This Week In College Viability (TWICV) for January 8, 2024

Gary (00:02.918)
It's January 8th, 2024. Hi, it's Gary Stocker with the first episode, the first podcast of this week in college viability for 2024 and it's a new year full of similar stories from 2023 and I'm not gonna say that 2024 will be exciting, that's trite. I will say that the college news and commentary I provide this week will continue to try and earn your support.

for allowing me to be, as I shared before, your informal fiduciary, going above and beyond the call to look after your best interests in college and higher education. And as I thought about this, you might think that the fiduciary role doesn't apply to college leaders, but I think it does. If I can be just a small part even of changing the college discussion and perspective for students and their families, faculty, staff.

maybe community leaders and others. College leaders won't call me fiduciary and that's fine, that's their job. But they will have to react to market changes and the data comparisons I provide through my college viability app. So on to today's stories, an egregious failure. Union Institute in Ohio. And I ask again, what are accrediting agencies doing? We'll talk about that in more detail here in a minute. There's a new effort in Texas.

to entice students and it's not even done by colleges, on FAFSA, which of course is the form that folks fill out to determine what amount of support they can get, financial support they can get to go to colleges. And then I'm gonna use a merger story, merger and acquisition story from healthcare and change the words a little bit. We're gonna have some fun with that and talk about why colleges can't do the same thing. And we'll also talk about something called quality earnings for colleges.

We always start off the podcast with the cutbacks and layoffs list. And this week, the first full week of 2024, there aren't any. So we're going to leave that alone for next week and we'll see what kind of new stories hit the wires. I've already got one out of Pittsburgh that we will add for next week's list. And let's talk with that campaign in Texas.

Gary (02:19.77)
And this is from John Marcus at Heck and Joe reports. And the headline reads, a campaign to prod high school students into college, tries a new tack, making it simple. And as always, I'll include the link to the story in the show notes. But what caught my attention right off the top was, this isn't even from colleges. It's the brainchild of an advertising executive by the name of Roy Spence. And he's got some billboards and built a website that helps students in Texas.

be more aware of the positive financial consequences of going to college. And he was citing the fact, and I think this was national data, that the proportion of high school students going directly to college from high school has gone down from 70% in 2016 to 62% in 2021. And here's what happened after this campaign. Again, this is reported by John Marcus at Hekenger.

A survey, and I'm reading from the story, a survey of 300 middle and high school students in Austin and central Texas found that the proportion who were very aware of how they could make at least 50,000 soon after high school rose from 23% before they used Royce Benson's website to 61% afterwards. So again, the market is adjusting. This case is not colleges. It's a private person.

trying to provide guidance to his community, to his region, to get more students to change college. We're going to talk about that here in a minute as well. Michael Horn is one of the big.

names, if you will, in higher education. And he had an article in Forbes, and this is the time of the year when there's looking ahead to 2024 articles. He offered four disruptive trends for higher ed in 2024. I'm only going to talk about two of them. And the first one, of course, nobody's going to fall out of their chair. More colleges will close or merge. And I use the word consolidate because the word merge scares people. And

Gary (04:23.47)
Horn notes that emergency funds from the federal government helped keep many colleges that were on shaky financial ground solvent through the 2023 academic year and those funds are no longer available. And according to Bain & Company, again, this is from Michael Horn, two thirds of institutions must shift their business models to survive and thrive. And again, Bain & Company, an established consulting firm in higher education, two thirds, two out of three.

66% of institutions must shift their business models to survive and thrive. And we've talked about that many times, and I'm sure those stories will continue in 2024. And then one we haven't talked about, that Horne notes, big colleges and universities will get bigger. I think his reference was to the online portion of the market. But even as I record this in the first, actually the second week of January, I have been pondering for a long time that

we may already be in a scenario where families are increasingly choosing, mostly public, but not always, bigger colleges and universities just because they sense the financial weakness, the financial challenge of smaller ones. So Horne kind of confirms that when he suggests that big colleges and universities will get bigger. That's not good news. That's not good news at all for smaller colleges, both public and private.

But I think that could be where we're at now. And if we're not there today, we're going to be there sometime soon. Page two, frustration all around and the FAFSA rocky rollout. And this was, I believe, released in to small sections of America in late December, as was promised by the Department of Education. And it's not like we expect a federal agency to be able to deliver a software product on time.

and functioning, and I will reference you to healthcare.gov from many years ago. But it's a little bit about the impact that complicating the college process will have on the number of students willing to fight through these federally induced delays and the hassle associated by associated with many by many for tracking and capturing the financial data needed to complete these forms.

