This Week in College Viability (TWICV) for Feb 26 2024

It's February 26th, 2024, and it's This Week in College Viability. Hi, Gary Stocker. Welcome back to the podcast. Thanks for making time to listen to the news and commentary that we share each Monday on This Week in College Viability. You know, it's good. The folks at Inside Higher Education must be following me. Their story last week about recent cutbacks and layoffs mimics the stories I have shared here over the past month or so. So to the folks at Inside Higher Education, thanks for listening. I'll be happy to continue to provide you content. Uh, second story, chicken in college. We're going to talk about an interesting partnership with Chick-fil-A and college here in St. Louis. Some concerns about a double dip enrollment recession. We'll talk about stagnating college completion rates. The good folks with a lot of challenges at Concordia University in Chicago have a dialogue with their students. It's still not a good scenario there. And then we're going to talk a little bit more inside baseball stuff with rating agencies on the outlook for higher education. But as always, let's start off with cutbacks and layoffs. I've got two for you this week. Wright State University— if you're listening, Inside Higher Education— Wright State University, I think that was on their list, um, going to suspend admissions to 34 degree programs. And here was the interesting part. This came from Higher Education Dive and Laura Szczolniak. They had, uh, Wright State University— this is in Ohio— had 54 students. Write that down: 54 students in 34 majors. Goodness gracious, I would hope they would cut those programs. And it's across associate's, bachelor's, and master's programs. Of course, the easy question is, what took so long? And if it took that long at Wright State, a fair question to ask is, is it happening At other colleges also where there are not nearly enough students for the majors they have, we're seeing consolidation on a weekly basis. That's this section that leads off each of our podcast episodes. It's just, I think, another indication of how far behind higher education is as a business in most colleges, maybe not all of them. Let's cut back to layoffs number 2. Here's a headline. Certainly there's a lot of angst over this. University of Toledo interim provost explains decision to cut programs. This is from February 13th, a Michael Sandlin from WTOL, Channel 11, CBS TV in Toledo, I presume. They're cutting back 48 programs at University of Toledo. And both of these are just two more examples, two more examples of why students for both public and private colleges should include checking out the number of programs and majors graduating from colleges you are considering. Let me say that again. It's not just enough to know that college is financially safe. There are many, many that are, also many that are not. But you wanna look at the programs, you wanna look at the majors. And there's data available for this in College Navigator. I'm even developing a comparison product And that's an early development that you can use to compare how many, for example, journalism's graduated from one college versus how many journalism majors graduated from another college. And that applies to STEM and literature and sciences and all that kind of stuff. So it's happening, it's gonna continue to happen. Page 2, another wave of campus cuts from, this is from Josh Moody at INSIDE Higher Education. Uh, I think I talked about this at the lead. The colleges that IHE included, Inside Higher Education included, are ones we've already talked about: UNC Greensboro, Toledo, Wright State, Baldwin-Wallace University, Marietta College, UNC Asheville, Concordia College— Concordia University, excuse me— Concordia University in Wisconsin, and the one that's in really trouble in Ann Arbor, Michigan. So it continues and it's going to continue to go on. These cutbacks and layoffs will continue across privates and publics. There will be private closures, there's probably precious few public closures, but I almost wonder sometimes if the publics aren't cutting back more than the privates. Uh, we'll have to keep an eye on that. So here's the Chick-fil-A franchisee. So Missouri Baptist University here in St. Louis, the headline reads, Missouri Baptist University partners with Chick-fil-A franchises. And this was from Bryce Chapman in the St. Louis Business Journal. On February 23rd, it's supposed to be a good project for the college. 56 students, the story reads, are earning some semblance of tuition costs covered by the fees that the Chick-fil-A franchisees, I think there's more than one, pay Missouri Baptist University. The report used the term tuition-free. To me, that implies they have no tuition costs. I'm a little unclear on how that works. And what percentage of students that works for. Certainly their tuition is subsidized in some form or fashion, but are they paying zero tuition? It would've been nice if Mr. Chapman could have followed up on that. And even Missouri Baptist, 'cause I look at these things with a jaundiced eye, listeners, regular listeners know Missouri Baptist University has had flat enrollment. They've had flat tuition revenue, tuition and fee revenue for the last 8 years. Their 4 and 6-year graduation rates are abysmal at 27% for 4 years, 