L ast year a shock wave rolled through Franklin College, in Indiana, when a peer institution — Saint Joseph’s College, halfway between Chicago and Indianapolis — announced that it would shut its doors.
“It was very eye opening,” says Kathryn Coffman, vice president and dean of admissions and financial aid at Franklin. “Everyone wanted to know why.” What financial state was Saint Joe’s in? What decisions had led to its demise? What were the warning signs? And did Franklin have them, too?
For many years now, tuition-dependent institutions — notably small private colleges and regional public universities — have grappled with such existential questions. Many find themselves in a difficult, complex market, with rising costs in operations, pressure to keep tuition down, increasing competition, an insufficient supply of traditional-age students, and national doubts over the value of college. Naturally, those factors have prompted many observers to take a dour view of the institutions’ future. Moody’s Investors Service recently downgraded higher education’s outlook from “stable” to “negative,” noting that demographic challenges, weak revenue growth, and rising labor costs will bedevil colleges in the near term.
Four years ago, The Chronicle began conducting a fall survey on enrollment and tuition revenue to try to determine whether financial pressures were indeed driving institutions to the edge — or whether the so-called crisis was overblown. To reach campuses that might be facing challenges, we partnered with the Council of Independent Colleges and the American Association of State Colleges and Universities, asking their members: Did you meet your goals for enrollment and net tuition this fall? If not, what do you plan to do?
The results over the years have not confirmed any one storyline. Response rates have ranged from 30 to 40 percent, and all information is self-reported, both of which hamper the reliability of the data. We could say how many respondents met their goals for enrollment and tuition revenue, but then even the goals themselves are subjective.
We’re an expensive product. ... People want to know that the investment they’re making is going to result in something.
In short, our survey has not revealed that we are about to see a wave of closures. But in the data and the comments, one can see mounting pressure on institutions in the form of high discount rates, diminished revenue and enrollment goals, and burgeoning competition. Institutions responding year after year have been up and down in enrollment. Some unexpected places seem to have found a niche and are doing quite well, while a predictable slate of institutions — many of them little-known, remote colleges — have consistent difficulties.
Through frank conversations with people at often-overlooked institutions (respondents who shared their contact information for a follow-up interview), we learned how the landscape is shifting, what keeps administrators up at night, and how some places are finding success, even in tough markets.
Franklin College, Ms. Coffman says, is doing fine. The college hit its enrollment goal — if not an aspirational “stretch” goal — and its finances are solid. But Franklin has changed how it tells its story to prospective students.
“Undecided is our highest major,” professors and advisers used to say, highlighting opportunities for exploration. “Now we never say those things,” the admissions and financial-aid dean says. The goal now is to bring students in, quickly connect them to meaningful experiences related to their major, and get them out the door — with good career prospects — in four years.
Higher education is not in crisis, Ms. Coffman says, but “every market has to look at itself and re-evaluate” from time to time. “We’re an expensive product,” she says. “Now more than ever, outcomes are critical, and people want to know that the investment they’re making is going to result in something.”
Making that case is crucial to colleges’ drawing the students and tuition dollars they need.
Private Colleges, Lower Goals
About 350 colleges responded to this year’s survey — roughly 100 public and 250 private institutions — although respondents did not necessarily answer all questions. Among public colleges, 44 percent failed to meet their enrollment goals, while 52 percent of private colleges missed those goals. A far greater share of the private colleges fell short by 5 percent or more.
Private colleges were also more likely to have lowered their enrollment goals during the admissions cycle. Thirty percent of all private colleges had revised their goals down at least once, and 11 percent did so more than once. Those proportions were higher this year than in the previous four years of the survey. Among public colleges, 17 percent had lowered their enrollment goals at least once.
Even more colleges missed the mark for tuition revenue. Fifty-two percent of public colleges and 55 percent of private colleges reported falling short on net tuition revenue. Almost half (48 percent) of private colleges raised their discount rate this year, on the higher end of results since the survey began.
For both public and private institutions, the most popular responses to enrollment and revenue shortfalls remained the same: Start attractive new programs, improve enrollment strategies, and pump up marketing.
This year’s survey also revealed new wrinkles, including a notable decline in the number of international and out-of-state students at public colleges. Approaching half — 43 percent — of public-college respondents said they had enrolled fewer of those students this year. A quarter of private-college respondents said they had enrolled fewer international students this year.
Another wrinkle: free college. During the 2016 presidential campaign, some administrators at private colleges wondered if Hillary Clinton’s free-college plan — modeled on a proposal floated by Bernie Sanders — would hurt the sector, diminishing private-college rolls and shuttering institutions. When Donald Trump won, the national conversation was moot. But New York State pushed ahead with its own free-college plan, dubbed the Excelsior Scholarship (last April, officials announced that students from families making up to $125,000 a year would qualify for a tuition-free college education at the state’s public universities).