Gary (06:45.674)
And the early reads I have are that the forms aren't necessarily bad. They might be better asking for less information. But the delays, because we're already well into the college selection process here for the fall of twenty four. It's a lot. It's a little bit about the impact of complicating the college process, but it's a lot about the impact these delays and associated future complications will have on college revenue.

Keep in mind that we've talked about marginal analysis before. We all make decisions on the margins. Is it the color, the size, the price, the location, those kind of things? It's quite reasonable to speculate that the inability to upgrade and improve the FAFSA form delivered on time, but just to small parts of the country.

to improve the FAFSA form and process will cause just enough marginal students who are decided undecided either way about college to decide that maybe it's not worth it because of the hassle, because of the FAFSA hassle. And if that's the case, will those decisions down the road lead to the demise of those colleges? That's gotta be a fair number, those colleges dependent on the last...

five, ten, twenty students who won't enroll at their college because of the hassle. There's something to think about. Derek Newton, and we've talked about Derek before, he writes for Forbes. And his report, I don't have the date on that, it was early this month. Report, college education or training will be the only way, the only pathway, excuse me, to good jobs. Well, all right, probably.

I'm not sure the only pathway is reporting on a secondary story. But Derek goes on to talk about the value of a college education. And Derek Newton is absolutely, 100%, absolutely correct on the value of a college education. There's no question. My own college viability manifesto, and I'll make sure to provide a link to that.

Gary (08:56.394)
in the show notes, my own college viability manifesto strongly reinforces that value. That's not the issue. The issue is that the issue is the college that a student chooses must also provide value and stability. That's not the case. That's not the case in way, way too many situations. Now, I'm not a college education doubter.

as Newton calls them, his term, college education doubter. I'm not one. I am, I am a college financial health doubter. And you know why. There are hundreds, hundreds of private colleges with poor financial enrollment and outcome trends.

that have no business staying in the business of higher education. I've shared with you before, I have my own private list of 230 plus high risk private colleges across the country. It's my list. I'm not going to share it with anybody. I don't need the hassle that goes with that. But as colleges close, I go to my list and not always, but in most cases, the colleges that are closed are on my list. And it's reasonable to conclude.

that the financial straits, the financial challenges of these colleges won't allow them to provide a quality education or the only pathway to good jobs as the headline reads. Maybe, maybe we can talk, Derrick Newton, into a discussion on viability someday. The question is viability. The question is not the value of a college education.

So let's have some fun with mergers or consolidations. And there was a story out of Missouri from chief, that's not true, it was a story from chief health care executive on January 3, written by Ron Southwick. And the headline reads, two Missouri hospital systems complete merger, forming a $10 billion system. Now I'm not going to share the names, it's not that big of a deal. But I've got some quotes, some lines from the story.

Gary (11:05.566)
And I'm going to substitute the story references to health care to higher education. So here's what the story says. At the same time, the two individual brands, these two hospitals, will remain in place for their markets. So I'll tell you, one's in St. Louis, one's in Kansas City. As a combined system, this merged entity, consolidated entity, will provide an estimated $1 billion in community benefits.

Sidebar note, colleges provide community benefits. There's a quote from the CEO of the new Merge system. And the CEO says, from the moment we first explored the concept of an integrated system, we have had a clear vision to improve, substitute words here, higher education in the Midwest. My words, not theirs.

By working together, he goes on, this hospital is healthcare CEO, by working together to deliver extraordinary, substitute words, education, college education, higher education, and becoming the region's premier destination for higher education, we will enhance our communities, I'm substituting words, and accelerate education and training throughout our region. And messages to the community, the CEO.

We're gonna read now from the article itself. The CEO says, the merger consolidation will provide the organization with improved financial stability to meet changes in the industry. Should I read that again? I'm going to. The merger will provide the organization with improved financial stability to meet changes in the industry.

The new organization also expects the merger consolidation could help in recruiting and retaining top talent in a message to, he says, patients, I'll say citizens. The CEO wrote, we are ready to do the important work of fulfilling our vision to improve, substitute words, education, higher education of our communities. And we are honored to be part of this journey with you. He concludes.

Gary (13:19.826)
I've said this before, let's say it again, higher education is maybe the only, maybe the only industry that has not engaged in significant and scaled mergers or consolidation ever. Yes, there are moms and pop mergers around the country on occasion, but the message from healthcare, which has lots of mergers, the logic of it makes sense.

higher education? Will it be difficult? Absolutely. Is it doable? Also, absolutely.

Gary (13:57.266)
91.7 WVXU, sound like an advertiser here. Zach Carion published a story on November 29th, and I missed this one. I had a LinkedIn person drop me a note over the week and say, hey, why haven't you talked about Union Institute in Ohio? And here's a headline from Zach Carion at WVXU in, can't remember the city, but it's in Ohio, egregious failure, colon.

