This Week In College Viability (TWICV) for May 12 2025

Gary D Stocker (00:00.91)
It is this week in college viability news and commentary for May 12, 2025. Hi, everybody. Gary Stocker back with more higher education stories as we do during this time frame every Monday. Lots of cutbacks and layoff stories this week. I'll have those in a minute. And with most commencement events taking place last weekend in the coming weeks, I continue to look for stories where colleges proudly announce

Their sub 50 % four year graduation rates hasn't happened yet. Probably should have provided a sarcasm alert for that one. Here are the top stories beyond cutbacks and layoffs this week. Not all colleges are worth saving. This is from a LinkedIn post that was posted last week. Avra University in Virginia, I believe, is suing its former CFO.

and Endowment Fund manager. And the Wall Street Journal says it is the end of the free college lunch. This and much more on this May 12th episode of This Week in College Viability. Hey, let's start off with layoffs and cutbacks. Hood College, H-O-D College in Maryland faces budget deficit, increases draw from endowments. This is a May 2nd story by Esther Francis at newspost.com. I think it's called the Frederick News Post.

So Robert Kleindienst is vice president for finance at Hood. He said that the college through an audit showed a $4 million deficit in fiscal year 20, in the fiscal year 2024 budget. Well, I would have thought they would have known that in the budgeting process, but maybe they just figured it out with the audit that seems a little late. He said that overall taking restricted grants and other restricted budgets into account.

The college's financial statements showed a $3.5 million budget deficit. Now don't doubt the accuracy of that statement coming from the audited financial statement.

Gary D Stocker (02:10.382)
There's something here called the Hodson Trust, H-O-D-S-O-N. And in October 2023, the Hodson Trust gifted Hood College a $54 million gift. Kleindienst said the college cannot pull from that gift until fiscal year 2027. a couple of years out. Kleindienst said Hood had typically drawn about 5 % of the endowment annually, which is about normal.

And he said that since the liquidation of this Hudson Trust, I believe maybe the gentleman or person had died, the college has begun drawing 7 % of the endowment instead of the 5%. Now, okay. All right, so see a couple of things here. I see a college doing a pretty decent job of keeping its finances in decent shape until a rather small hiccup from this Hudson Trust can be built back into the budget. And the story goes into some of those details.

I did look at Matt Hendricks Private College Advanced Financial Compass for Hood College. The numbers there were a little less comforting. For Hood College, they showed a decreasing net income margin that actually went negative in 2023. And it had revenue decreasing, but operating expenses were up 38 % since 2016. That's never a good match. And while the Hood Trust can help when it's available for access,

in a couple of years, I'm going to suggest that managing the expense growth should probably be a bigger focus than it is with that 38 % growth for the last 10 years. Enrollment's been down a little bit since 2016, so that expense growth in the presence of enrollment decline is not good in light of those enrollment trends. Johnson and Wales,

in Massachusetts to cut 91 jobs amid a $34 million deficit and decreased enrollment. This is from Dan McGowan in the Boston Globe. He's a columnist. This was on May 7th of this year. So what's next at Johnson and Wales? Layoffs are happening at two of its campuses, one in Providence and one in Charlotte, along with their Johnson and Wales online programs.

Gary D Stocker (04:32.301)
There is a memo from the university that says they plan to staff raises, delay staff raises until later this year when they can evaluate what is possible. So let me just do the math on this. So a $34 million deficit, let's divide that by 91 jobs. And if I did the math right, that's $373,000 per employee.

I believe it highly unlikely that 90 employees at Johnson and Wales got 370,000 plus in compensation. So clearly just cutting the jobs isn't the only action planned. I hope there's gotta be more to it than this. We'll follow that story in the coming weeks as well. Arkansas Baptist, this is not a good story. Arkansas Baptist,

Employees go weeks without pay. This is from Ryan Houston at KATV.com on May 6th. Let's look at the data. The data is not even all there. But the enrollment is down to 400 plus students, from 700 plus down to 300 plus. The four-year graduation rates, this is awful, not even in double digits since 2016. As a matter of fact, as I recall, they don't even have graduation rates listed for the last few years.

The retention rate is miserable, 20%. I can't find the data for percent admitted, for the endowment value, for the annual yields. And I'm sure there's a lot much more out that I didn't find. And then I posted on this on LinkedIn. I'm not going to repeat what I said on LinkedIn. But the more I looked at this as I prepared for today's I would encourage the folks at Arkansas Baptist, please.

