Comparing Colleges Financial Health - Iowa Private Colleges

Are you looking for information about the financial health of a private college? Or are you concerned private colleges you may be considering might be in financial trouble, might close, or maybe just struggle to provide a quality education? Hi, my name is Gary Stocker. For the past 5 years, I have been researching the financial health and viability of private colleges throughout the United States. In 2020, I created the College Viability App that I'm going to share with you today. During this video, I'll show you how to quickly and easily compare the financial health of private colleges you might be considering. Today it's 10 colleges in Iowa. I can help you become more informed, more comfortable, and more confident in your final college decision. This data, by the way, is from the National Center for Education Statistics from the period of 2014 to 2019 and is the most recently reported data from colleges. I will grant you it's a little bit old, but colleges have been historically slow, as has the federal government, in reporting financial data. Here's why it matters. It shows good trends, and it shows bad trends. You'll be able to see the data that I share with you, and if you get your own copy of the College Viability App, compare who's doing well and who's not doing so well in terms of finances, enrollment, and outcomes. To make it easier for you to be able to compare private colleges, we use a red yellow and green battery indicator to provide you just a quick summary of what we think the risks are with each private college. A red battery indicator suggests be careful. There are many indicators of lower enrollment, decreased revenue, increased expenses, and lower graduation rates that concern us. If it's a yellow indicator, a yellow battery indicator, really the pattern, if there is any, that we see is that this is the kind of college that may eliminate degrees or programs or courses to get their expenses in better alignment with their revenues. And of course, those that we categorize as green are ones that we see comfortable. We see either flat or increasing enrollment. We typically see some gains in tuition and fees revenue. And we also see that the balance between expenses and revenues over the past 6 years is acceptable. And finally, we like the graduation rate to be somewhere over 70%. So with those 3 categories, you'll see that attached to each of the colleges that we review, and it'll help you provide our view of the risks of choosing that college for their finances, their enrollments, and their graduation outcomes. Private Iowa colleges that we're looking at today: Allen College, Briarcliff University, Cornell College, Dordt College, Loras College, Luther College, Morningside College, Northwestern College, Upper Iowa University, and Wartburg College. This is a weak set of 10 private colleges in Iowa. The pattern is either decreasing or flat enrollment over the last 6 reported years. The expenses for all 10 have either gone up more than core revenues over the last 6 reported years, or the expenses have not gone down as much as the core revenues have gone down. Not a good pattern. In addition, the 6-year graduation rates are strong really for only 2 of the 10. However, 6 others are close to our 6-year graduation standard of 70%. 2 colleges though, Upper Iowa and Briarcliff, have really low 6-year graduation rates, below 50%. That's not good. Only 1 of the 10 has a really strong endowment, and that's Luther College at $168 million. 6 of the 10 are below the minimum threshold I use of $50 million in endowed assets. And the total rankings, and you'll see these individualized here in a few minutes, there are 2 private colleges in Iowa in this group that will rate as a red battery, not good. There are 8 private Iowa colleges in this group that we rate as yellow. And in this group we can't in good conscience rate any of the 10 as a green battery indicator. There's just too many issues across the board with this set of 10 private Iowa colleges. This is the 2021 College Viability App. It's data from the National Center for Education Statistics for the period 2014 through 2019. As we've discussed before, it provides value because it shows trends, both good trends and bad trends for the private colleges that we look at. Let's start by looking at the overall 6-year changes. We've got the 10 colleges, the 10 private colleges from Iowa that we're looking at here, and we have enrollment change, tuition and fees change, graduation rate change that I'll talk about in a minute, and then we look at the balance between expenses and revenues, and I'll show you a screen that compares the endowment for these 10 colleges as well. Let me go ahead and sort on this first column, the 6-year full-time equivalent students enrollment change. And you're going to see that it's really flat across the board. There's none of these 10 colleges that have significant enrollment. 