Gary Stocker analyzes nine Iowa private colleges from a Des Moines Register story using enrollment, endowment, and graduation data from 2014-2021. Six schools fall below a $50 million endowment threshold, and eight of nine saw declining admissions yield. Several have graduation rates near 50 percent, suggesting systemic financial weakness that curriculum changes alone cannot fix.
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Welcome back to another episode of This Week in College Viability. My name is Gary Stocker. This week we're going to be looking at 9 private colleges in Iowa, and it's kind of a follow-up story that Tyler Jett from the Des Moines Register published on, on a Sunday in late, in late June. What I want to focus on is the data from the College Viability App and the IPEDS database on these 9 private colleges, in large part because in the story that Mr. Jett wrote By and large, the college leaders seem to think they could continue essentially with the same business model by tweaking it with new courses, programs, those kind of things. Let's just take a minute to look at the data for these 9 colleges, and I'll offer some comments along the way. We're just going to look at 5 reports, and the first one we're going to look at is the full-time equivalent enrollment, and this is the standard one, standardized one that I always use. And you can see the list of 9 colleges, and they were all referenced in some form or fashion in the Des Moines Register article of June 25th, 2023. And all this data is compiled in the College Viability App. This is the Executive Analysis version for 2023. You can see the colleges, you can see their annual FTE enrollment. What we're going to focus on is the change over the last 8 years. And again, the data is from 2014 to 2021. We can see almost without exception, each of the colleges referenced in the Des Moines Register story lost enrollment over 8 years. Interestingly, the one exception, Iowa Wesleyan University, showed enrollment growth. They're the one that has just recently announced their closure. I know what's happening, we'll talk about that another day, but each of these college presidents look at these data points, I presume for other institutions in addition to their own, and say, hey, We're okay, maybe, but I think maybe not. Let's look at the next data point and let's look at the endowment. And again, the endowment is those funds that a college has raised, gifts if you will, from alumni, parents, students in some cases, and other interested parties. Now, at College Viability, we use a minimum endowment threshold of $50 million, 5-0 million. It's not arbitrary, it's one that we use all the time and it's It's our argument that $50 million is a minimum because it suggests that these colleges at least have systems and processes in place to raise gifts. Let's take a look at these 9 colleges. And if $50 million is our minimum threshold, we can see Clarke University, Graceland, Iowa Wesleyan, which is closing, Loras College, Upper Iowa University, and William Penn University are all below that threshold, some woefully so. In the story that Jet wrote, some number of these college leaders says, "We think we can raise more gifts." I question the logic behind that because if they haven't exceeded $50 million over decades, or in some cases centuries, what makes these colleges think they can do that now, especially in time of crisis? Let's move on to the next report and let's look at the tuition and fees revenue. Now, private colleges are famous for many things, but one of them is that their operating cash or operating revenue comes heavily from tuition and fees revenue. And you can see that highlighted here. Look at the 8-year changes, 2014 to 2021, for each of the 9. In every single case, the tuition and fee revenue has gone down. Now, iOS, seeing which closed, had the least. Um, I know there's some logic behind that. I won't talk about that today. And it's one thing to lose money in a business for one year, but if we're looking at 8 years and the tuition fee revenue has decreased over an 8-year period, don't tell me that a couple of new majors, a couple of new programs, a couple of new sports is going to turn that around. Maybe, maybe there's some additional revenue generated, but I'm going to make the case none of it will be materially significant to these colleges. In large part, it's just a function of numbers. But let's keep in mind there's 9 colleges here, and if you read the stories from the Des Moines Register this weekend and the Milwaukee Journal Sentinel had one last weekend, The colleges are, for the most part, doing the same kinds of things in an attempt to rescue their financial scenarios. If they're all doing the same kind of thing, that's gonna have, that's gonna put the same kind of tuition pressure on them that they've always had. Adding a course, adding a program, adding a sport isn't gonna change the outcome. Let's look at popularity indicator. Now this is a term that I use. It's also known as admissions yield, and by definition, that's the percentage of students who a college accepts who actually show up and