This Week In College Viability (TWICV) for May 12 2025

It is This Week in College Viability News and Commentary for May 12, 2025. Hi everybody, Gary Stocker back with more higher education stories as we do during this time frame every Monday. Lots of cutbacks and layoff stories this week. I'll have those in a minute. And with most commencement events taking place last weekend and the coming weeks, I continue to look for stories where colleges proudly announce their sub-50% 4-year graduation rates. Hasn't happened yet. Probably should have provided a sarcasm alert for that one. Here are the top stories beyond cutbacks and layoffs this week. Not all colleges are worth saving. This is from a LinkedIn post. Um, in that was posted last week. Everett University in Virginia, I believe, is suing its former CFO and endowment fund manager. And the Wall Street Journal says it is the end of the free college lunch. This and much more on this May 12th episode of This Week in College Viability. Hey, let's start off with layoffs and cutbacks. Hood College, H-O-O-D College in Maryland, faces budget deficit Increases draw from endowments. This is a May 2nd story by Esther Francis at newspost.com. I think it's called the Frederick News Post. So Robert Kleindienst is vice president for finance at Hood. He said that the college, through an audit, showed a $4 million deficit in fiscal year 20— in the fiscal year 2024 budget. Well, I would have thought they would have known that in the budgeting process, but maybe they just figured it out with the audit. That seems a little late. He said that overall, taking restricted grants and other restricted budgets into account, the college's financial statements showed a $3.5 million budget deficit. Now, I don't doubt the accuracy of that statement coming from the audited financial statement. There's something here called the Hodson Trust, H-O-D-S-O-N, and in October 2023, the Hodson Trust gifted Hood College a $54 million gift. Kleindienst said the college cannot pull from that gift until fiscal year '27, 2027, so a couple years out. Kleindienst said Hood had typically drawn about 5% of the endowment annually, which is about normal. And he said that since the liquidation of this Hudson Trust, I believe maybe the gentleman or person had died, the college has begun drawing 7% of the endowment instead of the 5%. Now, okay, all right, so see a couple of things here. I see a college doing a pretty decent job of keeping its finances in decent shape until a rather small hiccup from this Hodson Trust can be built back into the budget. And the story goes into some of those details. I did look at Matt Hendricks' Private College Advanced Financial Compass for Hood College. The numbers there were a little less comforting for Hood College. They showed a decreasing net income margin that actually went negative in 2023, and it had revenue decreasing, but operating expenses were up 38% since 2016. That's never a good match. And while the Hood Trust can help when it's available for access in a couple years, I'm going to suggest that managing the expense growth should probably be a bigger focus than it is with that 38% growth for the last 10 years. Enrollment's been down a little bit since 2016, so that expense growth in the presence of enrollment decline is not good in light of those enrollment trends. Johnson Wales in Massachusetts took out 91 jobs amid a $34 million— that's a big number. $34 million deficit and decreased enrollment. And this is from Dan McGowan in the Boston Globe. He's a columnist. This was on May 7th of this year. So what's next at Johnson Wales is layoffs are happening at two of its campuses, one in Providence and one in Charlotte, along with their, their, Jason, excuse me, Johnson Wales online programs. There is a memo from the university that says they plan to delay staff raises delay staff, staff raises until later this year when they can evaluate what is possible. So let me just do the math on this. So $34 million deficit, let's divide that by 91 jobs, and if I did the math right, that's $373— excuse me, $373,000 per employee. I believe it highly unlikely that 90 employees at Johnson Wales got $370,000+ in compensation. So clearly just cutting the jobs isn't the only action planned. I hope there's gotta be more to it than this. We'll follow that story in the coming weeks as well. Arkansas Baptist, this is not a good story. Arkansas Baptist employees go weeks without pay. This is from Ryan Houston at katv.com on May 6th. Let's look at the data. It's not even— the data is not even all there, but the enrollment is down 400+ students from 700+ down to 300+. The 4-year graduation rates— this is awful— not even in double digits since 2016. As a matter of fact, as I recall, they don't even have graduation rates listed for the last few years. The retention rate is a miserable 20%. I can't find the data for percent admitted, for the