News that enrollment shortfalls had spread to private colleges in the Northeast and mid-Atlantic regions, including selective institutions like Bucknell University, drew widespread attention in higher-education circles on Tuesday.
But higher-ed experts weren’t surprised.
The recent tremors are the outcome of years of data suggesting that a significant share of private colleges, especially smaller, traditional four-year institutions, are at risk of losing revenue as increasingly price-conscious families look elsewhere for degrees. But consultants and higher-ed leaders dispute how severe the problem is, and how best to fix it.
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News that enrollment shortfalls had spread to private colleges in the Northeast and mid-Atlantic regions, including selective institutions like Bucknell University, drew widespread attention in higher-education circles on Tuesday.
But higher-ed experts weren’t surprised.
The recent tremors are the outcome of years of data suggesting that a significant share of private colleges, especially smaller, traditional four-year institutions, are at risk of losing revenue as increasingly price-conscious families look elsewhere for degrees. But consultants and higher-ed leaders dispute how severe the problem is, and how best to fix it.
Some see the news as a further sign of an existential threat facing small, private, tuition-dependent colleges. Those institutions have a “very sensitive, delicate business model,” said Alana Dunagan, a senior researcher at the Christensen Institute, a Boston- and Silicon Valley-based think tank. Others say that while colleges certainly need to change, they’ve overcome such threats before.
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The trends have stoked fears of a further divergence between the most prestigious private colleges, with multibillion-dollar endowments, and those less so. While most private colleges reported increases in enrollment last year, 40 percent saw declines or no change, according to an annual report released this month by the National Association of College and University Business Officers. Less-wealthy colleges can be especially dependent on net tuition revenue from enrollment, causing them to discount their prices more and thereby threaten their finances over time, the report said.
The pressures are “reaching further down the food chain in the higher-ed ecosystem,” said Richard Staisloff, founder of rpk Group, an education consulting firm. More colleges have called the firm recently about mergers and acquisitions, he said, and restructuring.
Colleges have attacked the problem differently, he said. “If all your focus is on the revenue side of the equation, you’ll say, ‘The model works, we just have to find new ways to fund it,’” Staisloff said.
But that approach overlooks the major, cost-side changes many colleges must make in their business model, he said. “At many institutions, we’ve been playing around the edges for a long time. And playing around the edges doesn’t cut it anymore.”
Disruptive Pressures
Private colleges set a record for tuition discounting last year, awarding freshmen 52 cents of financial aid for every dollar of tuition revenue, according to the report. The organization, known as Nacubo, has warned for years that dependence on tuition discounts is unsustainable, as net tuition revenue has faltered.
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The average institutional grant for freshmen has increased by 91 percent in the past decade, as published tuition and fee prices rose 47 percent, according to the report. Average net tuition — what students paid after grants are subtracted from the listed prices — rose 18 percent, to $18,424 from $15,561.
Dunagan agreed that those increases are not sustainable. The high-price, high-discount strategy is “essentially a price-discrimination model where you’re trying to get everyone to pay as much as they can,” she said.
Colleges have long leaned on their wealthiest students to pay full price. “The issue is we’ve run out of those students,” Dunagan said, and those who remain are more price-sensitive. “The blood is out of the turnip.”
Small, less prestigious, tuition-dependent liberal arts colleges may well be unsustainable, but they represent a significant chunk of our national enrollment capacity. Where are these students gonna go? https://t.co/lC1JJkFtAD
Most colleges whose enrollments declined or flattened cited students’ sensitivity to price, the increased competition for students, and changing demographics, Nacubo found. A shrinking pool of high-school graduates in feeder regions, as well as competition from more-affordable public colleges, has for years put small and midsize private colleges on edge.
At the extreme, some colleges have closed or faced drastic budget cuts. Hampshire College, in Massachusetts, will shrink the size of its freshman class after years of declining enrollments, amid upheaval among top leaders and faculty and staff members.
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The most-dire predictions foresee that fate for swaths of academe. Those forecasts have been led by the Christensen Institute’s founder, Clayton M. Christensen, who has predicted that as many as a quarter of colleges may close or merge in the near future.
Colleges are “facing disruptive pressures over the long term,” Dunagan said, “but over the short term, the business model is collapsing under its own weight.” That means first cutting costs, she said, and later making long-term investments to compete with forces like online education and job-training programs. That might look different from one institutions to another — for example, the radical transformation of Southern New Hampshire University into an online mega-university.
The canaries in the coal mine aren’t dead but they have stopped singing. https://t.co/nuBsLtKP7E
A collapsing sector? Other leaders aren’t so sure.
Colleges have faced worries about tuition discounts and technological threats for decades, said Richard Ekman, president of the Council of Independent Colleges, an association of small and midsize private colleges. “What we’ve seen is that these colleges are very entrepreneurial,” he said. “In fact, not many colleges are going under.”
His organization has tracked college finances and the number of college closures for decades, and it sees little cause for alarm, he said. “The majority of small and midsized private colleges and universities,” a 2017 report reads, “are not financially at risk.”
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“We don’t know for sure what’s going to happen,” Ekman said. “Maybe the number of college closures will increase, but so far that hasn’t been the case.”
David L. Warren, president of the National Association of Independent Colleges and Universities, agreed that “the trend lines, while real, have been overblown.” The smallest colleges are indeed at risk, especially those in rural areas, he said. Demographic change is a greater threat than technological change, he said, and colleges will have to diversify their student bodies and match resources to their unique missions.
Warren and other experts agree that colleges most at risk must be able to measure outcomes, advertise their specialty, and cull what no longer works. But that doesn’t just mean the common, catchall term of “marketing,” said Ryan Craig, managing director of University Ventures, an investment fund.
The single biggest change in higher education in the past 20 years, Craig said, is students’ growing fixation on landing a job after college. “If you can’t demonstrate strong employment outcomes, it’s going to be very difficult,” he said. As the number of the wealthiest students dwindles, “subelite” colleges will have to slim down and differentiate themselves, he said.
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Some have managed to do that. Ekman, Warren, and Staisloff cited institutions like Utica College, which has tried to resist demographic threats in upstate New York by adding revenue-driving nursing programs.
Steven Johnson is an Indiana-born journalist who’s reported stories about business, culture, and education for The Chronicle of Higher Education, The Washington Post, and The Atlantic.