This Week In College Viability (TWICV) for October 7, 2024

Gary (00:01.48)
It's Monday, it's October 7, 2024, and that means it's time for the weekly episode of This Week in College Viability. Hi, it's Gary Stocker. I want to start off with a feel-good enrollment story. I reached out last week to someone who I believe is a top thinker in higher education, and I shared my observations that since mid-August, hundreds, hundreds of public and private colleges

had released enrollment growth stories for the fall of 2024. Now I know that there are hundreds more that couldn't release that kind of story because their enrollment is down. But time after time when I saw these good stories, I went to Matt Hendricks visualization tool and many, but not all of these colleges had financial issues. And it appears to me they were trying to hide these issues, these financial issues inside their increased enrollment stories.

And this person said, Gary, you're missing the point of these stories. She said, everybody likes good news stories. They want they don't want to soften them with financial weakness details. All right. I can live with missing the obvious here. Enormous growth is a feel good story, even though it may be somewhat misleading in many cases. On the other hand, as Tevve said in Fiddler on the Roof,

Enrollment, as I have shared many times, enrollment does not pay the bills. It is the net tuition, the net tuition and free revenue that lets colleges make their payroll and keep the lights on and much, much more. So I'm going to continue to follow the cutbacks and the layoffs and the closure announcements in the coming weeks and months, probably the coming years. And when I see one of those, the first thing I am going to do is check that college's news stories about the

followed their Fall 2024 enrollment announcements. If there is a disconnect,

Gary (02:04.566)
If I find something they shared in the news story that doesn't tie in with their financial health, you're going to hear it here first. In this week's top news and commentary, yet another college sees football as enrollment salvation. Standard & Poor's rating agency says college competition and operational pain are the new normal. And we're increasingly seeing stories about now you can get admitted to hundreds.

of colleges without even applying. We'll talk about the downside of that. And in the category of you get what you pay for. You get what you pay for. Free community college in Massachusetts expected to draw 45,000 students within a year. Okay, we're going to talk about that one. These stories are much more on the October 7th episode of This Week in College.

Viability Layoffs and Cutbacks, Elizabethtown College, they were on the show a couple weeks ago. They're reducing their full-time faculty by 13, and they're cutting a handful of programs. And this is from Ashley Sahlmacher on October 4th on Lancaster Online. All right, so 13 employees, let's just use 50,000 each as an average, math is easy. So 13 employees, faculty, 13 faculty, at 50,000 each is $650,000.

Kenny, excuse me, Kerry Straub, Straub, who is the vice president for enrollment management and marketing and communications. That's a lot. At Lancaster said that Straub declined to share how much money the college will save across all these layoffs. he, she, excuse me, Kerry, I'm guessing a girl. Kerry said out of respect for the impacted parties, she's not going to share the amount. Okay, I will. I'll do it.

I just did. Elizabeth Town College's June 2023 tax filing showed it spent 43 million in change in the 2022-2023 fiscal years. The math I did a minute ago, 650,000 is 1.5%. 650,000, again, my educated estimate of what they're cutting in terms of 13 faculty is 1.5 % of that $43 million in change.

Gary (04:29.656)
Call it a small number, call it a big number, call it whatever you want.

Gary (04:36.14)
I'll do the math. I always do the math. And Elizabeth Town is dropping fine arts major, a sociology major and minor, as well as a Spanish and Spanish education majors. We should probably talk about that another day. I'm worried about the cutbacks in Spanish in the United States. Page two, Mount Mercy University. To bring a football program to campus. This is my Brooklyn Daisy in Iowa Capitol dispatch on October 4th.

Now, the presidents at Mount Mercy and St. Ambrose was that were on the podcast a couple of months ago. Amy Novak at St. Ambrose and Todd Olson at Mount Mercy, where the football is going to be. The presidents of these soon to be married colleges, they're not calling it a merger, they're calling it a partnership of sorts. These two presidents announced a football team will be added at Mount Mercy. Now, Mount Mercy is the smallest, I believe.

and will effectively be merged, that's not what they're calling it, merged with the operations at St. Ambrose. Fine, do whatever you want. Add football, add lacrosse, add ping pong, whatever you want. But here's the point I want to make on this.

