This Week in College Viability (TWICV) for Feb 26 2024

Gary (00:04)
It's February 26th, 2024, and it's this week in College Viability. Hi, Gary Stocker. Welcome back to the podcast. Thanks for making time to listen to the news and commentary that we share each Monday on this week in College Viability. You know, it's good. The folks at Inside Higher Education must be following me. Their story last week about recent cutbacks and layoffs mimics the stories I have shared here over the past month or so. So to the folks at Inside Higher Education.

Thanks for listening. I'll be happy to continue to provide you content. Second story, chicken in college. We're gonna talk about an interesting partnership with Chick-fil-A and a college here in St. Louis. Some concerns about a double dip enrollment recession. We'll talk about stagnating college completion rates. The good folks with a lot of challenges at Concordia University in Chicago have a dialogue with their students. It's still not a good scenario there. And then we're gonna talk a little bit more inside baseball stuff with rating agencies.

on the outlook for higher education. But as always, let's start off with cutbacks. And last, I've got two for you this week. Wright State University, if you're listening inside higher education, Wright State University, I think that was on their list, go suspended missions to 34 degree programs. And here was the interesting part. This came from higher education dive and the rest of the Tomiak. They had Wright State University, this is in Ohio, had 54 students.

Write that down, 54 students in 34 majors. Goodness gracious, I would hope they would cut those programs. As across associates, bachelors, and masters programs, of course, the easy question is what took so long? And if it took that long at Wright State, a fair question to ask, is it happening at other colleges also where there are not nearly enough students for the majors they have?

We're seeing consolidation on a weekly basis. That's the section that leads off each of our podcast episodes. It's just, I think, another indication of how far behind higher education is as a business in most colleges, maybe not all of them. It's cutbacks and layoffs number two. Here's a headline. Certainly, there's a lot of angst over this. University of Toledo interim provost explains decision to cut programs.

This is from February 13th, and Michael Sandlin from WTOL, Channel 11, CBS TV in Toledo, I presume. They're cutting back 48 programs at University of Toledo. And both of these are just two more examples, two more examples of why students for both public and private colleges should include checking out the number of programs and majors.

graduating from colleges you are considering. Let me say that again. It's not just enough to know that your college is financially safe. There are many, many that are, also many that are not, but you wanna look at the programs. You wanna get the majors. And there's data available for this in College Navigator. I'm even developing a comparison product that's an early development that you can use to compare how many, for example, journalism's graduated from one college versus how many journalism majors graduated from another college. And that applies to STEM and...

and literature and sciences and all that kind of stuff. So it's happening. It's going to continue to happen. Page two, another wave of campus cuts. This is from Josh Moody at Inside Higher Education. And again, I talked about this at the lead. The colleges that IHE included, Inside Higher Education included are ones we already talked about. UNC Greensboro, Toledo, Wright State, Baldwin Wallace University, Marietta College, UNC Asheville.

Concordia College, Concordia University, excuse me, Concordia University in Wisconsin, and the one that's in really trouble in Ann Arbor, Michigan. So it continues and it's gonna continue to go on. This cutbacks and layoffs will continue across privates and publics. There will be private closures, there's gonna be precious free public closures, but I almost wonder sometimes if the publics aren't cutting back more than the privates, we'll have to keep an eye on that.

So here's the chicken filet franchisee. So Missouri Baptist University here in St. Louis. The headline reads, Missouri Baptist University partners with Chick-fil-A franchises. And this was from Bryce Chapman in the St. Louis Business Journal on February 23rd. And it's apparently to be a good project for the college. 56 students, the story reads, are earning some semblance of tuition costs covered by the fees at the Chick-fil-A franchisees. I think there's more than one.

pay Missouri Baptist University. The report used the term tuition free. To me that implies they have no tuition cost. I'm a little unclear on how that works and what percentage of students that works for. Certainly their tuition is subsidized in some form or fashion, but are they paying zero tuition? It would have been nice if Mr. Chapman could have followed up on that. And even Missouri Baptist, because I look at these things with a jaundiced eye, listeners, regular listeners know.