Find someone to turn off the lights. Turn off the lights at this underperforming college. Let these students and their families, faculty, staff, and the communities move on. This is not a good situation in so many ways. And it started out with employees not getting paid. I believe the story did say they eventually got paid for March and late April, but their April compensation, I believe, as I last checked, has yet to be presented to them. And let's go to Middlebury.

Gary D Stocker (06:53.034)
in Vermont and applications dropped to a five year low. That's interesting because applications these days are as easy as adding another ingredient to your pizza order to check a box and apply to another college. Applications dropped to a five year low at Middlebury College in Vermont as acceptance rate increases, implying suggesting that more students are accepting the offer of admissions from an application. It's just from the Middlebury campus news, so it's an internal document.

And on the same date, on the same May 8th date, here's another headline. This is from Claire Jones at WCAX Channel 3, CBS on May 8th. Middlebury faculty students protest proposed budget cuts. Same exact day for both of these stories. So the story reads from Claire Jones. Dozens protested at Middlebury College on Thursday as the school considered cuts to help balance the school's budget.

To get some of the money back, I have no idea what that means. To get some of the money back, the school has proposed a number of things. This is just bad writing. Like offering early retirement for Vermont based staff, reducing the retirement match from 15 % to 11%. And then eventually bringing back language schools to the campus. Again, the story doesn't delve into that. Healthcare costs also remain uncertain.

But school officials say if changes are made, if any changes are made, they will happen this fall. Faculty members, as you might guess, are not happy with this proposal. There's a quote from a student, a graduate student at Middlesbury College who said, this institute is nothing. This institute is nothing, the student says, without its staff and its faculty. Well, there's a profound observation.

And the story goes on to say around 250 frustrated faculty, staff, and students walked out and gathered on the Middlebury College campus green on Thursday. That would have been last week speaking out against proposed budget cuts to make up for a reported 14.1 million dollar deficit. So I got to go back to the quote. This institution is nothing without its staff and its faculty. But.

Gary D Stocker (09:14.286)
So the student who said that, let me just provide you a business lesson here. It's also nothing without the financial resources to support those faculty, staff and students. Just a weak quote used by the reporter on this one, just a very weak quote. And I only did a quick look at the finances from Middlebury. Nothing really jumped out at me as being awful. This might be, and looks like it might be, one of those situations where a college is simply trying to stay ahead.

of budget crisis. the $14 million deficit does, it's concerning, but the report doesn't have a year attached to it. Again, not very good reporting from this reporter to give more details of what's going on. Let's go to Linfield. Linfield College.

The College of Arts and Sciences at Linfield. The headline reads Linfield students and faculty pushback on proposed university budget cuts. OK, happens. The story writes, and this is from Tiffany Camby at OPB. She writes, majors in literature, philosophy, physics, and international relations are among the subjects under threat of elimination in a proposal presented to Linfield's faculty and shared with this outlet last week.

The university is looking to shed 27 faculty positions with a majority of those coming from the arts and sciences departments. Now there's more to the story. There have been cuts before. As she writes, Linfield is no stranger to restructuring cuts. The school let go. Linfield let go of 35 staff members last year. And in 2019, Linfield leaders announced plans to eliminate up to 25 tenured

positions in order to shore up the university's finances. So a slow, slow, slow collapse taking place at Linfield College. So to the data, there appears to be a little revenue and expense mismatch at Linfield. The revenue is not keeping up with expenses. And we talked about the history of layoffs and cutbacks to this college.

Gary D Stocker (11:28.782)
Their endowment growth, I noticed when I looked at the data, their endowment growth has been one of the worst, one of the lowest in the country since 2020. And so of course what I do is look at the draw and it does look like Linfield has been drawing away, drawing down, it's about an endowment, way above average, about four and a half to 5 % range. In 2019 alone, they took out a 23%, that's two, 3 % endowment draw, the normal amount for a normal college.

is four percent, five percent, something like that. Page two. I'm going to a LinkedIn post on this one. This is Seth O'Dell, who's CEO at Kana Homa. And you can see this if you go to LinkedIn as Seth O'Dell, O D E L L. And he writes, not all colleges are worth saving. Well, all right, I'm not sure I've ever said it that way, but I agree. Not all colleges are worth saving. He doesn't talk about a college in particular.

