Why More Small Nonprofit Colleges Are Facing An Uncertain Future
Part 1 in a series.
On April 6, 2018, students and staff at Mount Ida College got an email from President Barry Brown declaring that that spring semester would be the school’s last. The college had disclosed it was in a difficult financial spot, but the news came suddenly and with little public warning.
The closure threw the lives and finances of 1,500 students and their families into disarray. Almost 300 staff and faculty confronted unemployment. Some students rushed to apply to other schools, only to lose deposits as they ended up elsewhere.
“We felt like there was no hope — nowhere to go,” said Courtney Esposito, who’d been enrolled in Mount Ida’s dental hygiene program.
The failures at Mount Ida are still being debated, with litigation being appealed. (Disclosure: The lawsuit is funded by Bob Hildreth, a major donor to WBUR’s Edify.) But the loss demonstrated how much these institutions mean to their communities: as an employer, an investment and a home.
Last year, Moody’s Investor Services reported college closures across the nation had reached 11 per year between 2015 and 2017. That was more than double the average during the previous decade. Moody’s predicted closures would continue to increase, particularly in the Northeast and Midwest.
Massachusetts is home to 146 post-secondary institutions: from Harvard and UMass Amherst to tiny for-profit programs that teach cosmetology and massage. That’s one for every 47,000 of the state’s residents. All of those institutions come with histories, strengths and weaknesses of their own. But nearly one in five institutions are like Mount Ida in some important respects.
They’re private, not-for-profit institutions. Their enrollment is relatively low: with fewer than about 2,400 total students. And they have less than the state median of $40,000 set aside in their endowment for each of those students — so their revenue typically depends, in large measure, on tuition and fees collected from the students they enroll.
A Tighter ‘Market’
The United States is still expected to grow, and grow younger in the decade ahead. But that growth is not projected to come in New England. Between now and 2027, the National Center for Education Statistics has projected decline, at varying rates, in the number of high-school graduates in all six of the region’s states.
Whether or not that projected ‘plummet’ will materialize, it figures into the calculus of college presidents. Moreover, the makeup of the region’s graduates is already changing to reflect a changing nation: with more Latino, immigrant and biracial applicants, as well as “first-generation” college students who benefit from different kinds of support and encouragement.
Schools of all sizes can and do try to find and recruit students from elsewhere in the country and overseas. But widening your recruitment costs money.
This has made for a fierce, global competition between colleges for next year’s freshman class. And while a few of the state’s most prestigious nonprofit schools are thriving in that environment, the majority are having to adapt.
The state’s average yield — the percentage of all admitted students who enroll — has fallen by more than 10 percentage points in the past 15 years.
Affected schools compensate by admitting more applicants, which can lead to less-than-perfect matches between school and student.
Helen Drinan, president of Simmons University in Boston, admits that when that school experienced declining enrollment during the Great Recession, that (temporarily) took the form of admitting less qualified students — which, she says, ended up hurting the school’s reputation.
“From a long-term sustainability point of view, we know that an undergraduate program is key to a university,” Drinan says. “We had students here with an average SAT score of 1,000. That’s not good for a women’s college. That’s not good for a small college.”
But colleges can adapt by redefining what makes for a good fit between the school and an applicant. For example, at Pine Manor College in Brookline — formerly a women’s college, now a co-ed school that predominantly enrolls first-generation students — admissions officers have decided to prioritize a wider range of qualities, like “persistence” and “aspiration,” over more traditional measures of academic fitness.
Other schools seek to specialize in areas in which jobs are plentiful: like engineering, business, or nursing and health sciences.
An Endless Quest For Revenue
Mount Ida’s financial tailspin started in 2013, when about half of the school’s freshmen didn’t return to campus for sophomore year, according to former board chair Carmen Reiss.
“The revenue drop from losing half of the class … remained a significant problem for a small tuition-dependent college with little endowment to draw upon,” Reiss said, as she testified before state lawmakers days after the school’s final graduation.
When enrolled students don’t return in the fall — or when fewer admitted students enroll than expected — it constricts an already tight financial bind at small institutions that run, in large part, on tuition dollars. Luis Hernandez, chairman of Hampshire College’s board of trustees, said that is a struggle his school is all too familiar with.
“If you have 10, 20, 30 students that do not come in with the [freshman] class, you’re in the hole, and there’s no way to retrieve those dollars,” explained Hernandez. “So how do you make that up when you already have a budget for the year and you’re starting in the hole?”
Most private institutions in Massachusetts pay the bills with a blend of different sources. But the nature of that blend varies widely. For instance, the state’s elite private colleges and universities tend to get most of their money from the annual returns on their billion-dollar endowments, supplemented by research grants and private gifts.
Smallness is part of the tradition of the New England college: they’re intimate academic communities, tucked away from the outside world. But smallness can work against these institutions when their academic footprint is too light to attract those large research grants, and their alumni community is too small or short-lived to build a big endowment.
Colleges can compensate by expanding their tuition base beyond the region with an online-learning program — as did Simmons College. Or they could initiate a capital campaign to raise money from grateful alumni and private foundations, as Hampshire College did after a plan to seek a merger fell through earlier this year. But both of those options need timing, luck and effective leadership to succeed.
Under New Scrutiny
Shortly after Mount Ida closed, state regulators made clear that they cannot be held accountable for the management, or mismanagement, of a private institution. “Closure is the responsibility of [a private] institution and its board of trustees,” said Carlos Santiago, the state’s commissioner of higher education.
But ever since, Santiago and other officials have sought ways, at least, to monitor private colleges more closely.
In January, a board of experts issued recommended changes: a public “watch list” of institutions in financial jeopardy and a request that colleges be ready to “teach out” all their remaining students over 18 months using the resources they have on hand.
Presidents of those colleges (politely) rebelled. Two wrote a letter in The Boston Globe, saying the idea of a “watch list” of schools facing financial or structural problem could function as an effective death sentence, scaring off new applicants. They also said the state’s test of financial health was too stringent. The plan is undergoing revisions, while state lawmakers debate additional regulations.
Mount Ida’s closure was unusually abrupt, and especially painful. But it was only one of 11 independent, not-for-profit Massachusetts colleges to close, merge or change ownership in the last five years. The question is whether that wave has crested, and how the surviving institutions are trying to respond.
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This article was originally published on WBUR.org.
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