Union Institute loses federal aid, fined millions of dollars for misuse of funds. All right, we've seen similar stories before. Let's go to the data for Union Institute and University in Ohio. And again, from the college viability app, from 2014 to 2021, Union Institute and University, interesting, their FTE enrollment is down almost 600 students, not quite.

And it's gone from about a thousand in 2014 to just a little over 500 in 2021. Their four year graduation rate in 2021 was 33%. Their six year graduation rate in 2021 was also 33%. They're not even reporting admission, yield, percent admitted and other data points. Their tuition fee revenue was down 11 million over those eight years.

Their endowment assets aren't much more than couch money. Graduate enrollment is down. Full-time enrollment is down.

Gary (15:29.422)
And here's his line from the story. Union Institute and University is accredited by the Higher Learning Commission. It's a member of the American Association of Colleges and Universities and the Council for Adult and Experiential Learning. And I ask yet again.

What are these accrediting agencies doing? These issues at Union Institute didn't pop up in November, 2023 when this story first broke. The graduation rates just pathetic and not even reported in some years. The iPads data that we use for the college viability app is all over the place raising serious questions about the college's ability to even track and submit data.

And the college didn't even report a basic data point, a percent admitted for the last eight years. Yet it took until late 2023 for their accrediting agency, the Higher Learning Commission, to step up and publicly raise issues, publicly let you and I know that union had issues. I could have told you that five, six, seven years ago, maybe longer.

I continue to believe that these higher education accrediting agencies are nothing more than iDotters and T-Crossers. I know I will get nasty emails by saying that, but how many students go to places like Union Institute and University?

and receive a substandard education because the agencies like HCL and the six others, I think, are asleep at the education wheel. And this, this is a triple jeesh. Just stunning how ineffective and inefficient these accrediting agencies can be when colleges need to be shown the door. Turn the lights out.

Gary (17:43.51)
And these accrediting agencies essentially, you know, they don't want a role, they don't have a role, they can't figure out how to have a role. Triple G's and I can't even remember the last time I used a triple. And we've regularly seen similar stories about the lax financial monitoring reporting on struggling colleges from other accrediting agencies. And in the case of Union Institute and University,

It's hard to imagine that the lights won't be turned out shortly for the few remaining students that are there. But the issue is not union. Well, it is in part. The issue is how come you and I didn't know about this sooner? How come the students who are now struggling, the faculty and staff and community who now have to react to this closing didn't know this a long, long time ago?

Page three, Taylor University details $100 million master plan. Now, this is a story that goes both ways. And this is from Building Indiana Business from January 5. It's a press release. The link will be included in the show notes. And let me read. Taylor, the oldest non-denominational university in the Council for Christian Colleges and Universities, has welcomed back-to-back record-breaking freshman classes and leads Indiana.

in the recruitment of traditional undergraduate freshmen for Christian colleges as quite the qualified statement. And I don't doubt that back to back record breaking. Again, that's subjective. And I can tell you why, because when you go to the data, Taylor University, their FTE, and one that we always track in the college viability data is down 170 some odd students since 2014.

And they chose to report back to back post pandemic enrollment. All right, they can do that. But I can also say, guys, you're not being forthright. You're not sharing the full story. The enrollment is down. And it's apparent that, in my mind anyway, it's apparent that Taylor University is kind of following what we saw not work at the public university, West Virginia University.

Gary (19:56.266)
when they spent tens of millions to build stuff, buildings and services and those kinds of things. They built it in the hopes that students would come and they didn't. And now they're facing at West Virginia University a whole series of cutbacks. But here's the other side. And this is a positive balance. I went to the 2022 financial statement for Taylor University. And it ain't bad. They have a little over $30 million in long-term debt.

You never hate to see debt, but it's there. And I presume they can cover that amount. It's not that big of amount for their revenue, which is about that per year. And the rest of what I saw in the financial statement is not bad, not bad at all. But that's why I'm here. This is an example of spin. And there's nothing wrong with spinning a story, nothing wrong. But that's why I'm here.

I'm here to point out the poetic license colleges take with their business. Believe me, don't believe me. But the data I have supports the commentary that I offer on this podcast and other venues.

And another one of those free tuition, if you could see me, you see I have air quotes. West Liberty University announces tuition free toppers program. I think toppers, remember state, be the Hill toppers, I think. Is there, is there a mascot nickname? And this is from the West Liberty University Press release on January 8th. That's today. And I had this over the weekend. Anyway.

The Tuition-Free Toppers Program, this is from the press release, will cover tuition costs and up to 30 credit hours per academic year after federal Pell grant funds and any other grants and or scholarships are considered. All right, we've seen this before. And just to get perspective, something to give you something to think about.