Mount Mercy is not the only college adding football. Here in Missouri, William Wood University added it this year. And there are others across the country. And at some point, at some point, the only skill that will college football players will need at these kind of colleges will be the ability to lace up their own cleats. I assume they picked up that skill sometime back when they were much younger. They'll only be able to need to be able to lace up their cleats to play whatever sport.

because so many colleges, for example, see large football teams as enrollment and revenue panaceas. And remember, recently, I've talked about this before, research shows that while these sports teams, especially football, may provide a short-term bump in enrollment and revenue, but these colleges are bringing in comparatively low-skill players as comparatively

Gary (06:43.394)
low-skilled players, none of them could play for the big boys. And when they don't play, there's every reason to believe that there will be some noticeable attrition. These players probably can't play anywhere else, or very few of them could. So the retention rate will plummet. That won't look good for the college. And not only will that plummet, so will the tuition and fee revenue that accompany those athletes in the first place. And then we'll talk about something new. I'm going to start doing them.

Gary (07:14.798)
from this week forward. I'm gonna add a slash. Let me explain what that means. When I reference a college, I'm going to slash its four and six year undergraduate graduation rate. So for example, Mount Mercy slashes at 49 and 57, 49 slash 57. Mount Mercy graduates 49 % of their students in four years and 57 %...

of their students in six years. Neither of which are very good numbers. St. Ambrose slash is a decent but not great 58-64, 58 slash 64. 58 % of their students graduate in four years, 64 % graduate in six years. The 58 is not a bad number, the 64 % is still a bit low in my mind. So why am I doing this? I think I mentioned this in last week's podcast. Each fall,

colleges find innovative ways to note any type of enrollment increase. We just talked about that at the start of show. Yet each May, almost without exception, these same colleges stay away from sharing their pathetic graduation rates. Now that's not essentially effectively the case for St. Ambrose in particular. And there are many, many others with much worse rates at Mount Mercy. But none of these colleges,

share their graduation rates. So as the public service, which we always like to do, this week in college viability, we'll be tying graduation rates to every college story. Some will be good for sure. Most will be bad and in many cases embarrassing. So let's go on to another story by Brooklyn Daisy. And this headline reads, some Iowa private colleges break enrollment records.

ahead of the demographic cliff. And I see this kind of headline all the time. Brooklyn Drazee wrote this from Iowa Capital Dispatch on October 2nd. And these are the four colleges listed in Ms. Drazee's story. Northwestern College, Dort University, Buena Vista College, and Simpson College. Now let's do that slash rate. Let's do that four year, four slash six year graduation slash rate. Northwestern slash is at 5463.

Gary (09:33.326)
Dored at 63, 67. 63 is really good. The 67 seems to be low for an additional two years. Buena Vista slashes at 48, 68. I've seen a lot worse, but that's nothing you write home about. And Simpson College slashes at 58, 62. And only for all four of these, the difference between the four and six year graduation rate is smaller than I typically see. But as a group, these do a little bit better, sadly. Do a little bit better than most of the private colleges I have reported on.

and we'll report on in the future. Now, as I've said, not bad overall, and you'll see many, many other colleges report with worse numbers in the coming weeks and months. And I make that not bad, put that in quotes, that not bad judgment on college viability thresholds, the ones I use, you can use whatever you want. I use a four year threshold minimum at 50 % and a six year minimum at 70%.

So if you like to pay for everything you buy and only get goods and services for roughly 50 to 70 % of those things you buy, then you will like college's success at 50 % graduation rates.

And in hindsight, I probably should have provided a sarcasm alert for that last paragraph. Page three, Standard & Poor's. The headline reads, College Competition and Operational Pain are the New Normal. And the subheading reads, Margins are Down, Costs are Up, and Tuition Revenue is Constrained After the Pandemic Exacerbated Existing Challenges, according to a recent report, again, from Standard & Poor's.

