This Week In College Viability (TWICV) for September 16, 2024

Welcome to the September 16th This Week in College Viability podcast. Hi, I'm your host Gary Stocker. It is still summer in St. Louis, highs in the 80s, upper 80s most of this weekend. With any luck, the St. Louis Cardinals, hometown favorites, will be put out of their playoff hope misery sometime this week, and Colleges continue to announce positive enrollment stories. New enrollment record, biggest class ever are just some of the typical headlines, and that's fine. Colleges can spin the vague enrollment measure any, in any way they want, as much as they want. But if you haven't discovered Matt Hendricks' Perspective Data Science research tool, you need to do so. It quickly and simply visualizes 7 acute financial indicators from the year 2016 through 2023, way ahead of IPEDS and other statements. And Matt also created a measure that lets users compare their colleges, their private college's finances, to a set of 9 recently closed private colleges. Always interesting. Just looking at the 7 visualizations can give you a quick read on any private college's financial health. And viability. And what I have discovered is that the true financial health of a college is nowhere close to being accurately represented by its enrollment numbers. And of course, I'll post a link to Matt's research tool in the show notes. And on the show today, this week, frequent flyers Quincy University and Columbia College are back with us. I have missed them desperately. Rick Seltzer's daily briefing at the Chronicle has some new and updated concerns about student debt, and another really high-quality college, private college, has serious financial issues. We'll talk about all aspects of that. And I, I asked the question, are we making it too easy to get accepted into college? The Common App has a new direct admit program, and I have some concerns. We'll talk about that. And we're going to conclude the show with what I think is a new story and maybe not out there prior to today. Are colleges price fixing? Yes, that's right. Are colleges price fixing their tuition by using private financial information in their algorithms? And if that's not a good teaser, I don't know what it is. But hey, let's get started. Layoffs and cutbacks. Columbia College considers cutting 18 underperforming majors from the curriculum And this is from NBC 5 television in Chicago on September 13th. And the college says the move will ultimately reduce and consolidate underperforming programs. And the number is about 40 programs. I don't know what the headline means. In hopes of helping, helping the school return to a healthier financial position. Finding a dime on the street might, might accomplish that. They say the program array we currently offer cost too much and we must reduce those programs to eliminate some of those costs. The message went on to say that the school offers too many programs with a complicated pathway to complete a degree. Decluttering program pathways will reduce costs and improve student retention, the announcement said. Okay, I can't and won't argue with logic. And I know I'm commenting from the back seat, I know that, but I've asked it before, I'll ask it again: why wait so long? And the college closure drama of the summer has been the University of the Arts in Philadelphia. And the headline in the Philadelphia Inquirer on September 13th— always a good date— says UArts, University of the Arts, has filed for Chapter 7 bankruptcy to liquidate its assets, whatever those are, probably buildings. There is some hope from the story in the Inquirer that this action will finally lead University of the Arts to tell us why it had to close. They have been so vague, so it's so sad, not just that they haven't been up front, but the trauma that has caused, caused faculty, staff, students of course, and their community as well. Page 2, Rick Seltzer's daily briefing newsletter at the Chronicle last week is the source on this. And the headline reads, concerns continue about student debt. I'm going to read you 3 observations Eric Seltzer shared. Only about half of all borrowers were current on student loan payments as of January this year. This was after the pandemic pause was expired. And the information here, the information here is from the GAO, the Government Accountability Office. Number 2, balances had actually increased For 57% of the loans after 6 years— that's right, increased for 50% and 57% of the loans after 6 years of repayment. And those were for loans that had started between 2009 and 2013. And this one will get you: college dropouts with debt. College dropouts with debt are worse off than those who never went to college, economists writing for the Federal Reserve concluded last year. Now, this, this less-than-ringing endorsement of the college experience, I think this is for those on the fringe, those marginal students who can't decide whether they want to go to college, can't commit to 4 years, whatever. This is not, this is not going to increase the number of those