4 of the colleges have had significant declining enrollment over the 4 years. And even though the college with the most substantial, and I use that term lightly, enrollment is just Briarcliff with 63 additional students, keeping in mind this is over 6 years, so 10 students a year. Then let's take a look at the revenue these colleges collect from tuition and fees. Again, this is their business. This is where almost all private colleges garner most of their revenue. And we can see that, and I'll sort this from highest to lowest, so that we can see of the 10, 5 were able to increase their tuition and fees over 6 years. Now there's a modest qualification on that. Because again, it's over 6 years. So Loras College increasing their tuition and fees $170,000 over 6 years, not that much. And even Allen increasing over $3 million, divide that by 6 years, it's $500,000 per year. That might not be enough to cover any annual adjustments for faculty and staff salaries. And then we see some serious issues. Northwestern College down a little bit, but look at Wartburg in Upper Iowa and Luther significant decreases in the tuition fees they collected from students over these 6 years. Most businesses can withstand decreases in revenue over short periods of time, but you look at this over a 6-year period, that's not good. So the next 2 columns that I want to look at are over here on 6-year total changes in expenses and 6-year changes in core revenue. And what we're going to see in each of the 10 private college cases, there has been an inability to manage expenses in relationship to revenues. And we can look at each of the colleges just to get a feel for this. So at D'Ort University, their expenses went up $7 million and their revenues were essentially flat over a 6-year period. Morningside, $5.5 million in increase in expenses, revenue went down heading toward $4 million. That's a $9 million gap over the course of 6 years. Briarcliff University, same pattern. Cornell University, expenses went up and look what happened to their revenue over 6 years. This is the core revenue, down almost $11 million. That's a $15 million gap over those 6 years. Northwestern College, almost a $9 million gap. We can see Allen College, closest of the 3. Their expenses went up $3 million, the revenues not quite $3 million. So to their credit, Allen College has been able to drive, or at least keep their revenues even with their expenses. And then we look at the bottom, Upper Iowa expenses have gone down $3 million and change, revenue has gone down $7 million and change. We see that same pattern for Wartburg and Luther College, really bad numbers for Luther College. But what we see the pattern for these three, Upper Iowa and Wartburg and Luther, is they clearly recognize they have challenges. They tried to lower their expense base, but not nearly as much as the revenues took a hit over the 6 reported years. Next, I want to look at the 6-year graduation rates for these 10 private Iowa colleges. So I'm going to select Grad Rates from the menu bar, and I've already sorted them by 6-year graduation rate for the last reported year, 2019. And again, I'll remind viewers that the threshold I use, and I think many others do, is a 6-year graduation rate threshold, minimum threshold, is 70%, 7-0%. And we can see that just 2 of the 10 colleges in this set of colleges from Iowa meet or exceed that threshold, DORT University and Luther College at 75%. In all honesty and fairness, Cornell, Northwestern, Loras, Morningside, and Wartburg aren't too far off, but still nonetheless, if you look at something like 62% for Morningside and Wartburg. Here's how you read that. Out of every 100 students who started their undergraduate studies at either of those colleges, Morningside or Wartburg, in 2014, only 62 of them graduated from those respective colleges by 2019. Not a real strong number. Now, some of those students may be continuing on, Some of those students may have transferred elsewhere and graduated. That's not reflected in those numbers. But again, these resources give you a tool to compare. It's not just graduation rates, but it's how much the enrollment has changed up or down. Are they managing expenses? It's just all these things that come together to help you compare which colleges are financially, and even operationally, capable of providing you and/or your student with a quality college education that they're looking for. And then finally, let's go to endowment. And I'll select endowment from the menu on the right-hand side. Again, I've pre-sorted this list for the last reported year, 2018 and 2019. And we can see that of the 10, Luther has a relatively strong endowment. The threshold used for endowments is $50 million. Again, I use that, I think many others do as well. And so you can see that really only 4 of the 10 private Iowa colleges exceed that $50 million threshold. The ones below that, you can simply make the argument that by comparison they don't have the resources, nor do they have the systems and processes in place to collect revenues from gifts that the others have. It's a crude analogy, but that rainy day fund just isn't as substantial as it is for others. And then when you look at colleges like Upper Iowa and Briarcliff and Allen College with endowments below $20 million, just not a good number. That concerns me, and you'll see that contributes to their low battery rating here in a moment. I'm going to give Allen College a yellow battery indicator. They didn't report the 6-year graduation rate through the National Center for education statistics, that is a concern. Their 2019 endowment was less than $8 million, and it's just going to be difficult to compete with such a low endowment, even though they have kept a better handle on the expense-to-revenue ratios than their competitors. Briarcliff University, also yellow. It's important to note that their 6-year expenses grew twice as fast as their core revenue over the same period. And their endowment is really low at $16 