This Week In College Viability (TWICV) for May 20, 2024

Hey, it's May 20th, 2024. Time for another episode of This Week in College Viability. Hi, it's Gary Stocker back at the College Viability microphone again. I don't know that we are going to be able to catch our breath this summer. Layoffs and cutbacks, closures continue in there, and, and there's little reason to believe that will change anytime soon. It's a tough, tough higher education market out there. But hey, the headlines for today: we've got 3 colleges in the cutbacks, layoffs, and closure list. Uh, actually, another closure happened late last night. There are 3 Missouri private colleges in Southwest Missouri that don't respond well to being on a college watch list. We'll talk about that. The abrupt closure of Wells College Lots of new news on that, and in general, that's just plain bad for the industry because it was such a short notice closure. Student loan interest rates for both undergraduates and graduates are going up on July 1st. I'll give you the rates. And a New York representative introduces a bill to establish rules for colleges seeking to close. Sarcasm alert, that always works. So to the layoffs, cutbacks, and closures, the University of Southern Maine announces layoffs that take effect on Friday. Now this is interesting. This is from John— I'm sorry, from Joe Lawler in the Portland Press Herald in Maine. And this announcement came on Tuesday, May 14th. The closure— I'm sorry, the closure— the announced layoffs, not the closure. The layoffs were to take place the following Friday. And I'll read to you a quick line from the story. The University of Southern Maine announced Tuesday that it will lay off an unspecified number of employees. This is 3 days later, folks, it's gonna happen. The letter from President Jacqueline Edmondson announcing the cuts did not give an exact number. Oh my, and university officials would not say Tuesday how many positions are being eliminated. The one stat I have is enrollment was down 7,000 in 2019 and is down 10% or about 700 students. That's some serious cut in tuition revenue. Delta State, this is in Mississippi. The Delta State president proposes cutting the budget along with multiple departments. Nothing new, these stories are happening regularly as we report here on This Week. This came out of Caleb Sailors from the SuperTalk Mississippi media. This is on May 13th out of Cleveland, Mississippi. Delta State University president Dr. Dan Ennis In a memo penned for public consumption— interesting— the strategic changes that could be implemented include— this is at Delta State— include cutting more than $6.1 million from the fiscal year '25 budget, with an additional $1.5 million in savings to be realized by the end of fiscal year '27. Okay, that's fine. The public university plans to discontinue several programs that have consistently experienced low enrollment with half of those enrolling fewer than 10 students. These changes will consolidate 21 majors with low enrollments into 4 new degree programs to better serve students, according to officials. And this is from President Dan Ennis at Delta State in Mississippi. Well, that's all fine, but why do college leaders continue with their day late, dollar short business model. These low enrollment classes they talked about in the announcement would have shown that pattern long before May of 2024. Why are we acting now? Why are they acting now? This is— I think this is one of the reasons, one of the many reasons it's difficult to have confidence in almost all college leaders. They have so many, so many stakeholders to keep happy that they can't manage the business properly without in some form or fashion alienating some group or groups. Who's responsible? Certainly college leaders and their boards, absolutely. But let's not let the faculty off the hook here. Their intensely department-procure focus and inexcusably slow decision-making processes, I believe, are major contributors the financial and operational issues public and private colleges are facing. Let's go to this— the great state of Washington. Budget cuts leave Whitworth University— Whitworth University students concerned for their futures. And this is written— this is from Peter Choi and Vincent Saglimbeni from Spokane, Washington, KXLY. I can't tell if that's radio or TV. The university said that going into fiscal year '25— so I presume starting here sometime soon It has a budget of $68 million, but nearly $3 million, about 4.4%, in the red. And it's evaluating— it's now evaluating academic courses and employment. Again, I argue daily, dollar short. Now, no other details are available. All right, that's— we see that all the time. And my read on this is this is probably an overreaction story by a local media source. You know, the 4.4%, while noteworthy, is Not like what we've seen in other places, but the story is consistent with a regular stream of layoffs, cutbacks, and closures that I report on each and every week. This happened Sunday. I'm recording this on