students who consider a college education. I can only hope and beg and plead that colleges recognize the financial bind they handcuff students with when they can't graduate them. And I'll remind you yet again that less than 50% of undergraduate students, less than 50%, graduate in 4 years or less. An absolute tragedy. And this continues to beg the question: are too many colleges selling enrollment— get those students in the door, get those tuition payments— instead of focusing on graduation? And we'll talk more about that later in the podcast. And another frequent flyer, Quincy University, enrollment is down 3%. All right, credit they get for announcing that. The number of returning full-time students largest in 7 years. That's nothing but spin, and that's fine. I'm sure it's accurate. And the source on that is the Muddy River News. And for those of you that don't know, Quincy University is on the Mississippi River, also known as the Great Muddy River, I think. And this is on September 14th. And all I want to do is I'm going to go back to Matt Hendricks' Perspective Data Science and his 7 visualizations. And remember, his visualizations compared any college you search on— I've got Quincy University is what I did on this one— to 9 private colleges that have recently closed. And the data is from 2016 to 2023. At Quincy University, the net income margin maps really closely to those 9 closed colleges. The cash flow at Quincy, while bouncing all over the place over those 7 or 8 years, trends lower. Cash flow trends lower than those closed colleges. At Quincy University, the ratio of the end-of-year endowment to expenses— so it should be a high number— trends a little bit better than the closed. So they've got a couple bucks in the endowment, especially relative to expenses. The percent of endowment— that's the percentage of endowment used for expenses, also known as the endowment draw— is consistently higher. And what this means, that at Quincy University, Quincy University, they're using their endowment as a piggy bank to be raided to help keep the lights on, make payroll, and pay expenses. Their unrestricted net assets— unrestricted net assets to expenses. And again, the higher the number, the better. In the past 5 reported years, Quincy trends lower at a faster rate than closed colleges. Draw your own conclusions. With two more left: cash and cash equivalents on financial statements. Two expenses, and again, the higher the number is better. In 2021, I'm just pulling a single data point. In 2021, at Quincy University, they had 4.5 cents, 4.5 pennies in cash for every dollar in expenses. And ladies and gentlemen, boys and girls, it trended downward from there. And then finally, the ratio of total liabilities to revenue. In 2023, Quincy University had $1.69 in liabilities for every dollar of revenue. Closed colleges, those 9 closed colleges in 2023 had $1 in liability, and liabilities per dollar arose. Again, I could have picked one of many other private colleges spending positive enrollment numbers or less than great enrollment numbers— Quincy at least was honest— into, into the similar financial train wreck story. And I, I understand, I understand positive enrollment is a warm and fuzzy It's a good story. I had a reporter tell me that last week. But let's look at it from a human level. Quincy University has about 1,000 students, depending on how you count. There's something called full-time equivalent, which I use, versus total enrollment. They're not the same thing. The total enrollment is always going to be higher than the FTE. The financial data I just shared is scary stuff. None of it's good except one. One of them was higher than that, than the closed colleges. So I have to wonder, and I hope you do too, what will the president of Quincy University and its trustees say to their faculty, staff, and students and their families when their last dollar has circled the financial drain and someone is assigned to turn off the lights? Page 3. Talladega was in the show last week. Talladega County leaders— they haven't made the frequent flyer list, maybe they're striving to do that. Talladega College leaders respond to financial tumult. This historically Black college has suffered from enrollment declines and mounting debts, but campus leaders say they're working to restore financial health. Again, the why now, why wait questions. And we had Talladega, like I said, on the show last week. With a public declaration they weren't gonna close. So let's one more time, and I won't do this anymore for Talladega, at least for a while. Let's go to the data. From 2015 to 2022, their 4-year graduation rate averaged around 25%. For every 100 students that started at Talladega College, only 25 graduated from Talladega. And again, the qualifier, I know some moved on, graduated elsewhere. Their full-time enrollment was down 31— not a big number, but that's still down over 8 years. That's not good. They had a decent increase in graduate students, up 69. The total expenses were up $3 million in the face of declining