Gary Stocker reveals College 4 was Notre Dame College, which closed February 29, 2024, and analyzes why. The college had a 29% graduation rate, $17 million in unfunded grants, and revenue below expenses. Five of seven colleges studied showed the same pattern: auditors missed warning signs across the sector.
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Hi, it's Gary Stocker again. It was a week ago today, the first day of March, that I posted this first survey, and it had to do with Notre Dame College. And I posted the results of 7 private colleges to see if the Viewers of the video could decide which one was Notre Dame College. And as you recall, all of the 7 colleges were anonymized. I hid out the names. I just showed the data. Let's take a look at what happened. So when we look at the data, Notre Dame College announced it was closing on February 29th, and I showed anonymized financial enrollment and outcome data for Notre Dame College and 6 other private colleges. Of the responses I got, a little more than half guessed College 4, which indeed College 4 on the list was Notre Dame College. Now let's take a look at that same display, only this time I'm going to show you which one is Notre Dame College while still keeping the rest of the colleges hidden. So let's quickly go through this, and we can see that in terms of FTE enrollment, that Notre Dame College in terms of absolute number and percentages had the biggest drop, so that might have been an indicator. But it's important to note the others were not that far behind, especially colleges 1, 2, 3, 1, 2, 3, and 6. So, you know, they're all in the same category of not doing particularly well with FTE enrollment. Let's take a look at graduation rates. And again, Notre Dame College, you can see it exposed on the left-hand side there. The other 6 colleges are still anonymous. At 29%, they're all bad, all significantly below 50%. Is that a leading indicator of a college closure? Probably not, because more than half of colleges in the United States have a 4-year graduation rate less than 50%, and that's not good. But that's a story for another day. But Notre Dame College was lower than most. They raised it up a little bit. You can maybe look at that 8-year change to see if that gave you any indication. The admissions yield, I always look at the 8-year change. I'm always looking for patterns here, and you can see Notre Dame College was down 8 points over the last 8 reported years from 2015 to 2022. And of course, this data comes from the National Center for Education Statistics and its IPEDS database. And the 9% number in 2022, not good. College One had similar kind of number and was even down more than Notre Dame College. Will College One close?
I don't know.
If you look at the data across all 7 of these, I would be concerned that all 7 exhibit significant financial health issues and even viability issues. So admissions yield is one where you can compare. Feel free to pause the video to look at the data more closely. Percent admitted, I think when I did the first video, I noted that colleges 4, 5, and 6 were a little on the high side, and of course Notre Dame was one of those. Colleges 5 and 6 are admitting an awful lot of students. That's one of the indicators that organizations use to say, eh, they're accepting students more for their tuition payment than they are for their capacity to complete classes. But you can look at the data yourself. And again, I focus a lot of times, a lot of content on this unfunded institutional grants. It is almost all merit aid, is most scholarships. They're unfunded, they're just disguised tuition discounts. Interestingly, Notre Dame College was trying to get theirs under control, even though they were still giving away $17 million in 2022. It was just $18 million in 2015. This had gone down a little bit over those 8 intervening years. But look at the other colleges that have gone up. Now some are flat, but the College 3, College 5, College 6, they've significantly increased their unfunded tuition discounts. In almost all cases, I can suggest, based on educated speculation, just to get students in the door. Now, as I've shared before, nothing wrong with that. If you can get students in the door and still have profit, to be able to run your operation, to make your payroll, to keep the lights on, go for it. But evidence suggests that's not the best business practice. Endowments— if you've watched my content before, I have a minimum threshold that we use at College Viability of $50 million. None of these are even close. Notre Dame College is on the low end, but not even the lowest.
What about the other colleges, College 3 and College 7, who are significantly below that $50 million and even a little bit below Notre Dame College.
Are they gonna close? What I worry about is maybe they will and they won't tell us, they won't tell their students, they won't tell their faculty, they won't tell their community until the day of or the week of.
That's one of the values, one of the many values of the College Viability App. This is the executive analysis version and there's versions for faculty and staff, there's versions for students and their families. But it lets you compare the financial health, the enrollment, the outcomes, the viability of these colleges, so you don't have to wait for them.
You don't have to wait for that financially unhealthy college to say, hey, we can't make it, we're locking the doors and closing the college.
So you can see the data here for endowment values, none of them coming even close to that bare minimum of $50 million.
They're all in the same general low category.
And then this is a ratios on the ratios page on the executive analysis version only. And let's look at the first highlighted column.
This is total revenue over expenses.
So we use the iPads data and create our own ratio for that. So if it's 100% or higher, that means the revenue is a little bit higher than expenses. Look at 5 of the 7, including Notre Dame, is below having more revenue than expenses. Does this mean that colleges 1 and 2 and 3 and 6 are also at risk of closing. There's no single factor. I'm not gonna suggest, that's why I've hidden those. I'm not gonna suggest which colleges are closure. I provide the data, I provide the comparisons, I provide the pictures, but each individual, whether you are an administrator, board member, faculty, staff, community stakeholders, student, family, you have to make your own decisions. It's a subjective call, although I know I'm concerned about many of these colleges, and I know it, so I know the names of them. And the last one we'll talk about is the total assets over liabilities. And I think I showed the first time I did an average for the 1,300 private colleges in 2022, and that average number was right at 9.0. So you can see all of those are below that. College 6, I'm guessing, doesn't even know how to calculate that ratio or entered wrong data or something like that. So what does this mean? I've offered a couple of conclusions for your consideration. The data patterns are eerily similar for the closing college, Notre Dame College, and the others. How many of these private colleges may yet close? Even if they don't close, do they have the resources to provide their students with a high-quality, positive college learning experience? And so what questions can we ask these colleges? I posted that elsewhere, I won't do that here, but there's questions you can ask. What's your enrollment trend? What's your endowment? What has been your 4-year graduation rate? If they are like the colleges you see here, be careful, be very careful. And then one thing that I haven't addressed before, since I do research on a lot of this stuff, when Notre Dame College closed, I went out and grabbed their financial statement from the Federal Audit Clearinghouse, Interestingly, the company who had done the audits, the most recent audits for Notre Dame College, had failed to note there was any concern about the college's viability. It's something called a going concern, G-O-I-N-G, going concern, and it's a standard reference in audited financial statements. And while the term was in the Notre Dame College financial statement, there was no indication that they were in trouble. It was just standard terminology that was used. That concerns me. If we can't rely on auditors to say, hey, this college is in trouble, that's a concern.
I'm going to close with a comment that I copied and pasted from one of the participants in this little exercise. And they wrote, they had selected College 4, Notre Dame College. It was a combination of factors, they wrote, the very small endowment, the unsustainable draw, that is the unfunded discounts, Unfunded aid basically flat while the endowment dropped. But what really caught my attention was the last sentence. It's not significantly worse than the other 6 overall though. That's scary. How many Notre Dame colleges are out there saying everything is fine, we're not gonna close, we can make it? 'Cause Notre Dame tried that for the longest time. And in the history of closing colleges over the last many years, Almost all of them say, "We're fine, we're fine, we're fine, we're fine, we're closed." The College Viability app is available. The 2024 version of the College Viability app is available for all. I'll make sure to leave links to access that app in the show notes. This is Gary Stocker with College Viability.