Monday, May 20th. The University of St. Catherine's in California announces sudden closure, filing for bankruptcy. The university president and founder— interesting— Frank Papatheofainis Says the closure is due to financial struggles. Okay, the last day is May 18th. Well, the story in the San Diego Union Tribune was on May 19th. The last day was May 18th. That's really, that's really short notice. The story comes to us from Tammy Murga and Gary Robbins. And just like Wells College, which is the poster child this week, this month, for short college notice closures. There's no notice here. And I— this is going to come back. This is going to come back and haunt other private colleges, many other private colleges, when the market reaches some sort of no-trust tipping point. When the St. Catharines, the Wells, the St., um, the colleges in Massachusetts— now I've lost the name of it— um, close on such short notice. And too many are doing that. There's just no excuse. Page 2, Southwest Missouri University's on new reports watch list. Now this original story came out of the St. Louis Post-Dispatch, I think it was last week, and this one comes out of KY3 TV. Paul Adler wrote this, and the headline, sub-headline means Scholarship Foundation of St. Louis puts 37 Midwestern colleges in danger of closing. Now I went to the Scholarship Foundation of St. Louis site and I looked at their criteria, and effectively they're using the Forbes financial grades for the last 3 or 4 years as, as, as the focal point of coming up with the watch list. Now, they're entitled to do anything that they want. The Forbes list, while, while valuable in some regards, is not as thorough as, for example, our college— my College Viability app. But here's what's coming out of this. I'm gonna— there's 3 colleges where Drew University Evangel University and Southwest Baptist University. So the jury response to this story— and again, 3 colleges are on the watch list, this is out of Southwest Missouri— the jury response was abysmal, all over the place. It didn't address the facts. I, I don't even know if that was their full-time PR person or they hired somebody to write the response. The Evangel University response, they made note that they had $50 million in donation, you know, donation increase recently, and that's positive. But I did a little digging on this, and that, that $50 million doesn't show up in the IPEDS data that's submitted by the colleges to the National Center for Education Statistics. And that would have been through 2022. So it's possible that they have gathered the $50 million, but I've got a little jaundiced eye viewing on that. And then Southwest Baptist cherry-picked their responses. They cited things that only they can control and not actual market comparisons. Now, all three of these—Drury University, Evangelical University, and Southwest Baptist University—from 2015 to 2022, 8 years, like I always do in the College Viability App, each of the three had decreased full-time equivalent. That's the standard, the measure that we use, enrollment. Decreased enrollment, decreased tuition and fee revenue. Each of the three, as I've shared before and I'll share again, That, ladies and gentlemen, boys and girls, is a trend. Don't tell me that something that has developed as a pattern, as a trend over the last 8 years, can be fixed today, tomorrow, next month, or even next year. And just some sidebar notes, and again some of the extra research that I did. Drury has a decent endowment of the three. It's at $96 million, but they did draw it down $7 million in 2022. And drawing down the endowment is rarely, rarely a good thing. And in the face of declining enrollment, all three had that, only Drury decreased its expense base. Give them credit for that. Evangel has had substantial growth in its graduate programs, but both Drury and Southwest Baptist were down. Southwest Baptist University admitted 100%— every applicant they had in 2022 was admitted. And you've heard me say before, their new enrollment motto must be "Have heartbeat, will admit." And Drury and Evangel continue to engage in aggressive tuition discounting. Nothing wrong with that, but giving away the store to get students in the door is not going to be a long-term solution. Southwest Baptist tried to lower their unfunded tuition discounting, so they're trying to balance that a little bit. Let's move on. Sorry, Wells College I think this is going to be a bigger story as time goes on. And this is a story from Meredith Kladner in the Hackinger Report. This is on May 18th, and the headline reads, "The Story of How One College Abruptly Closed and Kept Everyone in the Dark." And then a quote from a student looks like, "You don't think your school is going to close down when they've given you a lottery number to choose your room for next year. So the story on April 29th, just one week before finals, Wells College announced it would close. That's been all over the news. But Heckinger reports and Meredith Clawdon reports there's mounting evidence that Wells