39% for 6 years. The revenue and expense ratio in 2022 was decent at 102%. So they're making a couple of bucks. Their 2022 endowment, end of year endowment was less than $5 million. That's a hand-to-hand, paycheck-to-paycheck kind of operating environment. Their endowment per student was a measly $1,900 per The Missouri average was $32,600. So again, let me say that again. Missouri Baptist University endowment per student, FTE student, was $1,900 and change. The Missouri average for 43 private and religious colleges was $32,000, 16 times more than what we saw from Missouri Baptist. Be careful. Page 3, Rick Seltzer had a column earlier this month. I just didn't get to it in previous podcasts. That was talking about a double-dip student enrollment recession. Now, we know the first demographic cliff is effectively on us. There are now new projections according to Seltzer's article that suggest colleges could face shrinking pools of traditional-age students not long coming out of the enrollment cliff that we're facing right now. And the story goes on to talk about the, the enrollment cliff. There could be another one in the mid-2030s. And talks about the number of 18-year-olds hitting a high of 4.3 million in 2025 and never touching that again for this century, never touching 4 million again for this century according to the report in the Chronicle from Rick Seltzer. The bigger picture, and again, this is from Seltzer's article, I'm going to read to you, quote, read to you from the article. Don't be surprised if higher education's third rails— plural— third rails— tenure modifications, shared governance changes, mergers, and the like— get more serious consideration if this double-dip enrollment decline scarcity materializes. Now, I've said this for a long time, and the first phase that we're in right now is closures. The second phase will be when those colleges who find a way to survive this demographic cliff and this series of enrollments and the series of closures, find a way to get together to make mergers. I don't like mergers, but consolidations, same thing, in the next phase that starts, I think, here in a couple of years. So it's going to change the market, as I have said many, many, many times. Always adjust. We're going to get together for this podcast 5 years from now. We're going to look back and say, hey, back in 2023 and 2024, maybe 2022, we were in the middle of it and we didn't know it because we are in the middle of it. We are in the middle of serious, serious consolidation and we're going through the process right now of that shaking out with college closures now and consolidations in the coming years. Page 4, let's— student registration for fall 2024 postponed until late April due to curriculum changes. Now we talked about this last week. And there are many colleges who are simply saying, hey, we'll just delay the decision date. Lazy, dangerous, because what happens if the feds can't deliver the FAFSA data in March? How long are they going to delay it? But this one in particular focuses on Columbia College in Chicago. They postpone the registration— this has nothing to do with FAFSA— until late April. They had strikes from adjunct faculty last fall. Their finances are not good. And the fact that they would come out and say, hey, and this is from Vivian Ritchie, who's the assistant campus editor at the Columbia Chronicle, that's an internal paper at the college. This is not good. They are trying to scramble to be able to decide what classes they can offer essentially on the fly. And that ties into the second story that I want to talk about for Concordia. And the headline reads— and this is from, again, an internal meeting— Concordia leaders open dialogue with students and employees through town hall meetings. And leadership, 5 or 6 folks in the leadership team at Columbia University for both Wisconsin and the one in Ann Arbor, Michigan, met with all these folks— students, employees, and faculty— here in the last couple weeks. And, oh. And in a similar vein, I want to talk a little bit about the challenges at Concordia University. And we had this on the podcast last week— Concordia University, Wisconsin, and Concordia University in Ann Arbor. I've shared the data before. It's not good in a lot of reasons. It's awful at Concordia Ann Arbor. Not quite as awful, but not very good at all at Concordia, Wisconsin. So here's my advice to the faculty and staff and students and families and anybody else who is any form of a stakeholder at Concordia University, either one of those two, get a copy, get a copy of Jonathan Nichols' 2022 book, Requiem for College. That's Requiem for A College. It is the history of John Nichols' tenure at St. Joseph's College in Rensselaer, Indiana. It's his history, but you know what? It's the future of Concordia University, Ann Arbor, and probably Concordia University in Wisconsin. Nichols does a fabulous job of stepping the reader through the emotions that led up to the closure, which I think is happening at both Ann Arbor and Wisconsin. And more importantly, he does an after-the-fact exceptional analysis of what the leadership at that college did not do and did incorrectly back in the 2016-2020 timeframe. So get that book, Requiem for a College. It's available through a lot of sources. Read it because if you're Concordia, Wisconsin, or Ann Arbor and many other private colleges, it's happening to you as well. And just some notes from that Concordia leaders meeting they had at both Wisconsin campus and Ann Arbor. The leadership mentioned deferred maintenance a couple of times. Many colleges have serious deferred maintenance issues. I make the case there's a safety tragedy waiting to happen out there. They made the note that 90% of the net tuition revenue at Concordia College Wisconsin goes to salaries. 