Gary (21:54.986)
This means that the paying students, those not participating in the tuition-free toppers program, are subsidizing the free, and again I've got your quotes floating up here, are subsidizing the free students. The college will rightfully use whatever Pell grants are available.

And those funds will drop straight to the bottom line because they've already got their English 101 class filled with paying students and their math classes and science classes and all that kind of stuff. So there's nothing wrong with what they're doing, nothing at all wrong legally or ethically or anything like that.

are not saying that some students are subsidizing other students. And I'll make up the numbers, but what's your enrollment? They have about 2,000 students. I'm rounding up a little bit. And let's say that 1,800 of those students are paying some form of tuition and fees. Those 1,800, again, I'm making up the numbers to make an example, are subsidizing the tuition for the free students. Again, nothing wrong with it, but it's important to point it out. And it won't be a lot of money.

I'm guessing the good folks at West Liberty University are betting that the number of new students they get, incrementally new students, from the Tuition Free Toppers Program isn't large enough to increase their cost basis by having to add more sections and faculty. But again, the fiduciary role, nothing wrong with what West Liberty University is doing. They're just not sharing the whole story. Page four.

from the good folks at the Transformation Collaboration. This is a higher education consulting and think tank enterprise. And I got some notes over the weekend, I think it was from Wallace Pond and Tony Bieta at Transformation Collaboration. And they shared something that I want to put in perspective. And I'm paraphrasing and using their words verbatim in some cases. In the business world, academics not included, they say, there's a financial reference to something called quality earnings.

Gary (23:57.322)
and they showed it was first advocated by Ken Blanchard in his book, Raving Fans. And it has to do with the extent to which earnings and profits are generated via honest, transparent, customer-centered practices. They shared, Pond and Bieta, shared that many companies, including institutions of higher education, have generated substantial revenues and margins. While...

saddling customers and students with debts that are unsustainable. Now, that's an educated perspective. That's an educated opinion from their from their business. And I respect that. And they go on to suggest that this sin, and again, that's an emotional word, this sin has been committed across the spectrum of college institutions with some of the worst offenders, some of the worst offenders being private nonprofits.

who often bury students in six figure debt for degrees that lead to low paying jobs or no jobs at all. We've seen that part of the story before. But here's the rest of the story. Blanchard, Ken Blanchard from the book, Raving Fans, would argue that those are bad earnings. They're not good earnings, they're not quality earnings. They're bad earnings or profits because they come at the expense.

rather than the benefit of the customer. Now, the point they're trying to make here is the benefit is an income sustaining, a good income sustaining job and career of the customer. And they are ultimately unsustainable for the institutions as well, because at some point, and we may be seeing this happening now, at some point, customer students will stop coming or borrowing.

or regulators will implement regulations associated with income. And we already see those efforts by the Department of Education. And so this quality earnings concept is not original. It's used in other industries. And investment bankers and brokers use this in doing their due diligence with mergers, acquisitions, liquidations in industries other than higher education.

Gary (26:12.394)
And they also shared with me it has parallels in cost structure. For example, the example they gave me in building trades, construction. $350,000 in annual revenue per employee is considered to be the bottom threshold, the lowest you want. Ideally, they note the construction entity should be realizing about $500,000 per employee in revenue.

That metric, that revenue per employee, enables a merger or acquisition, and we don't have acquisitions really much in higher education. That metric enables a merger or acquisition actor to know going into the deal, where the opportunities for greater efficiencies are the greatest. And I guess, let's hope that some colleges already use this. I'm not aware if they do, but let's hope that colleges develop

ratios for this kind of stuff for administrative costs or revenues, planning, instruction, operating staff, sports, because it's a good value. I may have to ponder how to use this on the college viability app in future months. And finally, the late, great Paul Harvey. Hello, America. This is Paul Harvey, standby for news. Said regularly that noise makes news. It's likely in my.

mind that many of the This Week in College Viability podcast listeners consider my content mostly noise, if not all noise. And if so charged, I plead guilty. I plead guilty. And here's why. Colleges only share nice news. And there's nothing wrong with that. They work hard to paint an idyllic picture of the college experience. And that exists in many, if not most cases. The college experience for students is a good one.

The college in many, but not all, cases has the resources to provide a quality education and graduate its students. I make noise. I make noise because of the hundreds of colleges whose picture painting efforts, whose good picture painting efforts are delusional.

Gary (28:30.294)
It's not a good experience because they don't have the financial resources needed to provide a quality income, good income producing degree and career. And if the noise I make, if the noise I make helps move the market towards the needed consolidation, or if my college viability app helps families choose a financially secure college.

I want to be guilty. I want to be guilty of making that noise. Until next Monday, Gary Stocker with College Viability and this week in College Viability for January 8th, 2024, we'll talk next week.