And this is a story published by Ben Unglesby, who's also been on the show, and that was on October 4th. Here's what Standard & Poor says. U.S. colleges face a new normal and accelerated existing challenges in the wake of the COVID-19 pandemic, including constrained operations, that means getting smaller, and heavy competition. A recent report from Standard & Poor's S &P Global Ratings found between 2018 and 2023, five years,

Gary (11:51.95)
Operating margins fell from not quite 1%, .8 % positive number, to just below zero, a negative .1%. This is a profit margin, so you don't call it that, the operating margins. And this is because of rising costs. And we've seen that all over the place. Now, it looks like S &P spun the next part here. It says, meanwhile, median tuition discount rates, median, that number in the middle, of all tuition discount rates,

Median tuition discount rates at private colleges rose by more than five points to 44.4%, putting pressure on college revenue. Now median is a spin, I think, because the average is well over 50%. So that's fine. It's still going up. It's still going up a lot and still putting pressure on the net revenue that colleges receive. I don't know why S &P would have chosen median. Maybe that's their standard reporting guideline. That's fine.

And then they also note that from 2019 through 2024, the ratings agency S &P issued 126 credit downgrades for the higher ed sector compared to only 62 upgrades. So about two to one, almost exactly a two to one ratio. And as we all know, competition almost always takes the form of pricing. And although sticker prices continue to climb, S &P says institutions often steeply discount

What they say is with financial aid, institutions often steeply discount with financial aid, both reducing the revenue and complicating the conversation around the value of colleges. Now let's get pickier. I'm going to get pickier. It's not really financial aid.

Gary (13:40.013)
It's a discount. For example, when the new car dealer offers you a discount on the car you're buying, they don't call it financial aid. It's just an unfunded lower price. They're taking less revenue. The dealer is willing to take, for example, a thousand dollars less to sell you the car. They're not transferring funds from one account to another for a thousand dollars. It's just less revenue.

And it's the same thing with colleges. They're willing to sell you, if you will, sell you tuition for $10,000 less or whatever number it is, $10,000 less to get you to buy their brand of college education. Let's just call it what it is.

Joanna Nesbit at money.com wrote a story last week, I think it was, you can now get admitted to hundreds of colleges, admitted to hundreds of colleges without even applying. Of course, I'll have a link to the story as I always do with the show notes. And this just reinforces my continuing belief that colleges focus a lot more on enrollment, colleges focus a lot more on enrollment.

than they do on graduation, on the ultimate success of their students. And the story reads, all told, hundreds of thousands of students across the country will likely get an unsolicited offer of admission at some point over the coming application cycle. Last year, Common App made over 400,000 direct admissions, and a website called Niche, N-I-C-H-E, or Niche, however you pronounce it, made nearly $1 million. Now get it.

Friction-free admissions. All over the web, you want to make your buying decision as friction-free as possible, make it as easy as possible. But here's where the friction develops. First, how many of these direct admit students will first of accept the offer, but how many of them will have to go into life altering debt to pay for no friction on the front end?

Gary (15:57.676)
And second, let's get back to that graduation piece. Yes, I harp on it because that's why we go to college, to graduate, not just to take courses. And already, as we sit here in now what is late 2024, less than 50 % of all college students from both public and private colleges in total graduate in four years or less. And we are now adding students whose initiative to go to college, in my mind, may be modest at best.

And what are the odds that we are creating an increased population of students who can neither be successful in college or pay for college?

And again, I will refer you to my college viability manifesto to show you how valuable I believe colleges are and can be. But it is increasingly evident, increasingly evident to me that the scramble to get college students in the door.

is superseding any assessment, is increasingly superseding any assessment of their ability to be successful college students. It's dollar first, success second. And we're already aware of millions of former college students who have college debt, but no college degree. And it is my firm belief, my very firm belief, and one of the reasons I started college viability.