endowment value, for the annual yields. And I'm sure there's not much— there's a lot much more out there that I didn't find. And then I posted on this on LinkedIn, and I'm not going to repeat what I said on LinkedIn, but the more I looked at this as I prepared for today's show, yeah, I would encourage the folks at Arkansas Baptist to please find someone to turn off the lights. Turn off the lights at this underperforming college. Let these students and their families, faculty, staff, and the communities move on. This is not a good situation in so many ways, and it started out with employees not getting paid. I believe the story did say they eventually got paid for March in late April, but their April compensation, I believe, was our last check, has yet to be presented to them. And let's go to Middlebury. In Vermont, and applications dropped to a 5-year low. That's interesting because applications these days are as easy as adding another ingredient to your pizza order. Just check a box and apply to another college. Applications dropped to a 5-year low at Middlebury College in Vermont as acceptance rate increases, implying, suggesting that more students are accepting the offer of admissions, offer admissions from their application. And this is from the Middlebury Campus News, so it's an internal document. And on the same date, on the same May 8th date, here's another headline. This is from Claire Jones at WCAX Channel 3 CBS on May 8th. Middlebury faculty, students protest proposed budget cuts. Same exact day for both of these stories. So the story reads from Claire Jones, dozens protested at Middlebury College on Thursday as the school considered cuts to help balance the school's budget. To get some of the money back— I have no idea what that means— to get some of the money back, the school has proposed a number of things. This is just bad writing. Like offering early retirement for Vermont-based staff, reducing the retirement match from 15% to 11%, and then eventually bringing back language schools to the campus. Again, the story doesn't delve into that. Healthcare costs also remain uncertain, but school officials say if changes are made, if any changes are made, they will happen this fall. Faculty members, as you might guess, are not happy with this proposal. There's a quote from a student, a graduate student at Middlesbury College who said, "This institute is nothing. This institute is nothing," the student says, "without its staff and its faculty." Well, there's a profound observation. And the story goes on to say around 250 frustrated faculty, staff, and students walked out and gathered on the Middlebury College campus green on Thursday. That would have been last week, speaking out against proposed budget cuts to make up for a reported $14.1 million deficit. So I got to go back to the quote. This institution is nothing without its staff and its faculty. But to the student who said that, let me just provide you a business lesson here. It's also nothing without the financial resources to support those faculty, staff, and students. Just a weak quote used by the reporter on this one, just a very weak quote. And I only did a quick look at the finances for Middlebury. Nothing, nothing really jumped out at me as being awful. This might be— it looks like it might be one of those situations where a college is simply trying to stay ahead of a budget crisis. Now, the $14 million deficit does— it's concerning, but the report doesn't have a year attached to it. Again, not very good reporting from this reporter to give more details what's going on. Let's go to Linfield. Linfield College and the College of Arts and Sciences at Linfield. So the headline reads, Linfield students and faculty push back on proposed university budget cuts. Okay, happens. It happens. Majors— the story writes, and so from Tiffany Camby at OPB, opb.org, she writes, majors in literature, philosophy, physics, and international relations are among the subjects under threat of elimination in a proposal presented to Linfield faculty and shared with this outlet last week. The university is looking to shed 27 faculty positions with a majority of those coming from the arts and sciences departments. Now there's more to the story. There have been cuts before. As she writes, Linfield is no stranger to restructuring cuts. The school let go— Linfield let go of 35 staff members last year, and in 2019, Linfield leaders announced plans to eliminate up to 25 tenured positions in order to shore up the university's finances. So a slow, slow, slow collapse taking place at Linfield College. So to the data there, there appears to be a little revenue and expense mismatch at Linfield. Expenses not— the revenue is not keeping up with expenses. And we talked about the history of layoffs and cutbacks at this college. Their endowment growth— I noticed when I looked at the data, their endowment growth has been one of the