This Week In College Viability (TWICV) for January 31, 2023 - Prototypical college response

Webster University (St. Louis, MO) was the focal point in a late January 2023 story in the St. Louis Post-Dispatch. The essence of the story is that the college is in financial trouble. It is unlikely to close, but it will almost certainly face a need for lowering its cost base. This podcast addresses the specific issues at Webster only in the context that their response is similar to almost all private colleges with similar financial distress - and it wont' work.

New programs, degrees, etc only guarantee new start-up costs. With the competition doing the same thing, Webster and all of the other colleges have no guarantees of adding any materially significant new net revenue.

The intense pressure private colleges face on tuition discounting will extend to new programs they begin. The Webster leader's focus on public grants are not a long-term solution. It’s similar to couch money. At some point, every business must generate positive net cash from operations. Webster's admissions yield (aka popularity) is down 19% points since 2014. Their 2021 unfunded discounts were over $33M and the funded scholarships were a meager $1.2M. Their tuition and fee revenue has decreased $83M (source National Center for Education Statistics and IPEDS).

Those trends are not good.

While the details of this story are about Webster University, the responses from other private and public colleges are almost universally the same. “Let’s grow our way out”. Do we not see the LACK of logic that if every college is trying to grow its way out of financial distress – none or very few will be able to do so?

While colleges can't cut their way to success, they can certainly look to change their business model and look for merger or other consolidation partners. Webster and other college leaders should be looking to lower their cost base because the documented trends from the past are not promising.