Missouri Baptist University has had flat enrollment. They've had flat tuition and fee revenue for the last eight years. Their four and six year graduation rates are abysmal at 27% for four years, 39% for six years. The revenue and expense ratio in 2022 is decent at 102%. So they're making a couple bucks. Their 2022 endowment, interview endowment was less than five million. Yeah, that's a...

That's a hand-to-hand, paycheck-to-paycheck kind of operating environment. The endowment per student was measly, $1,900 per. The Missouri average was $32,600. So let me say that again. Missouri Baptist University, the endowment per student, FTE student, was $1,900 and change. The Missouri average for 43 private and religious colleges was $32,000. Sixteen times more.

than what we saw from Missouri Baptist. Yeah, be careful. Page three, Rick Seltzer had a column earlier this month, I just didn't get to it in previous podcasts, that was talking about a double dip student enrollment recession. Now we know the first demographic cliff is effectively on us. There are now new projections, according to Seltzer's article, that suggests colleges could face shrinking pools of traditional age students, not long coming out of the...

enrollment cliff that we're facing right now. And the story goes on to talk about the enrollment cliff. There could be another one in the mid-2030s and talks about the number of 18-year-olds hitting a high of 4.3 million in 2025 and never touching that again for this century, never touching 4 million again for this century, according to the report in The Chronicle from Rick Seltzer. The bigger picture.

And again, this is from Seltzer's article. I'm going to read to you, quote, read to you from the article. Don't be surprised if higher education's third rails, plural, third rails, 10-year modifications, shared governance changes, mergers, and the like, get more serious consideration if this double dip enrollment decline scarcity materializes. Now, I've said this for a long time. The first phase that we're in right now is closures. The second phase will be when those colleges

Find a way to survive this demographic cliff and this series of enrollments and this series of closures. Find a way to get together to make mergers, I don't like mergers, but consolidations, same thing, in the next phase. That starts, I think, here in a couple of years. So it's going to change the market, as I have said, many, many times. Always adjust. We're going to get together for this podcast five years from now. We're going to look back and say, hey.

Back in 2023 and 2024, maybe 2022, we were in the middle of it. And we didn't know it because we are in the middle of it. We are in the middle of serious, serious consolidation. And we're going through the process right now of that shaking out with college closures now and consolidations in the coming years. Page four, student registration for fall 2024 postponed until late April due to curriculum changes. Now, we talked about this last week.

And there are many colleges who are simply saying, hey, we'll just delay the decision date. Lazy, dangerous, because what happens if the feds can't deliver the FAFSA data in March? How long are they gonna delay it? But this one in particular focuses on the Columbia College in Chicago. They postponed the registration. This has nothing to do with FAFSA until late April. They had strikes from adjunct faculty last fall.

Their finances are not good. And the fact that they would come out and say, hey, and this is from Vivian Ritchie, who's the assistant campus editor at the Columbia Chronicle. That's an internal paper at the college. This is not good. They are trying to scramble to be able to decide what classes they can offer, essentially on the fly.

And that ties into the second story that I want to talk about for Concordia. And the headline reads, and this is from again, an internal meeting. Concordia leaders open dialogue with students and employees through town hall meetings and leadership, five or six folks in the leadership team at Columbia University for both Wisconsin and the one in Ann Arbor, Michigan met with all these folks, students, employees, and faculty here in the last couple of weeks. And...

And in a similar vein, I want to talk a little bit about the challenges at Concordia University. We had this on the podcast last week. Concordia University of Wisconsin and Concordia University in Ann Arbor. I've shared the data before. It's not good in a lot of reasons. It's awful at Concordia Ann Arbor. Not quite as awful, but not very good at all at Concordia Wisconsin. So here's my advice to the faculty and staff and students and families and anybody else.

who is any form of a stakeholder at Concordia University, either one of those two, get a copy of Jonathan Nichols' 2022 book, Requiem for a College. That's Requiem for a College. It is the history of John Nichols' tenure at St. Joseph's College in Rensselaer, Indiana. It's his history, but you know what? It's the future.

of Concordia University Ann Arbor and probably Concordia University in Wisconsin. Nichols does a fabulous job of stepping the reader through the emotions that led up to the closure, which I think is happening at both Ann Arbor and Wisconsin. And more importantly, he does an after the fact exceptional analysis of what the leadership at that college did not do and did incorrectly back in the 2016-2000 timeframe. So get that book, Rockwell and Furr College. It's available through a lot of sources.

read it because if you're at Concordia, Wisconsin, or Ann Arbor and many other private colleges, it's happening to you as well. And just some notes from that Concordia Leaders Meeting they had at both Wisconsin, Wisconsin campus and Ann Arbor. The leadership mentioned deferred maintenance a couple of times. Many colleges have serious deferred maintenance issues. I make the case there's a safety tragedy waiting to happen out there.

