This Week In College Viability (TWICV) for July 15, 2024

Welcome back to the podcast show. Hey, it was, it was last Monday that Northwestern College in a Chicago suburb announced its closure. They announced it on Monday of last week, but they had actually turned out the lights the previous Saturday. Go figure. So let's start this hot summer week in anticipation of the next college that will wreak havoc on its students and faculty and community with yet another short notice closure. Hi everybody, it's Gary Stocker with College Viability and another large episode of This Week in College Viability packed with news and commentary. If you have questions or comments or even concerns, send them, send them to me at gary@collegeviability.com. They will go to the top of the podcast question list as they come in. With each passing week, we are getting closer to the fall 2024 FAFSA Armageddon. Conventional wisdom, for what it's worth, has many colleges reporting their year-to-date compared to last year, their year-to-date deposits down about 10 to 11%. That's not good. So hey, this week's higher education news and commentary include layoffs and cutbacks. Of course we have some Another college in financial trouble is recruiting students from a closed college. Oh my, an entire nursing faculty resigns. That'll be interesting. And Hampshire College continues to join the podcast. I'm really starting to, to get ready to put them in the same frequent flyer list as Birmingham Southern College and Webster University and Northland College up in the north part of Wisconsin. They they find ways to make it on the podcast on a regular basis. Congratulations to Hampshire College. I'm not sure they appreciate it, but so be it. And I have a college sports story that has implications for the non-Power Four colleges and their financial health. And the good folks at Northwestern College that I mentioned just at the top are charged with lying to their students about transfer options. That and much more on this episode of This Week In college viability, layoffs and cutbacks. Western Illinois University lays off 36 employees. All right, it's happened before, it'll probably happen again. And the source here is WGEM Radio on July 1st. And the university announced that it will— I'll read to that— the university will continue to work toward a financially sustainable and thriving future, and Western Illinois's priorities remain the same. To ensure educational opportunity and access for all students, blah blah blah blah blah blah blah. Well, if all those things were true, they would have enough students paying tuition so they wouldn't have to lay off 36 employees. Now, I still think Western Illinois is probably not going to close, in large part because of politics, but it is, it is a classic symptom of too many colleges and not enough students to go to those colleges. They, they, they don't get a GEECH, but man, they're close. Uh, layoffs and layoffs and cutbacks continue. The number of faculty layoffs at Delta State is still in flux. That's the headline from Molly Minta in Mississippi Today on July 12th. The university, Delta State, will notify faculty of layoffs on a case-by-case basis in the next 6 to 8 weeks, as the story reads. From Ms. Minta, Molly Minta's story in Mississippi Today, the regional college in the Mississippi Delta had initially planned to let its more than 200 faculty know on July 1st who was gonna have a job and who wasn't, but the president, Daniel Ennis, wrote in an email a few weeks ago that he can't finalize the number of layoffs until he knows more about the shape— get this— until he knows more about the shape of the 4 new interdisciplinary degrees that will replace the 21 programs that the university is closing. Now, as I ponder this, and I spend a lot of time pondering, I can't imagine the connection between new programs and immediate layoffs. I future revenue versus current costs. I, it's just, it's just another example of college leaders, college boards not knowing who's on first base, to draw a mixed metaphor there. And this, this has earned my first jeesh of the day. Just, just let's move on. Queens University of Charlotte says it will make cuts after missing enrollment goals. Goals. And this is from Lucy Marquez, and this is from the Charlotte Observer on July 12th. And they're missing their student goal by 100 students. All right, here's a— here's why this story is important. It's happening everywhere. I mentioned at the top of the story, top of the show, that year-to-date numbers are down about 10 to 11% on deposits. And Mississippi State is missing their— I'm sorry, Queens University is missing their goal by about 100 students. But this will be happening at potentially hundreds, hundreds, hundreds of more colleges during the next academic year. Page 2, Keystone College in Pennsylvania to accept transfer students from closed Clark Summit University, also in Pennsylvania. And this is from Jim Lockwood, a staff writer for, I don't see the source here. And the story reads, I'll put it in my own words, Keystone College— and I've reported here on the podcast— Keystone College faces its own financial struggles. Just last month, they announced they were cutting 29 faculty and staff positions and closing several low-enrollment academic programs to save $3.5 million. Okay, that's fine. Those are the kind of business decisions that need to be made. But I've, I've shared