Some Cash-Strapped Private Colleges Cut Programs, Sell Assets

Facing deficits, some small schools put buildings on the market, end programs—or even merge

Wheelock College has been searching for a lifeline all summer.

The Boston school, with roughly 1,000 students and falling financial reserves, put up for sale its president’s five-bedroom house and a residence hall in June, eager for a cash infusion amid growing enrollment and operating-cost pressures.

On Tuesday, Wheelock announced it had entered merger talks with Boston University, which sits a mile away and enrolls 33 times as many students.

The move “was undertaken to ensure the mission of the College remains sustainable as the higher education industry faces a changing landscape,” the school said in a press release. Officials declined to provide further details on the potential merger.

Wheelock is far from alone in exploring creative—or, some higher education experts say, desperate—ways to survive, like dropping programs and penning innovative property deals. More incremental changes, such as adding online courses or tinkering with tuition discounts, didn’t boost enrollment or revenue enough for many institutions.

Such businesslike decisions are a dramatic departure for schools where administrators historically bristled at words like “marketing.” They are a sign of the high stakes facing small, private colleges as families balk at rising tuition and question the value of a liberal arts education compared with more vocational alternatives.

The percentage of finance chiefs at private, nonprofit colleges who agreed or strongly agreed that their institutions will be financially stable or sustainable over the next five years fell to 51% this spring, down from 65% the prior year, according to polls by Inside Higher Education and Gallup.

“Many of these schools would not be making these moves were they not under significant financial stress,” said Susan Fitzgerald, associate managing director at Moody’s Investors Service .

While the initiatives may address immediate cash shortfalls or extend the timeline before another existential crisis, she said, they may not solve fundamental issues such as a school’s ability to recruit and retain enough students to cover overhead costs.

More than one-third of colleges with full-time enrollments below 3,000 students had operating deficits in fiscal 2016, according to a Moody’s report, up from 20% in fiscal 2013.

Facing a dire financial future, Marygrove College in Detroit announced earlier this month that it would discontinue undergraduate programs—which comprise about half its students—and focus on graduate students.

The school had already trimmed its expenses as enrollment slid. It solicited new donors. It tried increasing its online presence and recruiting more students.

Marygrove closed out its fiscal 2017 with a $4 million deficit. President Elizabeth Burns estimated the school was weeks away from running out of cash when it announced the plan to stop teaching undergrads.

“How close to the brink can you get?” she asked.

Dr. Burns said the move will cut overhead costs, and that she sees potential for growth in graduate students.

Officials at Aquinas College in Nashville, Tenn., also decided that the best chance for success was a slimmer portfolio. The school announced in March it would drop business and nursing programs and eliminate residential living to focus on training Catholic schoolteachers.

Earlier this summer, Holy Cross College in Indiana sold 50 acres of its campus to the nearby University of Notre Dame, then signed a 75-year, $1 lease for its use, with an option to extend it for 50 more years. The move enabled the school to pay off its debt.

Holy Cross, which historically served as a two-year college and feeder to schools such as Notre Dame, had been operating at a deficit the past few years after a push into bachelor’s degree programs and what officials now say were misplaced recruiting efforts didn’t pan out.

The board of trustees nearly voted to close last winter as cash reserves went dry, said the Rev. David Tyson, now the school’s president. “It was really at the crisis stage,” he said, adding that Holy Cross had high debt, no credit, no cash flow, no increase in enrollment and no auxiliary enterprises.

George Sutherland, a senior at Holy Cross and former student body president, said the campus community grew especially concerned after St. Joseph’s College, a Catholic liberal arts school about 100 miles away, announced its closure in February.

Mr. Sutherland said Father Tyson reassured him late in the spring that “while we were in financial difficulty, it was not dire.”

Meanwhile, there were nearly two dozen higher-education mergers and acquisitions from 2010 to 2017, nearly twice as many as in the 2000s, according to a tally by Parthenon-EY, a consulting firm.

In one such move, tiny Shimer College in Chicago was officially absorbed into North Central College in Naperville, Ill., earlier this summer.

Shimer tried to stay afloat by renting space from the Illinois Institute of Technology for the past decade, pursuing online programs and making it easier for transfer students to enroll. And while fundraising and retention were on an upward trajectory, they weren’t gaining dramatically enough for long-term sustainability, the school said.

North Central President Troy Hammond said the acquisition of Shimer’s Great Books curriculum, which focuses on small classes discussing primary sources rather than reading textbooks, provides his school with a differentiator in the crowded Illinois market.

“There’s the loss of autonomy” for Shimer, now that it is part of an institution with more than 50 times as many students, said Susan Henking, the Shimer president who brokered the deal. “There’s also the loss of worry.”


Source: The Wall Street Journal
Author: Melissa Korn
Published: August 31, 2017
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