administrators knew for months that the college would close or was likely to close, even as they made public assurances public assurances that all was well. So two things in particular the story notes: they were making teach-out arrangements, which of course is when a college arranges with other colleges to provide students with continued courses to complete their degrees, and they were also negotiating a zoning change to the college's land in the village of Aurora in New York State. This is a quote from the story, and this is from Anna Anderson. She's an attorney at the National Consumer Law Center, and I guess a Wells alum. What concerns me, Anna Anderson said, is there's no accountability. The students, she goes on, were given just days to pack up and leave. And if an institution, she concludes, if an institution that's disrespected, all right, her opinion, can do something that's so horrible, and this is important, what's to stop others What's to stop others from doing the same thing? Think about that. So Wells President Jonathan Gebalter, or Gibraltar maybe, to the Village of Aurora leadership, and this was— I don't see a date on this. Let me assure you, Wells President Jonathan Gibraltar said, let me assure you that we are accepting enrollment deposits for the fall semester. Our fall to spring retention rate for students is higher than it has been in several years. I'd sure like to define several. We are hiring staff and we are developing an operating budget for the next year. And he concludes with, we are full steam ahead. This is a college that just announced its closure. What kind of credibility does Jonathan Gibraltar have as the president of Wells College? Now, these leaders at Wells College are dancing. Obviously they have been dancing. And if we're in their shoes, maybe we are dancing around the details also. Maybe they have that fiduciary responsibility that they have to honor. But who's— as I've said many times— who's the fiduciary for the students and their families? Who's the fiduciary for the faculty and the staff? But there's a bigger takeaway, bigger, much bigger takeaway. How are students, how are students, faculty, staff, and other communities with financially distressed colleges, how are they going to be able to continue to trust their local colleges when they read about, hear about stories of such short-notice closures like Wells College and many, many others? This is just the most recent one. And again, you know, that's where I go back to my College Vibe viability series of apps. Call it the reverse FAFSA, where parents and families and faculty and staff and others can learn about the finances of the college instead of the college learning about the student's family finances with the FAFSA. It's also— you can also call the College Viability app the Kelley Blue Book for colleges. Good folks at Kelley kick tires on cars and report on them. At College Viability, we kick tires on finances and enrollment and graduation rates. We look at tuition and fees, we look at the poor graduation rates, we look how much unfunded grants merit aid colleges are giving away, and it's all tracked over the most recently reported 8 years. That, ladies and gentlemen, good or bad, will always provide a trend. And back to the Wells story for a second. Each of the data points that Wells President Jonathan Gerbalzer shared are almost certainly true. He didn't actually give us the data points, so I'm taking him at his word. That's probably dangerous, but they are all internal measures, or they're controllable solely by the college, and they really mean nothing. They mean nothing in the context, the overall context of a college's financial health. Thus the dancing. So folks, be very careful Be very careful about accepting unchallenged statements from colleges, especially if they're written. They are almost certainly spun to make them look good, and there's nothing wrong with that, we all do it. But that's why there's a market for what I've created in the College Viability app, to let consumers check on their own on the comparative financial health and viability of both public and private colleges. And reporters, I'll do it again. I've done this so many times. You need to email me and get a courtesy link. I'll send you a freebie to the College Viability App. Don't let these college leaders continue to pull the wool over not just your eyes but the eyes of your readers and your community, and the communities and your community as well. Students and families, here's a solution. Here is the solution. The first item on your college checklist should be a comparison of each college's financial health and viability. Use the College Viability App. It's $29. After you're comfortable with the financial comparisons, with the enrollment comparisons, with the graduation rate comparisons, then, then and only then, start your list of a more serious evaluation of majors and the location of the college and faculty, tuition, amenities, and much more. Page 3, the Education Department announces the