this information is not publicly available until 12-16 months after the end of a fiscal year.   Even then, it is posted in a complex data base from the National Center for Education Statistics.

A system that relied on private initiatives to identify financially troubled colleges would serve as a better approach.  College leaders would know that their financials - and all of their competitor's financial data would be available more timely and more readable.

Sources like CollegeViability.com are available to analyze and simplify the financials.  

Source:  Metro West Daily News

The first two paragraphs above are from Brianna McKinley. 

The hidden statistic that should worry us most

From The Atlantic:
The statistic that should worry us most is this one: According to a 2014 study by Gallup and Purdue University, only 3 percent of students have the kind of transformative experience in college that fosters personal success and happiness. Three percent. Even as the pressure of college admissions haunts students throughout their adolescence, whispering premature anxiety into questions of what to learn and how to spend time, the admissions process as we know it often misses the heart of the matter: What kind of education is really worth investing in? What is it that students should be doing, not just to get into college but to succeed there and live a good life after they graduate?

College Viability Commentary: The article goes on to suggest the three factors present in the successful 3%.  We offer that a continued run of stories like this one will continue to haunt the efforts of smaller and private colleges to attract students at a tuition rate that will keep these colleges in business.

At some point, those alumni and others who can afford to subsidize operations with financial gifts will grow weary or unable.

“I didn’t think this school (college) could possibly run out of money,”

“I didn’t think this school could possibly run out of money,”

This quote from a student was reported in a Boston Magazine story about a private college that has closed in the past two years in the Northeast.

It is beyond obvious that there are too many small and medium-sized private colleges in financial chaos.  It is equally obvious that there are too many students, families, and others living their lives without any knowledge that their college is not going to survive.

Releasein90 is the hashtag being used to demand that private colleges release their audited financial statements within 90 days of the end of their fiscal year.  Currently, it is 12-18 months before these finances appear in the National Center for Education Statistics (NCES) database.  Private colleges can post their financial statements to their web site without having the excuse of waiting for the NCES to publish.

Other industries release their financial statements every 90 days and 4 times per year.  It is no longer acceptable for private colleges to delay and hide their finances to the point that their students, families, and other stakeholders cannot access the information in a much more timely manner.

While it is unlikely many parents or the college counselors in high schools will have the time or skills needed to analyze this data, there is an abundant supply of higher education industry-watchers to do that reporting - including collegeviability.com.

Financial results from the fiscal years 2017-2018, most of which ended in June 2018, are still not available to the public. Those critical financial results won't be released by the National Center for Education Statistics until the Fall of 2019.  That will be too late for students who have already chosen their college for this academic year.

If you are a student, family member, faculty, staff, or community member, contact your private college today and ask them to send you their audited 2018 financial statements.  Those same colleges have timely information about your finances.  You should have the same timely access to theirs.

You can share them with gary@collegeviability.com

Today is the Day More Private Colleges Will Decide to Close

Today is the Day More Private Colleges Will Decide to Close

Well, maybe not the final decision to close.

May 1st is a common date for students to commit to the college of their choice with a financial deposit.  Since last Fall, college leaders and admissions staff have projected, updated and then projected again and again what they think will be the final number of new freshmen who choose their college or university.  They have also been tracking the total amount of unfunded scholarships (also known as discounts) offered to encourage new students to enroll.

Many of theses small and medium-sized private colleges have small windows of error for their enrollment projections.  The cost-cutting efforts over that past few years have left nothing more to cut without loss of quality and consistency.  Tuition revenue has become their most important determinant of a financially viable future. 

In many cases, the percent of students accepted has gone up from previous years, but the percentage of students who accept the admissions offer has gone down.  Scholarships in the form of unfunded discounts have eroded the amount of cash needed by these colleges to survive and thrive.

The noise about private college closings, particularly in the Northeast and Midwest has reached the level that it appears many families will have concerns about choosing a college that may not survive their student's college years.  If this thought process is exhibited in any significant numbers, the impact will result in a series of private college closure announcements.  The margin for success is small.

Based on the financial ratio research I have done on hundreds of private colleges, here is my prediction of private, not-for-profit college closure announcements through December 31, 2019.

                       Northeast: 3-5
                       South: 1-3
                       Midwest:  4-8
                       West:  0-2

If these estimates are anywhere close to accurate, the cascading impact for college decisions on May 1, 2020 will be substantial.  The word-of-mouth and industry prognosticators will create so much uncertainty in the future of small to medium-sized private colleges and universities that students and their families will increasingly choose more financially stable options for their college education.

May 1st will be a day of decision for many private colleges.  While still an option, the economic logic of mergers and alliances has probably passed; now the student's choices may make the struggling college's decision to close a reality. 

7 reasons that a private college's financial viability is important to you.

7 reasons that a private college's
financial viability is important to you.

• Lost credits:  There is an almost certain risk of losing credits if you need to choose a new college.
  
• Cost of lost credits:  Take the cost of each credit hour and multiply it by the number of credits that need to be re-taken. This is a good estimate of the additional costs you may incur if a college closes and you must transfer to another college.
  
• Time lost re-taking lost credits:  Not only are there lost credits, you will need more time  to complete your degree requirements.  There is also the time lost that you could be making a higher income that a degree would normally afford you.
  
• Infrastructure & deferred maintenance:  Research shows that a financially struggling college will most typically hold off on spending money on its facilities.  Safety and comfort can be concerns for you and your family.
  
