In this episode of the College Financial Health Show, Gary Stocker and Dr. Matt Hendricks conduct a data‑driven review of Cedar Crest College’s financial and academic health. They identify several red‑flag financial indicators: a 9% net income loss in 2023 and a 7.25% loss in 2024, a five‑year trend of capital expenditures falling well below depreciation (suggesting deferred maintenance), and a sharp decline in unrestricted net assets from $34 M to $30 M. Revenue analysis shows net tuition revenue down 10% since 2016, with an especially steep drop after 2018, while average tuition price rose from $19 K to $21 K, outpacing the median private‑college price. Enrollment fell 18% since 2016 and 35% since 2018, with a notable dip in the 2018 freshman cohort that may have triggered a new lower steady‑state. On the expense side, total costs rose 17.5% since 2016 despite flat staffing levels, creating a mismatch between rising expenses and declining revenues. The expense profile reveals a concentration of high‑salary staff and a large number of contracts over $100 K relative to revenue, as well as high institutional‑support spending ($8.3 K per student) versus lower academic‑support spending. Academic outcomes are also weakening: 4‑year graduation rates fell 8% to just above the 50% threshold, and 6‑year rates are well below the 70% benchmark. Program‑level analysis shows 19 of 64 possible majors are offered, many with fewer than 15 graduates per year, indicating a bloated, low‑enrollment major portfolio. The hosts recommend using their Strategic Compass to benchmark against peer groups, examine the admissions funnel, experiment with tuition pricing, review high‑cost contracts and staff compensation, and rationalize low‑enrollment programs to bring expenses back in line with revenues.
So, Dr. Hendricks, what college are we looking at today?
All right, this one is Cedar Crest College in Pennsylvania, and I'll jump into the Financial Compass. So again, uh, evidence of financial stress, and so we have a 9% net income loss in '23 and a 7.25% net income loss in '24. Those are pretty big, right? This is the 25th percentile or so for all school, all private colleges in the country. So 75— other words, 75% of the schools are doing better than that. Yeah, not ideal.
Although it's a post-pandemic pattern also.
Yeah, better than the closed schools, of course. But you certainly don't want to be in this territory for very long. So that's some evidence. And this is— this I double-checked. They did break this out, operating versus non-operating. So that's one piece of evidence. It's probably the strongest indicator of financial distress is the net income margin when they do break it out that way. Here's another one. Financial distress. This is the spending on capital, sort of like property, plant and equipment. That's what we call it, or CapEx. Capital expenditure relative depreciation ratio. Ideally, this would be about, at least over a long period of time, would average above 1, which would mean that your capital's growing rather than shrinking. Right? And when it's shrinking, you start to worry that the maintenance that should have been taken care of is not, old equipment is not being replaced and stuff like that. And so this is one of those schools where you just worry that they have deferred maintenance creeping in here. This has been 5 straight years where they have very, very low CapEx compared to the depreciation, which again could be an indication. We'd have to go and actually look at it and see what the state of the buildings are, what's the state of technology and stuff like that. But a safe guess here is that it's not up to date and that buildings are starting to deteriorate. Maintenance that should have been done is being pushed off, that kind of stuff. So that's another indication. Here's a third: unrestricted net assets. As I mentioned in the previous show, you want your unrestricted net assets to grow, and that's what the median school is doing. And the school grew quite a bit initially, but recently, coinciding with the big deficits, we have this shrinkage here in unrestricted net assets going from— you know, they didn't have a lot to deal with already. So that's why this is— you got to have a sense of urgency when you only have $30 million in unrestricted net assets. Which is what they have right now. They went from 34 to 30. You can see how fast this can go away, right? In just 2 years, they lost $4 million on a $30 million base. I'm not going to do the math on that really quick, but that's a pretty high percentage, right? Yeah, not ideal. And it's because they have deficits, right? And they're losing unrestricted net assets. A school with financial distress signals. How can we fix it? Let's take a look at the revenue side. And see if there's clues about what's happening on the revenue side. Their net tuition revenue, not a shock, is down 10%, all right, since 2016, but it is down pretty sharply, more sharply since 2018. 1, 2, 3, 4, 5, 6. Yeah, it's about how long it takes to get to a new steady state. So I just wonder if something happened here in 2018 and It's never really been addressed. Let's take a look at the price proxy. Price looks good. Um, it's high again. And there's another school that may be struggling with enrollments and may not know that it's sort of pricing itself out of its competition, uh, potentially, right? I don't know for sure, but again, there's easy way to analyze this. We work with clients to submit all of the students that applied and were admitted to the school and to the— submit that list to the Clearinghouse and figure out where all those kids ended up. And, and then from there, ask the question, why didn't they go to— why didn't they go to Cedar Crest, right? Why did they go to some other school? Um, and then you can get clues looking at the price of those other schools, what those schools offer, uh, that kind of stuff, to start understanding what, what could be happening to enrollment. But let's take a look at the enrollment Yeah, enrollment's down 18% since 2016, but down, well, like 35% since 2018. So again, something catastrophic I think happens with this freshman class that came in fiscal year 2019. It would've been fall of 2018. Look really closely at that freshman class, what's going on. Not guaranteed to be the smoking gun, but whatever happened to make this dip here, And of course, it's going to continue until you get to your new steady state is probably the smoking gun. Got to go way back. Got to go way back.