Before April, Utica College, in upstate New York, was on its way to a record year of applications. “When that announcement came out, things just sort of stopped,” says Jeffery T. Gates, senior vice president for student life and enrollment management. To hedge its bets, Utica accepted more students than it had in past years (keeping the acceptance rate low because of the application bump), and drew more transfer students. Good publicity from a tuition reset in 2016 helped, and the college managed to meet its net-revenue goal. But Mr. Gates says he has heard from other New York private colleges that are suffering.
The University of Pittsburgh at Bradford, a quasi-public institution located about 15 minutes by car from the New York border, also saw a slump. About 40 percent of Pitt-Bradford’s students are first-generation and Pell-eligible, a population that found the prospect of free college very attractive. “I don’t know if there is a lot that we can do to compete directly against that,” says James Baldwin, vice president of enrollment management.
The university was down 37 percent for freshmen and 52 percent for transfers for the population it typically draws from New York. The plan now is to step up recruiting in Pennsylvania, Maryland, and the District of Columbia, says Mr. Baldwin, who believes the university will find an equilibrium eventually. But declines in the number of traditional-age students in rural areas like Bradford’s don’t help. And anecdotally, the enrollment chief has noticed lower college-going rates straight out of nearby high schools: “Costs may be part of it.”
Competition for students can lead institutions to raise their tuition discount rates, and some respondents to our survey shared their uneasiness about the industry’s climbing discount rates and their doubts about how sustainable the practice is for their own institutions.
“We believe that there were significant raises in discount rates in our region, and this resulted in a lower yield rate for us,” wrote the provost at one private Midwest institution. “At this point we are optimistic that this is a one-year blip.”
One rural institution in the Northwest simply noted that prospective students had more choices: “We have increasing competition in a geographic area where there used to be little competition. We need to adapt to the ‘new reality.’”
Transformations Ahead
What will it take to respond to that new reality? Are the challenges as difficult as some warn, or fear? Will tinkering suffice, or does the industry need a deep reinvention?
Consultants like James F. Galbally Jr., who specializes in college finance, express alarm. He hears from college presidents who are overwhelmed by market challenges and eager to get out of higher education. He knows of a law firm in Philadelphia that specializes in bankruptcies and is opening a line of business for college clients.
Mr. Galbally thinks greater competition between the public and private sectors has made things worse. “There used to be a détente,” he says. “But now we are seeing that the publics are doing a lot of things to make themselves more attractive, and that’s influencing the number of students who are available for the privates.” In New Jersey, some private colleges had added health-professions programs to draw transfer students from community colleges, he says — but now public institutions are aggressively pursuing those students.
To thrive in the future, colleges will need to embark on major transformations, Mr. Galbally says: strategies that some institutions may dabble with but most don’t fully embrace. Colleges should find, for example, neighboring institutions that might be interested in collaborating on back-office operations, he says, or underenrolled courses and degree programs.
The most effective innovation may just be good stewardship. Mr. Galbally and other financial advisers have long contended that many colleges do not effectively manage their revenues and expenses.
That assessment resonates with DeWayne Frazier, vice president for academic affairs at Iowa Wesleyan University. In a competitive state, with more than 30 private colleges and three-million people, Iowa Wesleyan exceeded its enrollment goal this fall. But that goal is hardly all, he says, suggesting that colleges that have closed in recent years suffered from a range of problems. “It’s not just enrollment,” he says. “it’s bad business decisions.”
A survey couldn’t necessarily spot the missteps that closed some institutions in recent years. Burlington College, in Vermont, made a land purchase it couldn’t cover. St. Catharine College, in Kentucky, made mistakes on its financial-aid packages, according to the U.S. Department of Education. which would not reimburse it. Saint Joseph’s College had high debt and an extensive backlog of deferred maintenance, while also suffering an enrollment downturn. Iowa Wesleyan had been running an operating deficit, Mr. Frazier says, but the current administration is working out of it. “We’d love to have a new wellness center and other things, but we have to live within our means.”
To find new revenue decades ago, colleges often started online or adult-education programs. But today there are few if any untapped ideas, and rare opportunities to become a rapidly expanding national institution, like Arizona State University or Liberty University. But, Mr. Frazier says, there is always an opportunity to be the best player in a given market.
“Schools that are nimble and fast with their curriculum, able to get programs through their accrediting bodies, and move quickly,” he says, “they are going to survive.”
Ben Myers contributed to this article.
Scott Carlson is a senior writer who covers the cost and value of college. Email him at scott.carlson@chronicle.com.