They made the note that 90% of the net tuition revenue at Columbia College, Wisconsin goes to salaries. 98, that's nine, 8% of the net tuition revenue at Concordia and Arbor goes to salaries. C100 minus 98, that leaves 2% for everything else. The college again, quoting from their internal story.

They want to have a desire to be ethical with their colleagues and students. That's fine. I'm going to make the case it's a day late and probably lots of dollars short. That should have happened a long time ago. And buried in the data they share, we are overstaffed in quotes. We are overstaffed for the number of students we serve. And at the end of their internal document, they note that if there was a merger or a consolidation opportunity, it requires something in the order

of 50 million, that's five zero million dollars over eight years, and in addition cash for capital for dorms and a field house, additional cash for recruiting and marketing and all those kind of things. They've waited too long. They can join the list of colleges and universities that waited too long to act. I don't have high hopes for either of them staying with their current business model.

And back to Columbia College. So we're talking Concordia and Columbia, so bear with me as I stumble between the two. There was an article that just came out over the weekend. And again, this is an internal article from the Columbia Chronicle. But the focus point was on students. And it references a couple of students. I'm not gonna name them, even though the story does. There's one student from Chicago who plans to major in photography. And this person got into a lot of schools, but Columbia College in Chicago was their choice.

And the first time this student visited the campus was during the strike. And the student made note of the fact that there were people protesting. So something that she, that the student decided to look into, it just made that student think, rethink a little bit about whether they wanted to go to that college. Not ultimately the student decided they did not want the strike to deter them. They wanted to go. The student wanted to go to Columbia college in Chicago.

Still staying with the article, many of the admitted students said the location of the college drew them to apply. And that's fine. Most college students take reasonably close to home in metropolitan urban areas. That probably is even more so. And one student reported in the story or was quoted in the story of saying, I think it's a really interesting city, Chicago, of course. And I was very impressed with just the school in general.

The student's parent who was with him at the student registration event, new student event this recently, the father said he didn't have any concerns about Columbia College specifically, but mentioned he was worried about the cost of college in general. Columbia College is raising their tuition by 5% for the 2024-2025 academic year. Full-time tuition will be $32,000 in change. Figure the college will discount that somewhere in the vicinity of 50%.

like most colleges do, so about 16,000 and change for most students and the discount rate is ubiquitous everywhere. But interestingly, this story also notes one of the issues that colleges now trying to address is that tuition discount, 50% plus, I'm guessing, because it's not bringing in enough revenue, you think, to cover the costs of education. Here's why this is scary. I'm going to share the 2022 slash line.

It's 40 slash 47 slash 22 dash slash negative two. 40 percent of Columbia College students, undergrad students graduate in four years. That's 40 percent in four years. The second number, 47 percent graduate in six years. Tragic. Their admission yield is 22 percent, which isn't in and of itself bad, probably because of the urban location that they're in.

It's not a great number, but it's not a bad number. And the negative two, the minus two, is the change in their admission yield over the last eight reported years, all part of the college viability app that we provide.

That's not a good slash line, not a good slash line at all. And the minus two admissions yield should scare the college. The four and six year graduation rates are just awful. And here's what's gonna happen. A story I've shared with many. In April and May, there will be many students in colleges across the country, not just in Chicago or Illinois. They'll be sitting at the kitchen table or the family table, whatever.

And they'll be trying to decide which college to select from all the research, all the trips they've done, all the work they've done. And too many, too many of those families will choose a college that I can tell you today cannot reasonably be expected to survive with the financials, the outcomes, and the enrollment they have shown over the last eight or more years. And there will be, there will be a tipping point.