Talk about how the strategic compass could help.
Yeah, so what we do with the strategic compass is we align you with— so we have this massive peer set and different groups to compare you to, your cross-app peers, your competitors, your schools that look a lot like you in terms of financials and student characteristics. We have your same state peers, a whole bunch of different views to look at. But what we would do in this particular case is look at the entire funnel relative to all those peer sets and take a look at it. And I'd focus really, really focus on what happened here. Probably what happened is this freshman class is tiny in 20— again, fall 2018, and they're probably always that small. Every year after that. Even if the freshman class is sort of stable over this period, it would still give you this result, right? If that freshman class was smaller than the graduating class in that same fiscal year. So what probably happened here, we'd check this out, is maybe the number of apps was low, or, or the, you know, somebody messed up the admit rate. They didn't admit enough students, or they're being too selective. Um, there's funky things that schools have done to their applications to all of a sudden make applications die in one year. Uh, it's not— I've seen it several times where schools like lose half of their applications in one, one fall swoop, right? Just by changing application requirements or not being with it. You remember during this period almost every school has become test optional, no fees.
Yeah.
You got to make sure you're doing that if your competitors are doing that, right? Just really important to watch what your competitors are doing. And then of course, again, the, this, this price issue. Let's go back to, there might be some evidence here. Let me just show you really quick. Net tuition revenue right there. Okay. Per FTE.
Okay.
Notice this. So they started to struggle here in like 2019, right? And look at what's happened to their price. It's average price has gone from $19,000 to $21,000. And for the median school, it's at $16,500 to $17,500. I just— this, this is a sharper increase. It's not dramatic, but it could be enough, right? And typically, schools that are struggling, like these closed schools down here, don't increase their price, they decrease it, right?
Right.
So they could just be bucking, uh, very powerful forces, which are basically the free market force of and the price mechanism. You can't go against that. There's a market for your school. You can't charge a price that's outside of what's at equilibrium or you're going to lose students, right? Or you're going to leave money on the table. It's a simple market economics. But it's more complex in higher ed because nobody knows what the actual market price is, right? It's your job as an administrator to figure it out. And if you're not at the right price, you need to figure out really quick. What the right price is. So again, I'd look at the pricing mechanism, look at the funnel. Again, you want to go back a long time to like 2018, 2019 to figure out what has happened probably and benchmark against your competitors. Okay, that is again, maybe the price is an issue. Experiment with a lower price. If you're not sure, just do it with a small group of students first. See what happens to the yield rate, what happens to apps, that kind of stuff. All right. So expense side, and this is the part where you have complete control, right? You're not locked into a lot of contracts here usually unless it's tenured faculty. But even then, there's easy ways to buy folks out of the long-term contracts. There's stuff you can do, right? Most of your employees are not tenured, so you can— there's a lot you can do. So here's the deal on the expense side. And this is just a school that to me appears like they're kind of going about things as if everything's normal, even though it's not. So expenses are up 17.5% since 2016. And just to show, make sure what I said is right, let's take a look at revenue. So revenues are down. Yeah. So here's the deal. Revenues are down. 1.5%, which is not catastrophic, but it is catastrophic if you're going to increase your expenses by 17.5%. So again, that math doesn't work out well usually, and that's why they're getting deficits. They need to move expenses with revenues. So how can they bring expenses back down into alignment? Here's the part I didn't actually finish prepping. So let's take a look at some of the expense side stuff. A lot of this I'm going to rely on the 990s here. So I'll go down to employees. Well, that actually looks quite low, and I'm seeing this for the first time with you guys all at the same time. So staffing looks like it's not an issue, although we can see some perky things like we just saw in previous school. Yeah. So overall staffing is low, but yet they've got a high number of staff paid over $100K. So again, it's just a bizarre— put those together, it's a really bizarre situation where the place appears to be understaffed, uh, but only on like the low end, right? They've got a lot of perhaps overstaffed on folks that make a lot of money. Could be part of where they— I think the school may be located, if it's in a metro area, could explain it, but something that needs to be looked at for sure. Somewhere, maybe if they're in Philadelphia or something where wages are higher, I don't know. Let's take the contractor side. Contracts, no shock here, right? I mean, if it's not staffing, it's probably contractors, right? And it appears to be the case. Number of contractors is high for their revenue. They have 15 contracts over $100K. It's quite high for their revenue. For their enrollments. So go through all 15 of those plus all the other contracts that are not listed there and see what you can find. Um, see compensation to officers. Yeah. Again, just like the previous school we looked at with Adler, just a really high compensation going to admin. It looks like a number of people over $100K, maybe too high. Uh, so look at this. Right, this could be messed up too if you just don't have enough like support staff. You end up with people making $200,000 doing jobs that can be assigned to somebody that, you know, makes closer to minimum wage. That's not efficient. Um, so you got to start looking at like how this whole staffing hierarchy