Massachusetts Wants to Regulate Private Colleges That Might Close. Is That a Good Idea?

In an era of more small-college closures, Massachusetts is akin to ground zero. Mount Ida and Newbury Colleges both shut down in the past 18 months. Hampshire College recently made headlines for deciding not to seek a merger after all in response to its bleak financial picture. It’s a growing problem that lawmakers are debating how to resolve.

Students are particularly vulnerable when a college shuts down, and in an effort to protect them, Gov. Charlie Baker of Massachusetts, a Republican, wants to fast-track a proposal to impose more regulations on private colleges the state suspects could close. The state Department of Higher Education’s board chairman, Chris Gabrieli, said in January that the board’s goal was to put regulations in place by the 2019-20 academic year, according to The Enterprise, a newspaper in Brockton, Mass.

A new report from the Boston-based Pioneer Institute, “A Risky Proposal for At-Risk Private Colleges: Ten Reasons Why the Board of Higher Education Must Rethink Its Plan,” urges the state not to take on a role it may not be prepared to handle. In the report, Greg Sullivan, the think tank’s research director, highlights problems with the proposal that he believes will do more harm than good.

Baker and the Massachusetts Board of Higher Education’s proposal would allow the state to assess the financial viability of all its private colleges. If an institution is identified as being at risk in a given year, a newly created state agency would closely monitor the college and require its administrators to notify students, faculty members, and other stakeholders of that status by December 1.

The plan would give the state much more authority over the affairs of struggling private colleges — a position, Sullivan says, that could be easily manipulated. His report outlines 10 possible problems with the proposal, and makes recommendations on how Baker’s administration could avoid the pitfalls.

Sullivan spoke recently with The Chronicle about what role he thinks lawmakers should play in protecting students from sudden college closings. The interview has been edited for length and clarity.

Q. Governor Baker’s proposal is an attempt to address problems with the early-warning systems already in place, but your report suggests it’ll only create new problems. What about the proposal immediately concerned you?

A. The problem that the state’s administration is trying to address is a very valid one, but a regulatory approach not being used anywhere else in the country is dangerous. Under this proposal, a newly created agency can determine that a university is at risk and should not continue. They can require the university to submit a teach-out plan to the state, and that teach-out plan is subject to the approval of that agency.

My concern about this has to do with the fact that the process that they would use to determine the fate of a university is conducted behind closed doors, not in public. The methodology they’ll use has not been specified, nor is it required that it be quantified and used consistently. There’s an inordinate amount of authority given to a group of people that effectively have the power to close a university.

Q. Where in this proposal is there potential for manipulation?

A. I served two terms as Massachusetts’ inspector general, acting as a watchdog over state agencies and authorities. One lesson I learned is that it’s a very bad practice to concentrate subjective authority in a small group of people who are allowed to operate behind closed doors to make consequential decisions with permanent effect. This proposal is vulnerable to abuse.

Although the administration has proposed that the decision process would be kept confidential, I would say it’s unlikely that that information would be kept quiet. Once the word got out, the agency would be put under tremendous pressure by well-connected alumni, state senators, businesses, and others lobbying so one college could be allowed to continue over another. It’s just a recipe for undue influence.

Q. How accurately can the state identify the most at-risk private colleges?

A. The administration wants to use the teach-out viability metric as a screening process for private colleges. The metric is newly developed by EY-Parthenon, a private consulting company. The underlying components of the metric have not been disclosed. What we do know is that it’s based on data from the [federal government’s] Integrated Postsecondary Education Data System that is 18 to 24 months old when it’s released.

It’s simply a bad model. A good model is when the methodology is straightforward, spelled out in complete detail so everybody knows exactly what the rules are, and 100 percent transparent. And based on that bad model, colleges caught in the screening process are expected to let everyone know by December 1 that they’re in danger.

This is a very dangerous warning to send out because it is highly likely, if not inevitable, that once notification goes out, the college applications of prospective students would substantially decrease, current students would take action to transfer to other colleges, and faculty members would seek to move to other colleges. Lenders would stop lending, donors would stop donating. It would effectively be a self-fulfilling prophecy.

Q. Is there any place for a government entity to influence how and when a college should close?

A. It makes sense to come out with a system for early warning. That doesn’t mean any government entity — state, federal, or otherwise — should be able to direct a college to close or merge. I think it would be a good idea for this administration to have this proposal reviewed by people who are actual experts in higher-education finance.

If the state were to work with experts at the [U.S.] Department of Education and the New England Commission of Higher Education, [the regional accreditor,] on how to improve an early-warning system, they would be better able to protect students. But if the proposal continues in this form, it’ll give the wrong entity too much power to act as both an early-warning and termination system.

Zipporah Osei is an editorial intern at The Chronicle. Follow her on Twitter @zipporahosei, or email her at zipporah.osei@chronicle.com.