He talks about a set of colleges. So let me kind of step through his story. He suggests there are two different types of &A, merger and acquisition tracks unfolding in higher ed right now. The first, private equity driven cash, large scale roll ups and scalable growth. Okay, that's the first one. The second one is the one he talks about in his post. Non-profit &A's, mergers and acquisitions are mostly distressed institutions being acquired by mission driven universities.

So he wanted to talk about the second one because while it feels like growth, Seth O'Dell wrote, many nonprofit leaders are knowingly, excuse me, or unknowingly stepping into money pits disguised as opportunities. Being offered a dying college, being offered a dying college, a financially distressed college isn't a compliment. Mr. O'Dell writes, it's a warning. And here's why he's got two reasons.

These schools often knocked on every other door before yours. They were dialing for dollars, in this case knocking for dollars, trying to find someone to take them, saying, marry me, marry me, marry me. He says you're not acquiring an asset with these financially unhealthy colleges. You're inheriting, and he lists four items, you're inheriting deferred maintenance, buildings that are not in good shape, shrinking pipelines of students, tarnished brands for whatever reason, and hidden liabilities that are very difficult in many cases.

Gary D Stocker (13:52.942)
to uncover as we see in a lot of the stories on this show. And Seth O'Dell continues to write, turning around a distressed institution isn't just a matter of strategy. I'll say that again. Turning around, according to Seth O'Dell, turning around a distressed institution isn't just a matter of strategy. It takes cutthroat execution. And he gives some examples, cutting, gutting programs, cutting overhead layouts.

layoffs and cutbacks, and facing, of course, protests. Protel has lots of protests. Facing protests, lawsuits, and no confidence votes. We've talked about it many times before. It's happened many times before. It will continue to happen as well. So here's the questions that Mr. O'Dell suggests you ask yourself. If you're inclined to look at or even take the step of maybe merging or acquiring, probably merging with this college.

Ask yourself, would deeper-pocketed players want this college? Second question, are we buying a vision for the future of your college and this college, or is this a rescue mission? And I think the third question is really interesting. Could we build better from scratch? You can ask yourself, would deeper-pocketed players want this college? Are we buying a vision?

or rescue mission and could we build something better from scratch? And he says, I'm not against mergers and acquisitions. He says, I'm against emotional mergers and acquisitions. Seth O'Dell writes, if you're going to do it, move with clear eyes and a tough stomach and make sure what you're buying or merging with strengthens your future, not just your narrative and be because most of these colleges, he writes, aren't dying by accident.

They're not dying by accident, they're dying by design. They didn't fail, he writes, because of one bad president or one bad year. They failed because they were in over saturated markets, overbuilt markets, had outdated academic and business models, lacked any significant brand distinction and missed major market shifts like online adult learners, etc.

Gary D Stocker (16:16.43)
And so here's some really good points here. Many colleges are waiting too long. I've talked about that before. It's in the literature a lot. And this really supports, Mr. O'Dell really supports what I've said for a long time. The scale needed in higher education needs to be something like five to 10 to 15 colleges merging to get the academic and non-academic scale needed to generate materially

significant net positive cash. And as you've heard me say before, we're in the higher education consolidation era. It's a closure period now. Next year, year after, we're going to be entering the merger period when colleges that found a way to survive the closure period realized that to continue to survive and even thrive, they'll need to look at mergers and much, much more than just mom and pop mergers of one or two colleges. They'll need to do that to much larger scale. Page three.

How about another LinkedIn post? Matt Hendricks, good friend and partner, Matt Hendricks on May 6th, has a story about Everett University is suing its former CFO and Endowment Fund investment manager. Part of the complaint appears to be that the CFO and investment firm allegedly presented misleading reports to Everett's board and to hide endowment withdrawals. Mr. Hendricks, excuse me, Dr. Hendricks goes on to write,

However, the endowment draws were clearly presented in Average's own audits. All boards, he writes, should be regularly reviewing the audit and ideally benchmarking financials, including endowment draws. And you can do that with his app, the Private College Advanced Financial Compass. I can give you access if you drop me a note. You gotta do comparisons. You gotta compare it over time and you gotta do it relative to your peers. If you see a need for that, reach out to me through my contact information.

that I'll post on the show and we can set up a time for me to show you how that works. But Matt Hendricks writes, had they been following this practice and look at the audits, they would have spotted the first major withdrawal from the endowment around October 2022. So I'll have a link to the Average story. I read the story. I don't know what the misleading reports were. I couldn't quite tell from the story. You can look at it on your own. You can wade through the myriad.