is set up. Contracts, let's go through some of these other bigger. So Benefits, other employee wages. Yeah, somehow they're low on staff and they still have high compensation. So they may be in a metro. A lot, a lot to unpack here. And again, we could do it in our strategic compass. Advertising expenses high. IT expense low. That looks fine. Insurance. I'm just going to some of the big ticket items here that I know can cause problems. Insurance looks fine. Of fundraising expenses. That was kind of interesting. Yeah, take a look at the ROI on advancements. Fundraising expenses are high for size and revenue. Make sure that you're getting bang for your buck there. Fees for services, this is your vendor spend overall, although it's a little quirky because sometimes the 990s, they put in some of the vendor contracts into some other items like health benefits and stuff like that. So it's not always the best indicator, but, uh, that looks normal. Food service contracts looks normal. All right, let's go into some of the specific contracts. So I guess the big thing that we found above was that vendor spend was high, top end of the employee distribution is high. Uh, look at those. And, uh, we're looking at Cedar Crest specific contracts. Here. All right, this actually looks pretty good. I don't see— the only contract that is a bit high for the revenue is the food service contracts. But you notice, like, if you watch the previous show, this is a school that's, I think, probably bigger than the one we just discussed. Remember, that school was spending $3 million on Facebook and Google Ads, right? It looked like. And this is an excellent— by the way, if you're in the I've noticed this Genzabar IT contract a lot, and this is quite reasonable. If you're spending $2 million on IT, you might look these guys up. They're usually reasonable in the hundreds of thousands, not millions. But all this looks great. Same with Parkhurst. It's going to be good. So, so again, what the takeaway here, it looks like the contracts themselves look okay. It's just there's maybe too many of them. So double-check that, double-check the staffing, and they could probably get their budget back in alignment. But I'll leave it at that and pass it back to you, Gary.
So let me wrap up, Matt, with some comparisons for Cedar Crest College on from the 2025 College Viability App. And let's always start the graduation rates. And interestingly, they've had kind of a hit. They're down 8% in terms of graduation rates, 4-year graduation rates. And they've really had some issues in those interim years. They've kind of bounced all over the place. And you know, my threshold, of course, is 50%, and they're barely there in 2023. So, I took a look at the 6-year rate and the 6-year, the college viability threshold normal for 6-year graduation rates is 70%. And again, not really there hard at all. Maybe back in 2016, they were close. Even with the financial challenges, in addition to math and financial challenges at Cedar Crest, they have some issues graduating students. Something else I want to show for, for Cedar Crest, I'm going to quickly look at institutional grants, and it's gone up about $4 million. So they're giving away about— giving away in discounts about additional $4 million from 2016 to 2023. That's fine, that's what's needed in this market. But I want to do a couple comparisons. I'm going to look at institutional support. You show this in your AP Math. This is institutional support, the bosses, all right, the managers, CEO, the CFOs, the deans, those kind of things, per student. It's gone up from $6,500 to $8,300, about, well, not quite $2,000 over the last 6 reported years, right? So keep that in mind. It's $8,300 in 2023. Let's take a look at academic, same thing, academic support expenses. And man, I tease folks all the time, you don't need me, you don't need you, we don't need you to do the analysis on that. This college is spending a lot more on institutional support than they are on academic support. Matt, draw your own conclusions, but that's not going to generally be viewed as a positive development for any college at all. And then finally, I want to take a look at the College Majors Completion app for Cedar Crest College, and this is the internal market share. So for all of the programs that Cedar Crest offers that are in our database of 64 majors, they have 19 of those majors majors, and we look at two areas. Those high enrollment majors— business is a common one, psychology interestingly is a common one— and we look to make sure there's no ridiculously high percentage, and there's not. But like we talk in most shows, Matt, look at all the number of majors for a private college that are below, say, a minimum of 10 or 15. Most of the majors offered at this college are below 15 majors graduating per year. What does that mean? Well, We've talked before on shows, Matt, that colleges probably are no longer able to be everything to everybody, and this is a leading indicator of what that shows, what shows that, that colleges cannot offer all these majors in low enrollment volumes because we can make the quality question, Dr. Hendricks. And the analogy that I draw is, for example, you're an economics professor from back in the day, and if you had 400 economics majors at Matt Hendricks University And I had 4 economics majors at Gary Stocker College. You probably had a stronger, more diverse program, better program than I did. It's the same with brain surgeons, right? We've teased before, if somebody's going to do brain surgery on you, do you want that to be the guy who does one a day or one a month or one a year? And the same logic applies to that. And Matt, I'll wrap up this week's show with something we always talk about, and that is comparisons. And you did that a little bit earlier. It is the comparisons that matter. You can't in this day and age as a college leader, whether you're on the public side or the private side, just rely on your own data. You've got to see how you compete with others. Every other industry that I can think of compares themselves to others, and colleges need to do a much better job of doing that. So for Matt Hendricks, I'm Gary Stocker. Thanks for making time to watch the show. We'll be back next week with two more colleges on the College Financial Health Show.