enrollment, and their endowment is, is not even college couch money at $3 million. Their tuition and fee— this was interesting, I talked about this last week— the tuition and fee revenue was up $7 million, and it it doubled over the course of those 8 years. I don't understand where that's coming from. And their endowment per student, per FT student, is only $2,000. Really, really low institutional support expenses. And I harped on this last week— institutional support expenses are 47% of total core expenses. I've never seen that before. Academic support at Talladega is only 4%. Of every dollar. And I don't get to the type of story that I want to share next, and this is— it can only be categorized as a high-quality college. Ithaca College, exceptional graduation rates. I'll talk about in a second. Ithaca College unveils plan to stabilize enrollment and manage budget shortfall, manage budget shortfall. And this was on September 12th, last Thursday, and the source is Finger Lake One and of course I'll post the link in the show notes. And again, this is unique because Ithaca, Ithaca, Ithaca graduates students. It graduates a really high percentage of its students. But Ithaca College President Lijuan Terry Cornish had outlined a comprehensive strategy to address enrollment and budget challenges. The college is facing a shortfall in first-year enrollment this year with numbers down about 200 below target. The president, I presume Dr. Cornish, indicated layoffs are not anticipated and a more detailed plan will be shared later this fall. Vice President of Enrollment for Enrollment Management, Rock Hall, introduced efforts to engage prospective students earlier, including expanding outreach to high school sophomores and freshmen. The college aims to foster, the story concludes, with stronger connections to an extended recruitment campaign and a new parent engagement tool. President Cornish assured the community that the college is prepared to meet these challenges together, emphasizing with pom-poms flaring, I'm assuming, that the best is yet to come. And to the data we go. Again, a high-quality college. There's no other way to categorize this. Yet they still face challenges. From the IPEDS data, 2015 to 2022, FTE enrollment is down 1,600 students. That's 25% down. Tuition and fees decreased $30 million over that same period, down 20%. The graduation rates that I've said are so good slashed at 69 and 72. 69% for 4 years, 72% for 6 years. That's just exceptionally good. Their endowment is approaching $60 million, not great but above the $50 million threshold that we have. And this is what they missed. If there was a sin committed, a financial sin committed, expenses were down $23 million. They knew they had problems. And this is again over 8 years, but the revenue was down $115 million. Oops, again, a high-quality college that graduates students is really struggling financially. And even looking at Matt Hendricks' Perspective Data Science visualizations, Ithaca is quite strong on cash, and with the exception of revenue relationships to expenses, they look okay. And again, why? Even colleges as, as high quality as Ithaca College, why are they waiting so long to pull the financial fire alarm? Let's take the podcast in a new direction. The Common App announced last week a 2024-2025 direct admission programs with 117 colleges and universities. Beginning this month, first-generation and low- and middle-income students who are college-interested— I have no idea what that is— who are college-interested will receive proactive admissions offers. New to the direct admissions program this year is the ability for students to regularly see, learn, and act on their admissions offers in the application, in the Common App. Common App Direct Admissions also includes outreach and resources to counselors and families with students receiving direct admissions offers. And that's the qualification here. All right, you admit them, you're making it easier to admit them, but even with merit aid and Pell Grants, is, is this a group of students that can afford college without, without substantial loans? Can they graduate from college? Are we creating— I guess, are we creating first-year enrollment numbers? We've talked about that the last month or so with colleges saying we are great with enrollment. Are we creating too many students with a focus on admissions and enrollment and not on graduation? Now, the Common App are removing friction from the application process. That's good, no issues. They're ignoring the ability-to-pay component of the college admissions process. Are we creating a population of marginally qualified high school students who can't afford college, who don't have the academic skills that should have been taught and learned in high school? And if a college is a part of the Common App process, and there are many, is, is, dear Common App folks, is there any chance There could be a requirement that they, that they at least graduate half of their students after 4 years, so we at least have some semblance of focus