pay tuition on day one. Let's look at the 8-year change, and then we'll look at the actual numbers. Now, we're gonna note that for the 9 colleges, 8 of the 9, their admissions yield, their popularity indicator, either went down or stayed flat for the entire 8-year period. And even Upper Iowa, which has had all sorts of issues this year, and Central College is effectively flat. Now let's look at the actual numbers. We'll use 2021 because that's the most recent data reported. We can see that, for example, William Penn, their value is not bad. You know, I use 20% as a minimum threshold for non-select colleges. This really suggests that their population is dedicated to William Penn. But let's look at the trend—down from 55% to 42%, down 13 points in just 8 years. And the others are really hovering around that 20%. It's easy to see why Iowa Wesleyan wasn't able to survive. Look at their really, really sad numbers here. And really, all the others are struggling to get students whom they accept to show up and pay tuition. And finally, the one I think is most significant, even though it's not a a direct reflection of financial health and viability. It's suggestive of quality, and I think there's an indirect connection between quality and financial health. Now, the threshold I use for a 4-year graduation rate is 50%. If a college can't graduate 50% of the students who started 4 years ago, there's something going on. They don't have the systems and processes in place. They're accepting students not prepared for a college education. The factors don't, don't concern me that much, but the reality that there are about half of these colleges with a graduation rate below 50%. Now, on the other hand, some are doing quite well. Let's start with that. Look at Central at 60, look at Loras at 60, and Luther at 66, Simpson at 65. They're doing something right in terms of graduating students. They still have decreasing admissions yield. They still have lower tuition and fees. They still have enrollment issues, but they're doing something right for the graduation rate. These might be the kind of colleges that would be more likely to be acceptable in some kind of consolidation, or if you will, merger agreement with others. But let's look at Penn and Upper Iowa and Iowa Wesleyan, which is closed, Graceland and Clarke, even though it's right at 50%. These aren't even coin toss colleges. A student who starts at one of these colleges might as well flip a coin to determine whether they're going to graduate, graduate in 4 years or not. And there are all sorts of costs associated with that. If you don't graduate in 4 years, it's not just the actual cost to go to class, take the courses, pay for meals and room and board and those kind of things. The most important consideration if you don't get that degree in 4 years is the opportunity cost associated with the income you would not earn in that 5th year. If you get the degree in 4 years, you're earning money from that degree in year 5. If you don't graduate in 4 years, you're not earning that income. So what does this all mean? And interestingly, as I read these stories and stories like this College presidents regularly say what they're doing is fine. And I don't hold them at fault for saying that. They're paid to represent their college. They have a fiduciary responsibility to look out for the best interest of their college. What they are saying in the media is what you and I would do in the same situation. Here's the tough part. Who is the fiduciary for the student? For the student's family, for the faculty and staff and communities in these small private colleges throughout the country. No one is saying to these college leaders, your enrollment is going down, your graduation rates are poor, your admission yields are not good, you have next to no endowment. Why should I even consider your college. These colleges that you saw on the list of Iowa private colleges, and many other colleges in Wisconsin and Missouri and Illinois and Pennsylvania, New York, and other states as well, cannot possibly survive with their current business model. No matter what their college leader says, no matter what the president says about these colleges, the data just doesn't support that. And here's the reason why. It's a fact of basic economics. There are too many college seats in the United States and not enough college students, for whatever reason, filling those seats. One cannot adjust the laws of economics by adding new courses or new sports or new programs or cutting expenses The market is adjusting. Will we see massive adjustment today, tomorrow, next week, next month, or next year? Very difficult to say. But when you're looking at these colleges, you really want to consider their financial health because they may or may not close. But if they are struggling from month to month to be able to pay the bills What kind of quality education are they building? It's a fair question for all the stakeholders to ask, from faculty, staff, students, and the community, to ask now and in the future. This is Gary Stocker with another episode of This Week in College Viability. Mm-hmm.