It's not there yet. There will be a tipping point when college finances will be front and center in family discussions and Columbia colleges of the world won't be part of that discussion. But the sad part is that there's no way to predict how long it will be until that tipping point is reached. And the last thing I wanna do a little bit of a big picture.

And this is from Jason Sussman, who's a managing director at Kaufman Hall. And they have Ian Rees on the article. He wrote takeaways from our conversations with rating agencies on the outlook for higher education. And there are a couple of areas that Mr. Sussman focused on. And the first one was growth strategies. And he talked about tuition repricing was one of the three things I want to talk about. And tuition pricing.

He noted that there could be a psychological element that limits the effectiveness of this strategy. What has happened here in the last couple of years is colleges will take that $40,000 on this price and discount it at 50%. So the price is somewhere around $20,000. And some colleges are repricing their list price tuition, stay with me, from $40,000 to $20,000, effectively incorporating that 50% discount on the top in the hopes of getting more students to apply.

be accepted, and enroll at the lower discount rate.

that has in the limited history that has been happening had short-term impact, but the challenge becomes that the tuition discounting is so pervasive across higher education, mostly on the private college side, that the colleges have difficulty keeping that $20,000 list price tuition stable. They end up starting to discount from the lower list price.

and Kaufman Hall and their reports from some of the major rating agencies, S&P Global and others, Fitches and others, say that's not good. The other thing that Sussman talks about is athletic program expansion. We've talked about this on the podcast. The panelists from Jason Sussman's interview agreed with very few exceptions, athletic programs. I'm reading from his article. With very few exceptions,

Athletic programs are a recruiting tool, not a revenue driver. Now, in some ways, they're one in the same, but it's a way to get more students on campus. It doesn't really net out. And I think is what Sussman is trying to say, because you've got the costs associated with that athletic program, the salaries, the travel, the insurance, all that goes with it. And Sussman says, because athletics is typically a loss leader,

The rating agencies, we talked about Fitch, SMP, and others, are going to be interested in both whether enrollment growth continues and expands enough because athletics is a bigger draw or not, and whether the athletic programs, the current or even the new ones started, are financially sustainable over a long term. He also makes note of the fact that athletic programs are very difficult to unwind once they've been established, and we've seen that in many cases.

And then lastly, he talks about mergers and acquisitions. Now, there's very few acquisitions in higher education. Cash is rarely enough quantity to make acquisitions a purchase, a viable opportunity. But they note the fact, assessment notes the fact, that continued operational and financial pressures at the lower end of the rating system, those colleges that are in financial trouble, may lead to some increase in merger and acquisition activity.

He also notes that higher education is a sector that does not do mergers and acquisitions for very well. And he goes on to offer some reasons, including the Department of Education has made it more difficult. And he concludes that all these factors pose serious hurdles for institutions that may want to seek a merger partner, consolidation partner. And like we have seen, by the time these hurdles have been cleared,

financials or facilities that college is in trouble may have deteriorated, enrollments may have further declined, and the institution may no longer be an attractive candidate for merger consolidation or, he uses the word acquisition. This just reinforces what we're seeing. Closures, more closures, followed by loosening of the merger constraints.

equal more consolidations. Tuition resets, problematic. Adding athletics, problematic. Short-term mergers and consolidations, problematic. Closures followed by more closures followed by mergers and consolidations. So remember, the 2024 Private College Viability app is out. The public college versions will be available sometime in March. I look at the data daily. I look at the comparisons in the app many times per day.

and college supporters can proclaim histories on their side, and very few colleges will close. I will grant them the historical trend, but that's just not what the data shows. Yet almost every other industry in the history of our nation has had substantial merger and acquisition, merger consolidation and acquisition in those industries' lives. And I'm already hearing anecdotal stories

from those close to colleges and college leaders and families of students, that the financial health and viability of colleges increasingly, the financial health and viability of colleges increasingly at the front of the minds of consumers.

The series of college viability apps is now available. And of course, I'll leave a link to the three products available for three different stakeholder groups in the show notes. And I suggest we get together again and do this next Monday. Gary Stocker for College Viability. We'll talk next week.