98, that's 9-8%, of the net tuition revenue at Concordia Ann Arbor goes to salaries. C100 minus 98, that leaves 2% for everything else. The college, again quoting from their internal story, they want to have a desire to be ethical with their colleagues and students. That's fine. I'm going to make the case it's a day late and probably lots of dollars short. That should have happened a long time ago. And buried in the data they share, we are overstaffed— in quotes— we are overstaffed for the number of students we serve. And at the end of their internal document, they note that if there was a merger or consolidation opportunity, it requires something in the order of $50 million— that's 5-0 million dollars— over 8 years. And in addition, cash for capital for dorms and a field house, additional cash for recruiting and marketing and all those kind of things. They waited too long. They can join the list of colleges and universities that waited too long to act. I don't have high hopes for either of them staying with their current business model. And back to Columbia College. So we're talking Concordia and Columbia, so bear with me as I stumble between the two. There was an article just came out over the weekend And again, this is an internal article from the Columbia Chronicle, but the focus point was on students, and it references a couple of students. I'm not going to name them even though the story does. There's one student from Chicago who plans to major in photography, and this person got into a lot of schools, but Columbia College in Chicago was their choice. And the first time this student visited the campus was during the strike, and the student made note of the fact that there were people protesting So something that she— that the student decided to look into, it just made that student think, rethink a little bit about whether they wanted to go to that college or not. Ultimately, the student decided they did not want the strikes to deter them. They wanted to go— the student wanted to go to Columbia College in Chicago. Still staying with the article, many of the admitted students said the location of the college drew them to apply, and that's fine. Most college students stick reasonably close to home. In metropolitan and urban areas, that probably is even more so. And one student reports that reported in the story or was quoted in the story of saying, I think it's a really interesting city, Chicago, of course. And I was very impressed with just the school in general. This student's parent who was with him at the student registration event, new student event this recently, The father said he didn't have any concerns about Columbia College specifically, but mentioned he was worried about the cost of college in general. Columbia College is raising their tuition by 5% for the 2024-2025 academic year. Full-time tuition will be $32,000 and change. Figure the college would discount that somewhere in the vicinity of 50%, like most colleges do, so about $16,000 and change. For most students, and, and the discount rate is ubiquitous everywhere. But interestingly, this story also notes one of the issues that college is now trying to address is that tuition discount, 50% plus, I'm guessing, because it's about bringing in enough revenue, you think, to cover the costs of education. Here's why this is scary. I'm going to share the 2022 slash line. It's 40/47/22-/-2. 40% of Columbia College students, undergrad students, graduate in 4 years. It's 40% in 4 years. The second number, 47% graduate in 6 years. Tragic. Their admissions yield is 22%, which isn't in and of itself bad, probably because of the urban location that they're in. It's not a great number, but it's not a bad number. And the negative 2, the minus 2, is the change in their admissions yield over the last 8 reported years, all part of the College Viability app that we provide. That's not a good slash line. It's not a good slash line at all. And the minus 2 admissions yield should scare the college. The 4- and 6-year graduation rates are just awful. And here's what's going to happen. A story I've shared with many. In April and May, there will be many students in colleges across the country, not just in Chicago or Illinois. They'll be sitting at the kitchen table or the family table, whatever. And they'll be trying to decide which college to select from all the research, all the trips they've done, all the work they've done. And too many Too many of those families will choose a college that I can tell you today cannot reasonably be expected to survive with the financials, the outcomes, and the enrollment they have shown over the last 8 or more years. And there will be, there will be a tipping point. It's not there yet. There will be a tipping point when college finances will be front and center in family discussions and Columbia Colleges of the world won't be part