on graduation and not just on admissions and enrollment. And, and this is not a bad thing. This is not a bad thing that Common App is doing. It just seems to be front-loaded with no consideration given to a student's academic capabilities or even financial resources. In my mind, colleges have historically shown no or little concern for creating debt for their students. I believe there is a great risk that without full consideration of all of the consequences of college admissions, too many more students will start but not complete college and leave with the same debt issues as millions and millions of others. Page 4. The headline is kind of confusing. It reads, The Real Page Suit in Higher Education. So some background is important. This is from CTAS on September 14th, and this is the newsletter they have, so I won't have a link to this. But the RealPage, one word, RealPage suit and higher education, you can search on that. Here's what the story leads with. In March of this year, 2024, two attorneys at the Federal Trade Commission, Hannah Garden-Monheit and Ken Merber, released an important piece, so says the author, entitled Price Fixing by Algorithm is Still Price Fixing. The authors make a number of points, but one that stands out is price deviations Don't immunize conspirators. The authors go on to say that some things in life might require perfection, but price-fixing arrangements— and bear with me on this— price-fixing arrangements aren't one of them. Just because— now listen— just because a software recommends— college folks— just because a software recommends rather than determines a price doesn't mean it's legal. Setting initial starting prices or recommending initial starting prices can be illegal, say the authors, even if conspirators deviate from the recommended prices. Now, the source of this article was landlord pricing. RealPage was a company with a software algorithm tool called Yield Star, Y-I-E-L-D Star. And I'm going to quote US Attorney General Merrick Garland directly, and again, this is in the context with landlords and rent: Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law. Now let's quickly move from landlords to higher education. Katherine Hill uh, is an author, is part of the author, I believe, of the story, readily admits that the current financial aid rules allow colleges to charge higher-earning families more. We know that from, from history research and just our own knowledge. But justifies this— charging higher-earning families more justifies this as a way to reduce college costs for lower-income students. All right, we all know that. This may— she goes on to say— this may be desirable But is distributing private information to achieve this— is distributing private information to achieve this legal? The article goes on to say suits could conceivably be directed at colleges themselves, accusing them of price fixing and collusion on their tuition pricing, causing damages to millions of families. And colleges can make the defense, the article says, that the activity was effectively sponsored by the Department of Education. Okay, fair enough, they can. Two senators, Minnesota Democrat Amy Klobuchar and Utah Republican Mike Lee, both attorneys, co-sponsored 2021 legislation on antitrust venues. Klobuchar in particular has been active in this area, especially some legislation she has started. Now, This is really, really early in the process, but you can envision the trauma this can cause higher education and other industries if it moves forward. And it's a story I know I'm gonna be following along, and I assume with every other higher ed entity in the country. I wanna wrap this podcast episode with the same theme that I started with. Colleges spin. Nothing inherently wrong with that, even though I can make the case much of it is misleading because it paints a one-dimensional and probably misleading picture. Too many colleges are hiding their financial weaknesses. They're hiding them until it's too late for faculty or students or alums or the community to have any recourse other than to scramble. And, and that's why I'm here every Monday through Sunday, not only on the podcast, but every Monday through Sunday. I'm working to try and provide folks with a more comprehensive review and analysis of the financial health of private and public colleges. Almost all of us are familiar with the fact that higher education, the market, is shifting under our feet, and there are precious few people willing to clearly point out the financial and even operational weaknesses of individual colleges. Most people paint the macro picture. I paint the micro picture, college by college. Many indict the industry macro. Hardly any, hardly any do the same for individual colleges. And so with that, I will continue to be your quality control source You're a quality control person for the financial health and viability of individual private and public colleges in the United States. Until next Monday, I'm Gary Stocker for College Viability. Thanks for listening. Let's do it again next Monday.