It's my firm belief that the oversupply of colleges

Gary (17:37.292)
and the effort they have put into recruiting students to stay alive, to stay financially alive, to stay financially viable is resulting in unrealistic pressure on too many financially and or academically unprepared students. And write this down, I've said it before, I'm gonna say it again, the number of colleges, the number of colleges needs to shrink, needs to decrease.

and it needs to decrease a lot. Page four, Cleveland State President calls graduates a thriving force in the region and then addresses enrollment and financial pressures. And in her state of the university address, Cleveland State President Laura Bloomberg outlined initiatives already underway to address declining enrollment and financial pressures. And this is from Amy Rona. She does a lot of good work for Signal Cleveland.

This is Troy from Amy Maroon and Cleveland State President can call her college a thriving force. I'm sure it is in some degree in the region, but let's Let's go to the data because that's what we do here. They slash their graduation rates four and six slash at 31 and 49

31 % graduate in four years, 49 % in six. Pathetic. In 2022, their admission yield, the percentage of students who accepted the offer of admissions is down 10 points. Now it's down a lot of places, but it's important to note that it's down here also. The enrollment, and I always track the full-time equivalent enrollment is down 900. Interestingly, tuition and fees are up 6 million, and total expenses are up 70 million.

in the face of 900 fewer students. I guess you can only get that in public colleges. I should have provided a sarcasm alert there. And in August, Morona, also from Cleveland Signal again, Morona, Amy and Morona reported that 50 Cleveland State faculty took a buyout offer. 50, five zero, Cleveland State faculty took a buyout offer just in August of this year.

Gary (19:50.538)
Sarcasm alert. I'm betting that is a sign of no confidence. Now, Dr. Blumer goes on to share anecdotal stories about successful Cleveland State graduates. No question, they're successful, really successful. Graduates at every college out there, there are absolutely hundreds, probably thousands, tens of thousands of successful graduates from the Cleveland States and their equivalents, public and private throughout the country.

But cherry picking anecdotal success stories does not rebut the pathetic overall finances in the case of Cleveland State, the really pathetic overall graduation rates. And finally, free community college. yes, the panacea of a nation in trouble. Let's make everything free. I gotta do better with sarcasm alerts here.

Free Community College in Massachusetts, now get the number here, Free Community College in Massachusetts expected to draw 45,000 students within a year. Now don't know that's new students or on the top of the current total, but 45,000 students. And this is from CBS Boston TV, Neil Reilly on October 3rd. And here's the story from Wellesley. Tens of thousands of Massachusetts residents are expected to take advantage.

of a new policy expanding eligibility for free community college in the state governor, governor Morah Healey says. She said 10,000 students, that's a nice round number, 10,000 students have enrolled in community colleges for the fall semester. And again, the article doesn't say is that total or new. It's bad reporting. More than double the number, 10,000 is more than double the number of students who qualified for free tuition. This is just a badly written story.

under the Mass Reconnect, I guess that's a program they have a year before. This is a big deal, the governor said, Governor Healey said. And here's what gets me. We estimate that it's going to be 45,000. Again, nobody's defining their terms here. I wonder what college this reporter went to. And we estimate that it's going to be 45,000 in no time in just a year. The governor's budget has to dedicate $117 million in change.

Gary (22:10.446)
for the free community college program. And much of it's being funded through a millionaire's tax. You gotta expect that in Massachusetts. And anyone without a bachelor's degree, without a bachelor's degree who has lived in Massachusetts for at least a year, enrolls in about two classes. I don't know what about two classes are. Per semester is eligible for free community college. There's an allowance of $1,200, up to $1,200 for book supplies and other expenses.

depending on a student's household income. Massachusetts Bay president David Podell says it's a revolutionary change in higher education in Massachusetts. Senate president Karen Spilka said that community college enrollment is going through the roof, okay, and will help close the workforce gap in Massachusetts. And of course, here at College Viability, I like to do the math.

