TWICV for October 30, 2023
Gary (00:03.274)
It is the October 30th, 2023 podcast for this week in College Viability High. My name is Gary Stocker. Now this for me is a two for day. My podcast software ate my recording from October 23rd. So I've already redone that one today. And whether it was user related or not remains an unanswered question. I like the podcast software. So I'm gonna take the blame for this one.
But today we go to stories. We have a couple stories today from Kelly Meyerhoffer, who's our good friend at the Milwaukee Journal Sentinel. She is busy with all of the public in private college trauma and news in Wisconsin. And of course there are more college presidents blowing PR smoke, trying to manage their business through public relations. We will certainly sort through that for you. And the Biden administration released new and stricter rules.
unholding colleges accountable that can only be good news for consumers. I don't know about for colleges and we'll offer our take on what that means for the financial health and viability of colleges plus much, much more. And we'll start off with yet another story. This one titled The Public is Giving Up on Higher Education. This is from Michael Smith on The Chronicle. And he said, I'll spray the stats on this one. As always, I will post a link to the story in the show notes.
and I don't really care about either Republican or Democratic perspectives. I prefer to look at the market as a whole and not just some parochial views. And there has been this wealth premium, wealthy people do better in college, get into better colleges, that has shown time and time again, it's been shown time and time again that it's really not going to substantially impact higher education.
in large part because the absolute number of those students attending these rejectives, some call them selective colleges like Harvard and Yale and Southern Cal and many others, is really just a small, small percentage of the total college attending students. But Smith goes on, he talks about the major music and movie studios and why have they had comparatively in the last many years so much success. And he offers, he thinks it's because
Gary (02:25.238)
They have a strong, stronger sense of their mission. He cites the case when digital disruption initially hit the music industry, it's been a couple of decades now, the leaders of that industry opposed it. And they saw, he says rightly, but they saw it as a threat to their model. And their model back then was selling the CDs or DVDs at $20 a pop, whatever the case may be. But at some point, these leaders of both the museum
music and movie studios, realized that their model was different from their mission. And their mission was creating great entertainment and getting that entertainment in front of an audience. And Michael Smith goes on to add that new perspective for music and movies, that new perspective really changed everything because these leaders realized
that the new technologies online, not online, but music streaming and video streaming, the new technologies supported their mission, even if it threatened their old model. Now, he adds that many of his colleagues oppose online learning because they see it, just like the movie and music folks did, they see it as a threat to their model of education. And they're right, it is a threat. But...
I would offer, and Mr. Smith does as well, that they're not really thinking about their mission, which is creating opportunities for learning for as many students as possible. I'm quoting Mr. Smith to discover and develop their unique talents so they can use those talents to make a difference. And if the new technologies he offers disrupt the old way of doing things,
but allow us to advance the mission of higher education, which is teaching people stuff and do it. And he's right, higher education's mission is to educate. It's not, the mission is not to stand in front of a classroom and talk about stuff. And it's a great analogy. And when other industries, as Mr. Smith so capably puts, when other industries have faced changes in the marketplace, they have recognized their true mission and adjusted accordingly.
Gary (04:47.754)
It's reasonable to suggest that higher education is not even close to doing that. And that's an issue. And on to stories. And we'll have our first story from Kelly Meyerhoffer, again, an excellent reporter at the Milwaukee Journal Sentinel. And this story is with University of Wisconsin campuses in West Bend and Fond du Lac closing, and we talked about this last week, students and staff are stunned and scrambling time and time again. We see these stories across the country.
mostly with private colleges, excuse me, mostly with private colleges, but on occasion with public colleges. And so she writes during a University of Wisconsin, Milwaukee at Washington County orientation, at the start of the semester, Ms. Meyerhoffer writes, an administrator fielded questions from panicked parents who had read the headlines about the small campuses uncertain future and a potential merger with a local technical college. The...
administrator said, it wasn't something that we had to worry about, recalled a student by the name of Savannah Petrie. And this is exactly why students and parents and faculty and staff and communities kind of need their own fiduciary. College leaders either don't know what's going on, I don't know if I believe that or not, it's possible, or they won't share the critical data that stakeholders need. I absolutely believe that's the case.
Or I guess we can raise the inevitable question about how forthright and accountable they are for such statements as we have nothing to worry about and now they've closed the college. Ms. Petrie, the student we referenced, indicated she would have never enrolled at this college, University of Milwaukee in Washington County, had she known about their financial distress. That's sad. And how many other students enroll that classes this fall?
and last fall and for next fall, and their colleges already know they can't survive. I truly believe this, I truly believe this will be an educational pandemic of sorts in the next few years. And Ms. Meyerhoffer in her story has a chart that shows really the same data trends that we have in our college viability app. And that downward trend for this college started in at least 2014.