this before. There are closing colleges who do these teach-out agreements, whether you reach out to colleges to say, hey, help our students finish their degree— a noble gesture, even though it's a required one from the accrediting agencies. But they have— these closing colleges have no incentive to provide colleges that are financially healthy. And so many times they, they send their students to colleges who might also close. Or might also have cutbacks to programs and majors. And I'll tell you a brief story. I've had families from closed colleges contact me. They're desperate to know how they could avoid choosing a closing college for a second time. And sadly, there will be more stories like that. Well, I hope if you're going to Dickinson State University that nursing— your nursing degree was an option or not, a locked-in choice because the 7 nursing faculty at Dickinson State University all resigned last week. It's some sort of issue with credit hours, and Dickinson State President Stephen Easton said they're working to make sure the program will be up and running this fall without changing the curriculum for nursing students. Now, I'm a healthcare kind of guy. I worked in medical laboratories throughout many years in my career, and it's not easy to find nurses let alone properly qualified nursing faculty. And I don't know under what delusions Stephen Easton, the president at Dickinson State, is operating, but unless he brings those 7 back, there's— I don't see any way that they have it up and running this fall without changing the curriculum for non-nursing students. And here's a headline, here's a headline that always makes colleges happy, and this is from Massachusetts Live. Juliet Schulman Hall on July 8th, and the headline reads, "A rat fleeing a sinking ship." A rat fleeing a sinking ship. Students, staff, alumni react to Hampshire College woes. 19-year-old Hampshire College student PJ Sorella says Hampshire, Hampshire, however you want to pronounce it, Hampshire hasn't had open communication about its financial difficulties with students. The school has a habit, he goes on to say, the school has a habit of sugarcoating how serious the situation is. But of course, the good folks at Hampshire College, from the playbook of colleges throughout the country, we are confident, they say, that our student-centered approach to education will remain a distinctive experience for our current students, the spokesman said in a statement Ladies and gentlemen, boys and girls, colleges are a commodity. It is the degree that matters. It's not the marketing of a unique experience. If we went to the websites of every college in America, they're going to have something similar to what the good folks at Hampshire College say. We are confident that our student-centered approach— I hope it's student-centered. What else would it be? Goodness, you know, even the marketing folks aren't getting it right these days. They talk about tuition increase. I'll read the quote here. At Hampshire College, they're going to increase their tuition by 3.5% for the upcoming academic year, which remains— now listen to this— which remains at a lower range for selective colleges in the region. Now, I don't know how Hampshire College defines selective colleges. But I went to the data like I always do, and I'm quite sure that their average of 70% of admitted students— so for every 10 students that apply, 7 were admitted— over the past 8 reported years is hardly selective. You know, the 70% doesn't quite get to the level of have a heartbeat, we'll admit model like too many colleges. But 7 of 10 is not, is not, is not selective. And that's why it's one of the reasons I'm here, to point out the silliness that so many of these colleges throw out there because they don't think anybody's out there providing quality control to the, to the communications garbage they stick out there. And even a quick sidebar, while many colleges have decreasing admission yield rates, number of students who actually show up once admitted. Hampshire's down 10 points. They were up in a mid-20 kind of number 8 years ago. They're down to 16%. So the market's telling them, hey, Hampshire, we have better options, we're going somewhere else. Fitch, consulting firm— Fitch, a financial firm— their headline reads, tuition growth not enough to preserve margins, profit margins, for U.S. private colleges. This came out on July 2nd. It's a corporate communication, and from Director Emily Wadhwani, she says, looking ahead, additional operating pressure is expected with many institutions grappling with elevated costs and a fractured enrollment environment. Ms. Wadhwani goes on, this will likely result in more pressure on revenue, with operating margins falling to the lowest point in over a decade despite relatively steady investment returns. And endowment support. All right, I'll grant her that. I'm not sure I agree. Cash flow, she continues, and coverage are likely to face continued pressure, particularly emerging from an admission cycle fraught with FAFSA issues. Um, we know what those are all about. So, so what this essentially is, this is corporate finance speak, corporate finance speak for Gary's correct, closures will continue. One of the top financial firms in the world, Fitch, says as much in their corporate wording there. Closures will continue. They don't say it, I am. And here's something to keep an eye on. Keep an eye on cash flow