“Five years was a long time to be at the point of the spear and in crisis mode,” says José Bowen, former president of Goucher College, a small liberal arts college founded in 1885 outside Baltimore, with about 1,500 undergraduates. Last October, about a year into his new five-year contract, Bowen told Goucher’s Board of Trustees that he was throwing in the towel and leaving to write a book.
Bowen, heralded as an academic innovator, was burned out. Why? Because there are few worse jobs today than that of a small college president. Consider what it must be like to run an institution whose success or failure, year after year, depends largely on the decisions of 18-year-olds. Determining the tuition sticker price requires presidents like Bowen to approve an alchemy of inflation and deep discounts quietly doled out to those with financial need and others whose academic credentials could boost his school’s ranking on top college lists. And if that isn’t challenging enough, try charting a course in a commodity business, where falling demand is a given and budget tightening a constant. Worst of all, competition is only going to get more intense.
“We did what we thought were the tough things at Goucher, but [the crisis] is not over yet,” says Bowen, who overhauled the liberal arts college’s curriculum, eliminating unpopular majors like German and replacing others like math with more marketable-sounding ones like integrative data analytics. Bowen also built a new First-Year Village on campus, complete with game rooms, outdoor hammocks and soundproof study areas.
Financially challenged Goucher, which earns a C+ and ranks 320th on Forbes’ College Financial Grades ranking, is actually an above-average college among the 933 private not-for-profit institutions we analyzed. Though Goucher is forced to offer admission to 80% of its applicants annually and heavily discount its $44,300 tuition for virtually all who enroll, its well-regarded brand, $200 million endowment and proximity to major cities actually give it a substantial competitive advantage over most other small colleges.
Using the most recent data available from the government’s National Center for Education Statistics database, Forbes analyzed all private not-for-profit colleges in the U.S. with enrollments greater than 500, grading them on balance sheet strength and operational soundness, plus certain other indicators of a college’s financial condition, including admission yield, percentage of freshmen receiving institutional grants and instruction expenses per student. (For the full list, see below. For our methodology, please click here)
It’s no surprise that upper-crust colleges—members of the Ivy League as well as prestigious institutions from Stanford and MIT to Rice, Northwestern and Williams—returned to the top of our list with perfect 4.5 GPAs and A+ grades. This year only 34 colleges received A+ grades, and another 40 scored at least A-. However, just as income inequality has become more pronounced among U.S. households, the wealthiest elite colleges are getting richer, but the most of the rest have become poorer.
Forbes analyzed the finances of 933 private not-for-profit colleges with enrollments greater than 500. The weathiest, elite schools are getting richer, and most of the rest, poorer.
Our most recent ranking reveals that the number of D-graded colleges, those with GPAs less than 1.5, have swelled from 110 when we started grading finances in 2013 to 177 today—a 61% increase. Those earning GPAs from 1.5 to 2.5, C colleges like Goucher, Marquette and Drexel, make up 498 of our 933, up from 434 in 2013. Most Cs and Ds, a total of 675 private colleges, are so-called tuition-dependent schools—meaning they squeak by year-after-year, often losing money or eating into their dwindling endowments. Though colleges and the government provide little transparency into the financial health of schools, a significant number among our lower ranks are nearly insolvent.
Take the University of Bridgeport, a long-troubled school once controlled by Reverend Sun Myung Moon’s Unification Church located on the shore of the Long Island Sound in Connecticut. The money-losing university has a full suite of academic offerings but specializes in preprofessional studies like nursing, dental hygiene, criminal justice and chiropractic studies.
The school’s new president, Laura Skandera Trombley, worked wonders at Pitzer College in California from 2003 to 2015, but she may have met her match with Bridgeport. Nearly every financial ratio we track looks abysmal. University of Bridgeport ranks 895th on our list and is near the bottom of our class of D colleges. Its primary reserve ratio, for example, which measures how well a college’s “expendable” assets could cover expenses without straining operations, was 0.28 according to the most recently released financial data. That translates to less than four months of liquidity, compared with say three years for Lehigh University, six years for Maine’s Bowdoin College and 12 for Princeton.
“When I walked in the door there were 14 deans for 5,000 students. And we have three now. I’m also reviewing all of our vendor contracts,” says Trombley, whose Ph.D. is in English.
But Trombley’s cost cutting may not be enough to save Bridgeport. Last year she attempted a financial Hail Mary of sorts in negotiating a merger with Marlboro College, a tiny liberal arts school in rural Vermont known for its “design your own curriculum” pedagogy and heralded in the 1996 guidebook Colleges That Change Lives.
Recently Marlboro’s enrollment fell to 142 from a peak of 300. It has been bleeding red ink for years. Last year Marlboro hired Ernst & Young Parthenon and approached more than 70 colleges with a pitch book pleading for its salvation. Trombley wanted to bolster Bridgeport’s liberal arts offerings and convinced Marlboro that it would leave its Vermont campus and faculty intact. At the last minute, however, Marlboro jilted Bridgeport in favor of financially stronger Emerson College, rated C+ according to Forbes’ Financial Grades. Emerson, known for media and communications, will eliminate most of the small college’s staff but will absorb Marlboro’s student body and tenured professors willing to move to Boston. Its $35 million endowment will go to Emerson, as will the net proceeds of its 530-acre Vermont campus and 60 buildings, now being sold off.