• Public uncertainty:  History suggests that financially struggling private colleges create a public perception that the college may not survive.  This becomes a self-fulfilling prophecy as more potential students have concerns about viability. This uncertainty could negatively impact your college experience.
  
• Faculty turnover: As with increasing public uncertainty about a college's viability, there is an increased risk that faculty will choose to move to other, potentially more secure teaching jobs.  The expectation of your favorite professor staying with a financially struggling college may not prove to always be likely.
  
• Smaller enrollment as viability concerns develop:  There tends to be a negative impact when new and current college students have reason to believe a private college may not be viable.  Smaller enrollment can lead to a college experience that is less diverse and energetic than you might have expected.

Five Great Questions to Ask About a Private College’s Financial Viability

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10. Five Great Questions to Ask About
    a Private College’s Financial Viability 
    
    
    
    
    
    
    Note: There is no harm if your college representative is unable to answer these questions. Many private colleges are financially strong and can demonstrate that directly or indirectly. These questions provide you with a basis with which to make a more informed decision
    about the financial viability of a college.
    
    
    
    
    Questions are offered in the top section.  Discussion on each question is in the bottom section
    
    
    Questions To Ask
    
    
    Question 1:  We are aware that private colleges are facing financial challenges.  On a scale of 1 to 10, (with 10 being a really high risk - and 0 being no risk), how likely is it that your college will be financially viable for a student starting in 2019 and finishing 4 years later? 
     
    Question 2: Was your tuition discount rate above 50% for the last class you admitted? 
      
     
    Question 3: How do you communicate financial concerns to your students, faculty, staff, community, and others? 
    
     
    Question 4: For the last two years, has your revenue been greater than your expenses? 
    
     
    Question 5: How long has your chief financial officer been at the college? 
    Question 6:  What is your college’s long-term debt?  How does your leadership plan on paying that down?
    
    
    
    
    Discussion of Questions
    Question 1:  We are aware that private colleges are facing financial challenges.  On a scale of 1 to 10, (with 10 being a really high risk - and 0 being no risk), how likely is it that your college will be financially viable for a student starting in 2019 and finishing 4 years later? 
    
    
    Discussion:  This is an easy way to let a college representative know that you are interested in their finances – just like they are interested in your finances.
     
    
    
    Question 2: Was your tuition discount rate above 50% for the last class you admitted? 
    
    Discussion:  Generally-accepted higher education standards acknowledge that any tuition discount above 50% substantially can negatively impacts a college’s financial viability.  It is important to balance the benefit of the discount (known as an unfunded scholarship) offered to your student against the impact of similar discounts to other students.  These tuition discounts make it more difficult for a college to generate the revenue needed to remain viable.
    
     
    Question 3: How do you communicate financial concerns to your students, faculty, staff, community, and others? 
    Discussion:  It is a difficult scenario for private colleges leaders to convey serious financial challenges to their students, faculty, and staff.  Such bad information can perpetuate itself to more quickly lead to the financial downfall of a college.
    
     
    Question 4: For the last two years, has your revenue been greater than your expenses? 
    Discussion:  A simple question.  It may require your college representative to follow up with you.  Access to this financial information is available through CollegeViability.com
    
     
    Question 5: How long has your chief financial officer been at the college? 
     Discussion:  A warning sign of financial challenges can be turnover of a chief financial officer.  They can be the single resource in a private college that recognizes that an institution may not be financially viable.
    
    
    
    
    Question 6:  What is your college’s long-term debt?  How does your leadership plan on paying that down?
    Discussion:  A simple question.  It may require your college representative to follow up with you.  Access to this financial information is available through CollegeViability.com
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Financial Viability Information About Private Colleges

Anyone who has gone through the college search and selection process knows the type of effort needed to submit the required financial information.  Colleges and universities know much about family finances.  However, families and students don't know much about the finances of those colleges.  Yet, there are an increasing number of private colleges and universities with demonstrable financial challenges. 

I have started a new company, College Viability, LLC to create resources that will provide parents, students, faculty, staff, and communities easy-to-read and easy-to-understand financial data about small and medium size private colleges.  The financial data from these private colleges will be from their audited financial statements from as late as 2018 and from the National Center for Education Statistics

Over the past three years, I have been compiling and analyzing financial data about small and medium sized private colleges and universities.  This research has been bolstered by the increasing frequency with which which private colleges are publicly acknowledging their financial struggles and uncertain futures.

In 2018, there were prominent and less-than-prominent closures and closure announcements.  The common theme was that these private colleges were unable to recruit enough students at a tuition rate that could keep those organizations open and viable.  There are too many colleges and too few students to successfully fill them.

One of the most prominent 2018 closures was Mt. Ida college, just outside of Boston.  The leadership of that organization announced to students, parents, faculty, staff, and the community in April that they were closing in May.

In early November 2018, Iowa Wesleyan University (IWU) announced that they may have to close for the Spring 2019 term.  Subsequent events appear to have at least postponed their demise.  My research shows a concerning number of other private colleges with similar audited financial statement profiles as those of Mt. Ida and IWU.

Economic and market factors are a constant reminder that the closures of 2018 will be followed by more closures and closure announcements in 2019 and beyond.  No amount of new programs and new recruiting initiatives will change those two basic factors.

More private colleges will close -- or change their business model soon.  College Viability will help students, parents, faculty, staff, and communities evaluate the risks of closures happening to the private colleges they are considering.

The site went live on February 1st.  I look forward to your review and input.

February 1, 2019