analytics. Now, timely cash flow analytics are few and far between out there, but I'm aware of companies using AI to bring together college financial data from multiple sources. And in the end, using AI and some programming languages, they're able to predict cash flows— they're able to predict cash flows and cash flow issues well in advance of other tools and resources. If you want to know more about what I've been working on, contact me at gary@collegeviability for more information, and I'll be glad to follow up. Page 3. Let's, let's look at athletics. On occasion I bring this up, and there was a story in Yahoo Sports from Ross Dellinger, who's a senior college football reporter. This was back in late June. With the future of college sports uncertain, Mr. Dellinger says, one thing is clear: an official and permanent split of NCAA Division I is here. Now, it's a fascinating article. Of course, have the link in the show notes that you can take a look at, but here's what What concerns me, and then what if the big college boys and girls take their balls— footballs, basketballs, softballs, baseballs— and refuse to play with their lesser athletic brethren at the non-Power Four conferences? There's something called pay-to-lose games. That's when smaller colleges less talented athletic colleges go to big colleges and they're paid money to go and lose, lose the game. Not to lose it on purpose, but because their skills are different, their players are different, they just rarely win those games. And these pay-to-lose games contribute much to the lesser brethren's athletic revenues. I don't know what the numbers are, um, I've seen the occasional representation, but I'm not going to use that today. Many colleges could have their athletic budgets obliterated if they can't count on the competition cash, this pay-to-lose game from the big boys, and they can't even begin to think about NIL money, paying NIL money to their student athletes. Now, I, I just haven't thrown enough brain cells at this. I don't have a vision, don't have any vision to predict how this might shake out. I have some concerns about the financial impact that this Power 4 folks may— an unexpected consequence it may have for colleges who aren't in that Power 4 shakeout that is that Ross Dellinger is talking about in the official and permanent split of NCAA Division I. And then next, which colleges, which private colleges always lose money? Now this is Robert Kelton, who is a regular contributor across social media and media, and and he's at the University of Tennessee. And I just got a quick— he did some research in his— at his Tennessee, I presume, on the percent of colleges with an operating loss. Now, his numbers go from 2012 through 2022, but I just want to read the numbers from 20,000— from 2019, 2020, and 2021. In 2019, 40— almost 44% of colleges, private colleges, had an operating loss. For every 100, 44 of them— not quite— had an operating loss. That number plummeted in 2020-2021 with COVID money from the governments to 3%, 3.5%. But interestingly, it skyrocketed again, even more than the 2019 number, to 67% of all private colleges in 2021-2022 had an operating loss. Kelton goes on, a new book— and the book is Colleges on the Brink by Chuck Ambrose— a new book that makes the case for more colleges declaring financial exigency. And that's essentially, they say, we don't have the resources to pay faculty. That's a gross generalization, but that's what it is. Uh, Ambrose proposes that colleges declare financial exigency in order to cut academic programs. In many cases, that's a requirement, and there's some inside baseball behind that. And Kelton goes on, I think it is more important than ever for faculty and staff and even students to have a sense of the financial health of their college by being equipped to read budget documents, enrollment projections. This, he goes on to say, is crucial for shared governance to have a chance of working in difficult situations, period. So Gosh, I have a 2024 College Viability App created. It's created especially for faculty and staff. It retails at $300. I have both private and public college versions. I'll leave links on the show notes. And I, I used to be $300 per license, but because I think it's so important for faculty and staff to see these data, not have to worry about reading financial statements and financial documents I made that license an enterprise-wide license. $300. $300 lousy stinking dollars for either the public or private version of the 2024 College Viability App to let faculty and staff look at the last 8 years of data for not only their colleges but for their competitors. So I'll leave a link in the show notes. Use it, don't use it, it's out there. Or you can try and figure out how to read financial statements, enrollment projections, and Form 990s and all sorts of difficult-to-read and analyze documents like that. I've just made it easy for you. Your call. And U.S. confidence, next headline. U.S. confidence in higher education is now closely divided. Well, I think I've had stories like this before. And this is from Gallup and Jeffrey M. Jones reported this on July 8th. And just, I'm gonna read the story, a couple items from the story. In 2015, 56% of Republicans had a great deal or quite a lot of confidence in higher education. Now, now only 20% are confident and 50% have little or no confidence. It's almost flipped since 2015. And Republicans