Gary D Stocker (18:42.286)
of accusations and counter accusations in this story, not a pretty story at all. Page four, the Wall Street Journal writes, this was on May 2nd, the Wall Street Journal writes, the end of the free college lunch, the end of the free college lunch, begin to rein in student loans and forgiveness plans. Now from this story.

A report last week by the Bureau of Labor Statistics, listen carefully now, a report from the Bureau of Labor Statistics found the unemployment rate for recent associate degree graduates, many colleges or vocational schools, in their 20s, 20 years old, give or take, was 2.1%. The graduation rate for four-year college graduates was 15.3%. And for those with advanced degrees,

the unemployment rate was 8.4 percent. So the Wall Street Journal writes in their editorial, more of that went over. You have a higher chance of being unemployed these days if you go to college. Not Gary Stoker, that's the Wall Street Journal. We have a higher chance of being unemployed these days if you go to college than if you don't. I added that.

But the bill they're going to say would require, in the future, require colleges to pay a share of the debt that borrowers don't repay. Student borrowers don't repay. If a grad repays, for example, only a quarter of the debt he or she owes, the college would be on the hook for some share, as yet to be determined, for some share of the other 75%. This would give colleges an incentive to eliminate or improve programs.

from which grads earn too little to repay the loans. I've talked about this the last few weeks. I'll have the story link. It's behind a paywall to the Wall Street Journal. So there was a comment from somebody on this Wall Street Journal. So I read through a hundred, not a hundred, but dozens of comments on this. One said, make the colleges, this is a comment to the Wall Street Journal article, make the colleges and universities responsible for collecting their students' education debts.

Gary D Stocker (21:04.942)
by whatever means. This would help stiffen, this commenter writes, this would help stiffen the institution's attention to value in education and students understanding of responsibility in a business transaction. This is from the Wall Street Journal, a commenter from the story in the Wall Street Journal about the end of the free college lunch for May 2nd. Make the colleges and universities responsible for collecting their students' education debts.

That's not going to happen. And even if it does, in a scenario where it does, the number of colleges, acceptable plummet, they're not going to take a risk on having to pay back a student's loan.

Just I talked about this. I've written about this many times. Public and private colleges in this country will not willingly be a party to giving money back to either public or private entity. The Wall Street Journal story simply reinforces the pressures mounting on colleges to provide value or payback. And as I've said a couple of times in this show and many other times.

We are in that higher education consolidation period closures now and in the next one to two years, something like that, followed by significant and I believe large scale mergers. So let's wrap this episode of this week in college viability and I'm going to give you a sarcasm alert upfront. We are headed into the annual college period of wasted time. The annual college period of wasted time, those

three months when learning could take place, and it does on a really small scale, but when learning could take place on a much larger scale. However, higher education as an industry views those 90 days differently than every other industry that works 12 months out of the year. I guess why work 12 months, they say, when you can get by with something like nine casual months, nine short months.

Gary D Stocker (23:16.994)
And that includes extended time off for Christmas, spring break and other items. Yeah, and I know there's sarcasm involved there with intent. And as usual, this summer, I'm going to be watching those college spinner announcements spinning the news that cite what's usually heavily qualified enrollment numbers. The largest increase of females over six feet tall, I'm making that up, is a heavily qualified enrollment number. I will also be tracking those colleges who don't say anything.

who have no news about their fall enrollment because they don't want to share with the world that they have declining enrollment. In this scenario, it's no news about enrollment increases. No news is bad news. And we typically don't see hardly any college closure announcements in the summer months. I'm going to continue to focus on the enrollment news over the next three months or so.

And I'll keep listeners updated on what public and private colleges are saying about their fall 2025 enrollment. And I'll hold those comments for another show because I think I know it's going to happen. So let's call it a wrap. And until next Monday, again, many thanks for making time to listen. I'm grateful for each and every one of you. This is Gary Stocker for College Viability. I'll be back next Monday. We'll talk then.