Gary (07:12.294)
and slid toward the bottom of the data mountain from about 2018 to now, what does it take for these college leaders to see these trends? Do they not feel some obligation to their students? And I know this is a public college scenario, but in my experience, it doesn't matter, public or private, they're just not sharing the trends. And Steve Willdeck, who spent 25 years, part of the same story, in the Milwaukee Journal Sentinel,
working 25 years for University of Wisconsin Colleges, Mr. Will Deck is distressed, and he's distressed because the public has not been informed about the data trends, just like I said. And we know why. If a college leader says we're in trouble in some form or fashion, it can easily and logically become a self-fulfilling prophecy. What we have here, I believe, are college leaders who can't or won't.
share important data with their customers. These students, Mr. Wieldeck says, parents, faculty, staff, and community continue to be left in the dark.
And I've shared this before, but the motto I think for these colleges appears to be something along the lines of, we're fine, we're fine, we're fine, we're closed, not good. And trust me, the market will adjust. It always does. And it won't be good for small, mostly rural public or private colleges. And I'll encourage you again, and I'm going to do the plug, use...
our College Viability app to self-informed. And let yourself know to look at the data yourself, to get access to the data yourself. And as always, I'll have a link in the show notes so you can get access to the app. And it's just for what it's worth. It's an end of the year, end of the data year promo. So the app is quite affordable, especially if you have concerns about a college or colleges you are considering or attending.
Gary (09:15.606)
And then kind of a new story here that we don't really talk about much. And this is from Lorenda Mielke, and she's a senior vice president at Kauffman Hall. And Kauffman Hall is a consulting firm that does really good work and a lot of work in healthcare and not as much work in higher education, but they do have a business component that includes higher education. And she writes that tuition pricing, or the headline is tuition pricing when the road less traveled may not be the best solution. And what Ms. Mielke is talking about
is tuition resets. And I'll quote her from her story on the kaufmanhall.com website. A broad-based tuition pricing reset, call it anything you want, is unlikely, she says, to be sustainable over the long term. Lower prices might create, might, she says, create a market perception of decreased value. Think about that. Might create a perception of decreased value because you've lowered the price.
And importantly, she continues, it is nearly always difficult to resist the temptation to resume tuition discounting. If tuition price has been lowered and the tuition discounting creeps in again, Ms. Mocchi suggests the institution will find itself in an even worse situation than it was before they tried the public relations stunt, I'm going to call it, of decreasing tuition from
50,000, 25,000 because it's already at 25,000 because colleges are already discounting tuition 50%. And 50% of 50,000 is $25,000. Ms. Milky does a fine job of restating that. And if you're a private or more private or less so a public college in financial trouble, the only way to continued viability and strong growth is to generate.
materially significant new net revenue. Discounting tuition in the hopes of substantially growing net revenue just isn't going to happen.
Gary (11:29.158)
The next story is on something called borrower defense. And this is from Inside Higher Education and Katherine Knott. And the headline reads, the college is confounded by flood of borrower defense claims. Now let me define what borrower defense is. And under federal borrower defense repayment rules, those students who believe they were either defrauded or misled by a college,
can file a claim seeking financial relief and potentially having any loans, federal loans they have discharged. So let's do this. Let's call this the college lemon laws, just like we have historically had for cars. So now community colleges, public universities, religious colleges, and other types of colleges are hearing from the education department that their students have filed these bar word defense applications.
and in some cases, a lot of them. And while there's much going on behind the scenes, and maybe that's a story for another day, the rules from the Department of Education, the rules and guidelines are few and far between. And so, so far colleges have been uncertain on how to respond. Now, here's why this is important.
Gary (12:49.842)
If these borrower defense claims become an increasingly, even more increasingly accepted method of challenging a college's systems and processes, its impact on all of higher education could be massive. It could force colleges to invest even more heavily in support services when they don't have the resources to properly do so even now.
Gary (13:17.762)
And to Kansas we go next, and Kansas is not yet on my list of high risk states for college closures, but man, they're working hard to get on the list. And I've got a couple of stories from Newman University, I believe it is. And it's from Alexis Stallard, who is the editor-in-chief of the student newspaper called the Newman Advantage. And the background of the story is back in early September, Newman University.