“It’s a really challenging economic proposition to make a campus built for 300 people on an isolated hilltop in rural Vermont viable,” says Marlboro president Kevin Quigley. “The economics were never presented to us [by Bridgeport] in a way that was credible.”
Marlboro, whose name will live on in Boston as Emerson’s new Marlboro Institute for Liberal Arts and Interdisciplinary Studies, was lucky. Numerous small colleges have already either closed or are on the brink of shuttering. Recent closures include Vermont’s Green Mountain College and Mount Ida College in Newton, Massachusetts. Well-regarded Hampshire College, in western Massachusetts, remains, thanks to a last-ditch revolt by parents and alums.
More college defaults are looming. According to a recent book and study by Nathan Grawe, a professor of economics at Carleton College, the population of high school graduates will drop by 9% between 2025 and 2031. In most of New England and some Mid-Atlantic states, the decline will exceed 15%.
Even worse, according to a study by Kevin P. Coyne, of Emory University business school, and Robert Witt, chancellor emeritus of the University of Alabama system, bloat is endemic to our nation’s higher education market.
“Public colleges have 6.4% excess capacity, growing at about half a percentage point a year. But the private colleges have 12.4% excess capacity, growing at about triple the rate of public colleges,” Coyne says. “Here’s the worst news. The smaller half of private not-for-profit colleges, those with enrollments below 1,125, have overcapacity of 28% and growing rapidly.”
Unfortunately, most college administrators have their heads in the sand. “There is kind of an immutable natural force that exists only on the college campus. It’s like gravity,” says Fred Prager, a veteran higher education financial advisor who recently staved off a payroll crisis at Holy Names University in Oakland, California, by helping the school issue a $49 million private bond offering. “That force is denial. It’s denial by faculty, denial by the board, denial by the administration and denial by families that financial exigency is real.”
Higher education economist and former Mercy College president Lucie Lapovsky argues that most smaller schools feel pressure to increase their budgets in order to attract students.
“If you look at five-year plans for small colleges, they’re all assuming growth. I had one of those,” Bowen says. “My board didn’t like the idea that … we can’t keep building a plan based on growth. I told them the only way we’re going to succeed is by putting other colleges out of business, because you have to take market share.”
According to Witt and Coyne, the idea of colleges merging is a bit of a fallacy. Their study of 55 private not-for-profit college closures since 2016 reveals that most actually shut down and liquidated assets. Only 14 actually underwent anything that could be considered a merger.
“In the future there will be press releases that will throw around the word merger,” Coyne says. “Nobody would use the word ‘merger’ to describe when a company closes and another company buys its equipment for pennies on the dollar.”
One catalyst that could quicken the demise of zombie colleges is a recent rule change by the National Association of College Admissions Counselors (NACAC) that relaxed the ethical rules that have long prohibited colleges from poaching each other’s admitted and enrolled students. Thanks to pressure from the U.S. Department of Justice, colleges are now free to offer special incentives for early decision applicants as well as target those who have already agreed to enroll at competitor schools. They are also able to solicit transfer students from, say, last year’s applicants who might be having second thoughts.
Last year, according to NACAC, some 521 colleges failed to fill up their freshman classes by the usual May 1 deadline. It’s a perennial problem for a growing number of middling colleges. Missing enrollment targets by a small number of students can have dire financial consequences for many schools.
“In the old days if you were off by two or three students, you had a panic,” says Bowen. “If you’re off by a hundred—lots of schools last year were off by a hundred—out of a class of 400 or 500, that’s like 20%. Holy crap! That’s a giant revenue swing. And, of course, it’s a four-year problem.”
High Point University of North Carolina, graded C+ by Forbes and known for its aggressive recruiting tactics, offers early decision applicants first choice of dorms, a parking space and priority in selecting class schedules. Colorado Christian University likewise offers early housing registration, plus an additional $1,000 in scholarship cash per year, for early applicants.
There is a kind of an immutable natural force that exists only on the college campus like gravity. That force is denial.
“For the smaller schools, it’s going to get vicious,” Witt predicts.
Among Forbes’ list of less prestigious small private colleges, there are a few rare exceptions.
Tiny Davis & Elkins, with 800 students on a bucolic campus in West Virginia’s Appalachian mountains, rose from a C in 2015 to B+ last year. It did so by installing a new president with a background in fundraising. In 2016 Chris Wood paid down Davis & Elkins’ debt, and two years later he closed a $101 million capital campaign that will bolster its endowment.
Still, belt-tightening has become a way of life at Davis & Elkins. Wood brought food service in house (“It’s a revenue producer”), jettisoned artsy majors like dance in favor of preprofessional programs like nursing, and eschewed high-cost athletics like football, promoting instead lower-cost “emerging” sports like women’s triathlon and acrobatics & tumbling.
“We’re rowing against the current, and the current is getting stronger,” Wood says, just three years into his tenure. “But the only way that any of us are going to make it is if we row harder.”
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