are not alone in having reduced confidence in higher ed. 35% of independents, it's down from 48% in 2015, down 13 points. And even Democrats were at 68% confidence. In 2015, it's down to 56%, down 12 points for the survey that was released in early July. And he goes on to say, Mr. Jones goes on to say, in the past year, all party groups have shown at least some increase in the percentage with very little or no confidence and a decrease in the percentage saying they have some confidence. All right, none of the party groups show meaningful change in high confidence over the past year. So ladies, gentlemen, boys, girls, the market is speaking. That's what's going on here. Sadly, most, most in higher education, most college leaders, most college boards in higher education have turned down the volume and aren't listening to that marketing music. And finally, I want to talk about page 4, and the headline reads, "You just shut the door. Northwestern College lied to students in closer message regarding transfer options." This comes from WGN-TV in Chicago, Andy Koval, on July 10th. Here's what the college said. The college has reviewed options for you to complete your academic programs at other post-secondary institutions in the community, and we have identified several institutions that provide comparable programs and have indicated they will accept our students. However, the story goes— this is from Andy Koval at WGN-TV— it appears Northwestern College lied to their students in that message. They listed a series of colleges, and it's Prairie State, Moraine Valley, DeVry, Moraine Valley again, and all these institutions were contacted by WGN News, and each of them said that they had not been contacted by Northwestern College at all and had no plans for any kind of teach-out agreement with Northwestern College. Again, yet another episode, embarrassing episode how college leaders just can't get a handle on either what's going on in their industry or how to reasonably react when it's time to turn out the lights. I'm not going to do a jeez on this. This is just bad. This is just bad. Let's do a wrap. I did a special podcast last week with Jeff Spear, and Jeff, uh, is, is CEO of a company called CFO— Chief Financial Officer— CFO Collegue. And it's an innovative higher education consulting firm. And so one of my questions to Jeff was, hey Jeff, what's the future of higher education? He provided an entertaining response. I'll read his response. My analogy, Mr. Spear said, my analogy is that too many schools are in a speeding minivan with no driver heading for a cliff while the occupants argue over what DVD to watch. Indeed, he goes on— that's where the giggle is— indeed, he goes on, there are many who don't have a workable plan either to address the known external forces or the ignored internal ones that may and will ultimately lead to closure. And then later on, I asked him about getting more timely financial data from colleges, because now it's effectively 2 years old before we get good data. The 2024 College Viability App has IPEDS data from 2022. That's the last year that's available from the federal government and from the colleges, because remember, colleges themselves submit the data to IPEDS. So I asked, hey Jeff, what about— what are your thoughts on colleges releasing quarterly financial statements just like most industries do? And he suggested that, well, he made a case that the deadlines for annual statements, Mr. Spears says, are unacceptable in light of how difficult things are in higher education. The federal government, he says, allows for a full 9 months before annual audited financial statements are required. So he made a— he gave me an example: reporting a $10 million loss for fiscal year '23, 2023, and that would be for the year ending, say, in the end of June which most do, uh, June 2023, could have easily been delayed based on the rules until March 31st, 2024. That's 9 months. Then the Department of Education, I assume, takes around 3 months to process those submissions. So essentially, Mr. Spears concludes that another fiscal year has ended before the full impact of the previous year is revealed and he doesn't even address issues of cash flow. It's just an awful system. So quarterly financial statements, I'm, I'm for it. I'm going to push for it. We'll see how likely that develops in the coming months and years. So here's the wrap. We have an industry with too many minivans, and that same industry whose finances are effectively hidden from the public because they're so long in coming out, effectively hidden from the public until it's too late. There will continue to be many private and many public colleges that do well both financially for themselves, which they should, and academically for their students, which I hope is their missions. But my, my deepest concern continues to be that there are many, many, many more colleges that will continue to do neither. I wish I was wrong. Those stories that I do on a weekly basis, both in this podcast, other podcasts, and the media that I post, and the data behind them strongly suggests that I am not wrong. Sadly. Until July 22nd when we do this again, hey, my name is still Gary Stocker. This is still This Week in College Viability. Thanks again for listening. If you have questions or comments, send them to gary@collegeviability.com. And let's get together and do this again next Monday. Until then, take care.