of that discussion. But the sad part is that there's no way to predict how long it will be until that tipping point is reached. And then lastly, I want to do a little bit of big picture. And this is from Jason Sessman, who's the managing director at Kauffman Hall. And the headline reads on the article he wrote, Takeaways from our conversations with rating agencies on the outlook for higher education. Now, there are a couple areas that Mr. Sessman focused on, and the first one was growth strategies. And he talked about tuition repricing was one of the three things I want to talk about. And tuition pricing, um, he noted that there could be a psychological element that limits the effectiveness of this strategy. What has happened here in the last couple years is colleges, colleges will take that $40,000 list price and discount it 50%, so the price is somewhere around $20,000. And some colleges are repricing their list price tuition— stay with me— from $40,000 to $20,000, effectively incorporating that 50% discount on the top in the hopes of getting more students to apply, be accepted, and enroll at the lower discount rate. That has, in the limited history that has been happening, had short-term impact. But the challenge becomes that the tuition discounting is so pervasive across higher education, mostly on the private college side, that the colleges have difficulty keeping that $20,000 list price tuition stable, they end up starting to discount from the lower list price. And Kaufman Hall and the reports from some of the major rating agencies, S&P Global and others, Fitch's and others, say that's not good. The other thing that the assessment talks about is athletic program expansion. We've talked about this on the podcast. The panelists from Jason Sussman's interview agreed with very, very few exceptions, athletic programs. I'm reading from his article. With very few exceptions, athletic programs are a recruiting tool, not a revenue driver. Now, in some ways they're one and the same, but it's a way to get more students on campus. It doesn't really net out, I think is what Sussman is trying to say, because you've got the costs associated with that, that athletic program, the salaries, the travel, the insurance, all that goes with it. And, and Sussman says because athletics is typically a loss leader, the rating agencies— we talked about Fitch, S&P, and others— are going to be interested in both whether enrollment growth continues and expands enough because athletics is a bigger draw or not, and whether the athletic programs, the current or even the new ones started, are financially sustainable over a long term. He also makes note of the fact that athletic programs are very difficult to unwind once they've been established, and we've seen that in many cases. And then lastly, he talks about mergers and acquisitions. Now, there's very few acquisitions in higher education. Cash is rarely enough quantity to make acquisitions a purchase, a viable opportunity. But they note the fact— assessment notes the fact that continued operational and financial pressures at the lower end of the rating system, those colleges that are in financial trouble, may lead to some increase in merger and acquisition activity. He also notes that higher education is a sector that does not do mergers and acquisitions very well. And he goes on to offer some reasons, including the Department of Education has made it more difficult. And he concludes that all these factors pose serious hurdles for institutions that may want to seek a merger partner, consolidation partner. And like we have seen, by the time these hurdles have been cleared, financials or facilities at colleges in trouble may have deteriorated, enrollments may have further declined, and the institution may no longer be an attractive candidate for merger consolidation, or he uses the word acquisition. This just reinforces what we're seeing. Closures, more closures, followed, followed by loosening of the merger constraints to equal more consolidations. Tuition resets, problematic. Adding athletics, problematic. Short-term mergers and consolidations, problematic. Closures followed by more closures followed by mergers and consolidations. So remember, the 2024 Private College Viability App is out. The public college versions will be available sometime in, in March. I look at the data daily. I look at the comparisons in the app many times per day. And college supporters can proclaim history is on their side and very few colleges will close. I will grant them the historical trend, but that's just not what the data shows. Yet almost every other industry in the history of our nation has had substantial merger and acquisition, merger consolidation and acquisition in their, those industries' lives. And I'm already hearing anecdotal stories from those close to colleges and college leaders and families of students that the financial health and viability of college is increasingly— the financial health and viability of college is increasingly at the front of the minds of consumers. The series of College Viability apps is now available. Of course, I'll leave a link to the 3 products available for 3 different stakeholder groups in the show notes. And I suggest we get together again and do this next Monday. Gary Stocker for College Viability. We'll talk next week.