million. And on top of that, a graduation rate, a 6-year graduation rate at 40% is not strong. It suggests they lack the systems and processes to get students from the start of their college degree to the completion. Cornell College, yellow battery. They have a $15 million expense-to-revenue imbalance over the 6-year reported period. That's from 2014 2019, plus they have relatively flat student enrollment over that time period as well. Dork College, also yellow, again flat enrollment over the 6 years. Their expenses increased 7 times more than the revenues increased over that reporting period. It's just one of those things that you, when you look at the yellow battery colleges, you just have to wonder what kind of cuts they may put on the table next to be able to better balance their expenses and revenues. Loras College, again a yellow battery indicator. Their 2019 endowment at $40 million is below that $50 million threshold that I use. Again, bad FTE enrollment, bad student enrollment. It was down over the 6-year period. In addition, their tuition and fee revenue from students was flat as well. Luther College, I'm giving a red battery indicator. It's a marginal red. They have a strong endowment, I think the strongest of the group, but the $27 million they have, the $27 million imbalance they have in expenses to revenues over that last reported 6 years is concerning. In addition, they have 350 fewer students in the 2019 reported year than they had in the 2014 reported year. And in conjunction with that, their tuition and fees decreased $13 million. I have some concerns about the long-term health and viability of Luther College. Morningside College, a yellow battery indicator. Their endowment is at $44 million in 2019, a little bit lower than the minimum threshold. Again, flat student enrollment, and their expenses were $9 million more over the 6 years than the revenue, the core revenue that they collected over that same period. Northwestern College, yellow battery indicator. Their enrollment, their full-time equivalent, also known as FTE enrollment, was flat over the reporting period. Their student enrollment FTEs, full-time equivalents, was flat over the 6-year period. They have about $9 million expense-to-ratio imbalance. Upper Iowa University, a very strong red battery indicator. Lots of concerns as I look at the data provided by the National Center for Education Statistics. Their full-time equivalent, full-time student enrollment decreased more than 2,000 students over the 6 years reported. Their tuition and fees revenue was down $5 million and change. And their revenue to expense, excuse me, their expense to revenue imbalance was $10 million to the bad in that same period. And their 6-year graduation rate at 47%. Again, not even half of the students that started at Upper Iowa in 2014 had graduated with an undergraduate degree from Upper Iowa 6 years later in 2019. And finally, Wartburg College, also yellow. Their student enrollment decreased, their FTE enrollment decreased more than 200 students. Their tuition and fees revenue decreased almost $4 million. And they had a $10 million, plus or minus, expense-to-revenue imbalance. Their 6-year graduation rate at 62%, you really like to see it much closer to 70% or higher. All college students deserve a quality college education. I want to give you information to help you make the best possible college decision that includes comparisons of private colleges' financial health and viability. You've already looked at the majors, and at the campus, and the faculty, and the online offerings, and the amenities. Let's simply add the comparison of the college's finances, enrollment, and graduation outcomes to your checklist for you to make that decision. I don't do predictions. I don't do guesses. I just provide simple comparisons of data that the colleges themselves have provided to the federal government, and information on occasion from the auditors of the financial statements for these private colleges. It's all publicly available information. Granted, very few people have the skills or interest to analyze a college's finances. That's why I created the College Viability App. You can get your copy on the link I provided down below. I only review a small set of private colleges in each of these videos that I post. If you have some private colleges you would like me to review, go ahead and list those in the comments section down below. Usually a list of 3 to 5 or as many as 10 is what I typically do for these videos. And while you're at it, tell me about the biggest concern you have about selecting a college, especially as it has to do with their finances, their enrollment, and their graduation rates. My research shows that choosing the wrong private college, for any reason, can cost about $50,000. There's a link below to a free worksheet to calculate what your costs and lost income could be if you have to change colleges for any reason. Now you know how to compare the financial health and viability of private colleges. You can feel more comfortable with whatever your final decision might be. Invite me to a meeting at your high school for the parents of seniors. I'll provide a virtual review of some of the private colleges in your region. And as always, if you like this video Make sure you click on the like button below and click on the little bell if you'd like to be advised when any of these new videos are posted. My name is Gary Stocker, and I use the College Viability App.