$117 million in change divided by 45,000 students, whatever those look like, is $2,611 per student. In 2022 and 2023, in-state tuition, that's a reasonable comparison, in-state tuition was $5,300 in change. Out-of-state tuition was about double that. And I didn't even look at the community college graduation rates in Massachusetts. I can, if somebody wants me to, they're not gonna be good.

So I'm going to remind you, going to remind the listeners, and I'm grateful for all of you, I'm going to remind you of the old adage, you get what you pay for. You get what you pay for. I wonder what percentage of the 45,000 new students that the governor says will come will have no financial, who have no financial skin in the game, will do the work necessary

to become educated, skilled, and trained Massachusetts citizens and employees? No skin in the game, or maybe very little skin in the game, if I think it through. Will the faculty at these community colleges teach what is actually needed by these companies? There's reason to think there's a disconnect there. And who is going to track and who is going to report?

Gary (24:38.178)
the attrition rate of students, who is going to track and who's going to report the graduation rates of these students. You get what you pay for. And certainly there'll be some of those students that take great advantage, great advantage of the offer. But this again is what you pay for. This will be a waste of dollars in many ways. And so let's wrap this episode up.

The closure announcements or preloads to those closure announcements will start soon. I really believe that to be the case. Those fall 2024 Title IV checks are now making their way into the hands of college CFOs, a large number of whom will head to their president's office with this news. We aren't, we are not going to have enough cash to complete the semester or the year, whatever.

A lot of CFOs will head down to the president's office and hey, we're going to run out of money. Now what happens next in those conversations will determine if these colleges close with dignity while taking the best possible care of their students and their faculty and staff and communities, or whether they deny financial reality until it's so late that their closure announcements are sudden.

giving no one a reasonable chance to plan for the future. Now there is clearly an industry-wide recognition that there will be more college closures. It is inevitable. Guessing how many is an effort in futility, and I'm not going to do it. I never have and never will. I can tell you the weak ones. Give me a call. Drop me a note. The number will be whatever the number ends up being. It just is. The data that I look at regularly, daily, sometimes hourly.

The data I look at suggests it will be dozens of new additional college closures just in this academic year. So here's my message to college leaders. And I know some of you watch or listen to this podcast. Some of you watch or listen to the college financial health show that I do with Matt Hendricks on Tuesdays. Here's my message to college leaders, and that includes board of trustee members. While the trauma of closing will certainly be painful and probably embarrassing.

Gary (27:00.728)
painful and embarrassing. Look, please look at the lives of your faculty and students and staff. Look at it as part of your fiduciary responsibility to the college. It's a tough, tough gap to leap, but in this day and age, that's what you have to do. And here more important is my message to students and families. Colleges will do what they will do.

When you're looking at colleges, especially as you're looking to transfer maybe, or in particular, you're looking at colleges for the fall of 2025, ask the representatives of the colleges you're considering about as finances. Ask about enrollment trends. Ask about recent layoffs or program cutbacks. Ask if they would send their children to that college. And then don't, do not take their word for it.

Spend the $29 to purchase the 2024 college viability app. There'll be a 2025 version early next year. There is one for both public colleges and private colleges. Spending a couple of bucks now to help you make an informed decision about a college will likely spare you the trauma of selecting one that is not financially capable, providing the college education for yourself or your loved ones that they need.

and want.

Now I'll be traveling next Monday to a higher education conference in Indianapolis. The plans are to post a previous episode of This Week in College Viability. And I'll be back with another weekly episode on October 21st. Until then, thanks for making time to listen. Send your questions or comments or concerns or rebuttals to me at gary at college viability. That's one word, gary at college viability dot com. College is a good thing. It really is. Go if you can.

Gary (28:56.758)
Courses are fine, they're out there, but graduation is much, better. Many colleges will close. Most will not. Think about that. Until next time, it's Gary Stocker with College Viability. Thanks, and we'll talk again in two weeks.