highest federal student loan interest rate in more than a decade. The undergraduate rates are going from 5.5% to 6.53%. These are all on July 1st of this year. The graduate rates from 7.05% to 8.08%, and the Parent PLUS up to 9.08%. It's like the government is working hard because they monopolize loans. It's like the government is working hard to disincentivize students, to say, hey, let's make it really expensive so they don't go to college. And so let's go back to Wells, but a different angle here. Following the Wells announcement There's a bill in the New York legislature that would set rules for college closures. And this is a May 16th story by Ed Vivenzio from the Finger Lakes Daily News in New York State. And here, let me read from the story. In the wake of Wells College closure announcement, State Senator Rachel May has introduced a bill that would establish rules for a college or university seeking to close. The Senate bill would authorize or direct— right, authorize and direct the commissioner to establish rules and regulations for colleges and universities planning to close. Here are some of the specific requirements. These colleges— good luck with this, by the way— these colleges would have to make public— these colleges have to make public any decision to cease operations at least 1 year prior to the proposed closing date. Goodness. They'd have to hold at least 3 public meetings to address concerns for students, faculty, staff, and the local community. Boy, I'd love to facilitate those. They'd have to provide notice to the institution's accrediting agency at least 9 months before the anticipated closing dates, and they'd have to provide students details on teach-out plans or transfer agreements at least 6 months in advance. And there's a couple more items as well. All right, well, legislatures always react to current events. We've seen that in Massachusetts, we've seen that in Wisconsin, I think maybe in Pennsylvania as well. None of them have come to fruition except in Massachusetts. But you have to wonder, if these types of bills become laws in more and more states, how that's going to impact the market. That's certainly a topic for another day's discussion. Page 4, Keystone College announces progress to plan— progress in plan to remain open. Keystone College announces progress in the plan to remain open. The college announced last Friday, I think it was, that it is in the final stages of funding— of a funding agreement with a strategic partner. I'll pause while you stand up and applaud. From the story, Keystone College says it has made significant progress on a plan to keep the college open. Keystone announced Friday that it is in the final stages of a funding agreement with that strategic partner, unnamed strategic partner, to create a plan to move forward. Details of the agreement are not yet public, but Keystone says day-to-day operations of the college and its academic mission will remain essentially unchanged. Put the taps on the shoes. There's a lot of dancing going on here. Why now? Why at this late hour? Why was this angelic investor and benefactor not identified months or years ago? Let's go to the data. Of course, we have to go to the data. This again from 2015 to 2022, the National Center for Education Statistics. At Keystone College, the enrollment is down 25%. The 4-year undergraduate graduation rate is around 30%. And you've heard me talk recently, anytime that 4-year graduation rate is below 40%, I have to wonder, I have to ask the rhetorical question, is this really a college? Or is this more— nothing more than a tuition collection enterprise imitating, trying to imitate a college? The 2022 endowment was $4 million, barely even couch money in the context of colleges. It's down $3 million in the last 8 years. Never a good thing. Tuition and fee revenue is down $4.5 million. Uh, their unfunded institutional grants, merit aid, whatever, is down $7 million. They're trying to quit giving away the store, but everything else is so bad it doesn't matter. And the retention rate is, is not good, hovering around 60%. And then just a reality check: in this market, with the closure rates we've been talking about, with the financial challenges we've talked about, do the leaders at Keystone really, really think students will want to pay tuition to attend this college? That gets a jeez. And the wrap, folks. I'm gonna say this again because I am one of the very few trying to sound this very reasonable alarm. The fall 2024 and spring 2025 terms are heading toward a higher education free fall like we have never experienced. There are too many factors coming into play to create the proverbial higher education perfect storm for colleges. Be concerned. Be very concerned. And finally, I will be taking the next two Mondays away from the microphone. I will be traveling with my family. I'll be back with a new This Week in College Viability podcast episode on Monday, June 10th. Until then, hang in there. We'll talk in 2 weeks. This is Gary Stocker with College Viability.