President Kathleen Jaeger, I believe, it might be Jaeger, announced a $4 million budget shortfall. All right, it happens. And the president, President Kathleen Jaeger, Jaeger wrote to the student body and faculty that the 4 million budget shortfall is all part of a prioritization process to help us strategically align our budgets with our available resources and to continue doing an excellent job serving our students and living our mission.
We must be responsible stewards when resources are limited. It was said in the email. And she continues, while we are proud of how we serve students and our community and confident in the quality of our programs, we must live within our means. Okay, fair enough. And I've said this before and I'll say it again. Why is Newman University just now responding to the financial health?
and viability issues. Since 2014, their FTE enrollment, the one we track, has plunged about 300 students, 300 students down. And now there have been both increases and decreases in that time period, but the trend is down. Tuition fees have been flat for eight years, eight years essentially flat tuition fee revenue. In part, that's the case because they have increased the tuition discounts. Technically it's called the unfunded institutional grants.
by over $4 million. So they got $4 million in less revenue. And they've had to do that as almost all colleges do just to get students to accept their offers of enrollment. And the college admitted in the story that they were not a wealthy institution. They're good on that. In 2021, their endowment was just over $24 million. And again, here at College Viability, our bare minimum endowment threshold is 50 million. That's our standard. That's not anybody else's that I know of.
Gary (15:42.846)
And remember now that the Newman Universities of the world may or may not close.
Situations and scenarios will dictate that. But what type of quality college education can they provide if they're watching their last financial, their last dollar circling the financial drain? So to the Newman colleges, the Newman universities of the world, please be upfront with student and faculty and staff and your community. Let them know we might not make it.
Gary (16:24.81)
And then the second story, and this is from Stephanie Nutt, posted in KSN NBC News out of Wichita. And it talks about the eight majors that I didn't really reference in the previous story, that Newman University is canceling. And I'm gonna read the list of the eight, and it includes English, finance, history, marketing, math, philosophy, social work, and theater. Now,
In my mind, this is an interesting mix, an interesting combination of closures. The finance and math seem out of place compared to many discounted majors I have seen announced. It's typically just the liberal arts kind of topics, the soft topics, if you will. The other six compose the rest of the list. And here's what Newman University said, and I think in a press release. So.
garbage up front, despite the rich history and contributions of these programs, the realignment is essential to maintain a commitment to academic excellence, and to ensure the sustainability no way, and relevance of Newman's academic portfolio. So I guess finance and math are not relevant for Newman's graduates? I don't know. The university is creating a skill-based program that goes on, like their MBA in data analytics.
specifically targeting companies in their region who are looking for new hires with those kind of skills. All right, that's fine. And they will use other programs at Newman University like biomedicine and agribusiness to partner with campuses in rural areas. And this will give more students the chance to get a four-year degree. And as I've said before, the only guarantees for starting up new stuff, whatever it may be, is the absolute certainty.
you will incur additional fixed startup costs. And on the backside, there's absolutely no guarantee, and it's quite unlikely in my mind that these programs generate any materially significant net revenue to drop to the bottom line for Newman University or almost any other college. And I'm being calm here. Once again, why are we waiting?
Gary (18:49.302)
college leaders, Newman president Kathleen Yeager, board members. These negative trends have been forecast and actual for many years. Too long, too slow. That's not going to work. Let's now talk about that education department and their stricter plan for college oversight rules. I'm referencing a couple of stories here. One is from the actual release from the U S department of education.
And the others from Jeremy Wolf, I believe in the Chronicle, I'm sorry, in High Red Dive. Jeremy Bauer-Wolf in High Red Dive. And let me read from the release. The U.S. Department of Education, and I'm paraphrasing here, debuted a sweeping regulatory package Tuesday, fortifying federal oversight of financially unstable colleges, including broadening the circumstances in which they must supply the government with
a letter of credit where they're in trouble. And the release goes on to say this new set of rules improve accountability from colleges for colleges it deems predatory or high risk for students. The new rules also contain significant new consumer protections, the release says, like mandating colleges provide clear financial aid offers that actually an easily understandable language that breaks down the cost of attendance by types of available assistance. And that's of course grants.
loans, discounts, all that kind of stuff. Notably, and this was interesting, I thought, the regulations forbid institutions from withholding academic transcripts of students who paid for their college education with title IV financial aid. All right, we'll grant the government the capacity to write those rules. Here's my question. Who's gonna determine whether those funds for which the academic transcripts come?
were paid with Title IV, financial aid or not. I have no idea how that works. I'm hesitant to believe that that's gonna be easily doable. And critics going on, critics have accused the federal government of sometimes, I say always, sometimes being slow to react to college closures. And there are all sorts of stories like that, particularly those that have occurred abruptly, this story continues. And institutions shutting down can scramble students' plans, leaving them potentially saddled with debt and unclear where to transfer.
Gary (21:08.542)
or unable to finish their degrees. One part of the new rules forces financially shaky institutions, doesn't define that, to provide the education department with a letter of credit. Alright, fair enough. The events include a declaration of financial exigency. Now let me offer my definition of that. Financial exigency is essentially a declaration, hey, we're probably not going to make it. So a college could also run into trouble.
if it earns a failing financial responsibility score from the Department of Education's own data. Now, all right, they have to put that in there, but the Department of Education's scores are used data that is easily manipulable and is old. And too much higher education data is a year too old. But that's not a good rule because colleges with good, it's kind of called DOE scores.
have closed because the scores are not reflective of a college's true financial status. So what's the bottom line? This is gonna impact both students and colleges. The students will start becoming more aware of the risks of choosing certain types of colleges and the colleges themselves will have to contend with the possibility of their bad finances more readily becoming publicly available.
and all of the negative consequences that entails. Now, here at College Viability, we try and give you access to that anytime you want it through our different versions of our College Viability app. The government's trying their own route. You can go whichever way you choose. Mine is timely. Theirs is not. And then the final, the second story from Kelly Meyerhoffer back at the Milwaukee Journal Sentinel has to do with Carthage College, professors who were told to teach more without additional pay.
And as you might guess, that didn't sit well with them. And so as we see, there's protests that follow this kind of business model change. And the faculty at Carthage College voted to censure their leadership and the vote was 94 to 14, so significant. And looking at the data for Carthage College, their enrollment over the last eight years is down 81 students. Their college is certainly with bigger losses than that, but that's over eight years. And if you can't grow your business over eight years, that's a concern.
Gary (23:30.338)
Their tuition and fee revenue is down about 8 million over those same years. Their endowment assets are just at 44 million. Now, there are many lower than that. But again, remember the threshold we use is 50 million. And they've tried to keep their discounts under control because their unfunded institutional grants, their discount dollars, are actually to have actually decreased over $4 million. That's probably one of the reasons that the enrollment has stayed down because students are choosing colleges that give them better discounts.
And interestingly at Carthage College, they're doing a more than a decent job of graduating students. Their four-year graduation rate has gone up from 54 percent in 2014 to 61 percent in 2021. And again, our threshold is 50 percent. And their six-year rate is 61 and 68 percent. Our threshold is 70 percent, so a little bit below that. But there are way too many colleges with numbers a lot worse than Carthage College. Now, of course, nobody wants to work more.
for the same compensation. And so here's what the administration at Carthage College says, and this is from Kelly Meyerhoffer in the Milwaukee Journal Center, under the new policy taking effect in fall 2024, contract faculty will teach one additional course every year and two additional courses every third year. Tenured faculty would teach one additional course every three years. Now,
I've shared before, I'm an adjunct faculty at a private college here in the St. Louis area. And creating a college course is not easy. It takes a lot of work. Teaching the same course time and time again becomes progressively less challenging, easier to do, because you've done the content before. So there's work involved. But it's not really the details of the story at Carthage College that gets my attention. It starts with the less than subtle threat.
that Meyerhoffer reports, the administration said, we take this step reluctantly and only because we are convinced of its necessity. All right, this is from the college president, I believe, Mr. Timmerman. This step, the subtle threat begins, this step will also reduce the likelihood that the college will find itself needing to make reductions in an emergency manner. Take that anyway you want.
Gary (25:53.106)
And again, the faculty express our concerns, you and I would too. The details aren't as important, I don't think, I don't believe, as a president. Because what if we start to see this reactionary trend from other college leaders? What if other college leaders determine that directly cutting costs, labor costs and others, is not enough and that they can actually lower their cost base without impacting tuition and fee revenue?
simply by changing the work rules. How will faculty react? Not well. How will students react? Probably not well. And will these endless votes of no confidence become even less meaningful than they already are? I don't have the answers, but it's relatively certain that we'll have the chance to revisit this type of story soon. And so we've concluded another trip.
through the stories and scenarios that are higher education today. And I've shared before, and I'm sure I'll continue to share this, something's going on and it ain't good. And I truly believe we'll look back at the years 2022 and 2023 in a year or two, 2025, 2026, something like that, and realize looking backward that we were at the beginning of what will become a college consolidation tsunami.
And I'll be back next week with more stories as I work to try, work hard to become the fiduciary, your fiduciary, your informal fiduciary for students and their families, faculty and staff and community stakeholders until next week. This is Gary Stocker, take care.