worst, one of the lowest in the country since 2020. And so of course what I do is look at the draw, and it does look like Linfield has been drawing away, drawing down its endowment way above average, that 4.5 to 5% range. In 2019 alone, they took out 23%. That's 2-3% endowment draw. The normal amount for a normal college is 4%, 5%, something like that page too. I'm going to a LinkedIn post on this one. This is Seth Odell, who's CEO at Kanahoma, and you can see this if you go to LinkedIn. It's Seth Odell, O-D-E-L-L. And he writes, not all colleges are worth saving. Well, all right, I'm not sure I've ever said it that way, but I agree, not all colleges are worth saving. He doesn't talk about a college in particular. He talks about a set of colleges. So let me kind of step through his story. He suggests there are two different types of M&A, merger and acquisition, tracks unfolding in higher ed right now. The first, private equity-driven cash, large-scale roll-ups and scalable growth. Okay, that's the first one. The second one is the one he talks about in this post. Nonprofit M&As, mergers and acquisitions, are mostly distressed institutions being acquired by mission-driven universities. So he wanted to talk about the second one, because while it feels like growth, Seth Odell wrote, many nonprofit leaders are knowingly— excuse me— are unknowingly stepping into money pits disguised as opportunities. Buying— being offered a dying college, being offered a dying college, a financially distressed college, isn't a compliment. Mr. Odell writes, it's a warning, and here's why. He's got two reasons. These schools often knocked on every other door before yours. They were dialing for dollars, in this case knocking for dollars, trying to find someone to take them, saying marry me, marry me, marry me. He says you're not acquiring an asset with these financially unhealthy colleges, you're inheriting. And he lists four items. You're inheriting deferred maintenance, buildings that are not in good shape, shrinking pipelines of students, tarnished brands for whatever reason, and hidden liabilities that are very difficult in many cases to uncover, as we've seen a lot of the stories on this show. And Seth Odell continues to write, turning around a distressed institution isn't just a matter of strategy. I'll say that again. Turning around— according to Seth Odell, turning around a distressed institution isn't just a matter of strategy. It takes cutthroat execution. And he gives some examples: cutting, gutting programs, cutting overhead, layoffs and cutbacks, and facing, of course, protests. Lots of protests. Facing protests, lawsuits, and no-confidence votes. We've talked about it many times before. It's happened many times before. It will continue to happen as well. So here's the questions that Mr. Odell suggests you ask yourself. If you're inclined to look at or even take the step of maybe merging or acquiring, probably merging with this college, ask yourself, would deeper-pocketed players want this college? Second question, are we buying a vision for the future of your college and this college, or is this a rescue mission? And I think the third question is really interesting. Could we build better from scratch? You can ask yourself what deeper pocketed players want this college. Are we buying a vision or a rescue mission? And could we build something better from scratch? And he says, I'm not against mergers and acquisitions. He says, I'm against emotional mergers and acquisitions. Seth O'Dell writes, if you're going to do it, move with clear eyes and a tough stomach. And make sure what you're buying or merging with strengthens your future, not just your narrative. And because most of these colleges, he writes, aren't dying by accident. They're not dying by accident. They're dying by design. They didn't fail, he writes, because of one bad president or one bad year. They failed because they were in oversaturated markets, overbuilt markets. Had outdated academic and business models, lacked any significant brand distinction, and missed major market shifts like online adult learners, etc. And so here's— there's some really good points here. Many colleges are waiting too long. I've talked about that before. It's in the literature a lot. And this really supports— Mr. O'Dell really supports what I've said for a long time. The scale needed in higher education needs to be something like 5 to 10 to 15 colleges merging to get the academic and non-academic scale needed to generate materially significant net positive cash. And as you've heard me say before, we're in the higher education consolidation era. It's a closure period now. Next year, year after, we're going to be entering the merger period when colleges that found a way to survive the closure period realize that to continue to survive and even thrive, they'll need to look at mergers, and much, much more than just mom-and-pop mergers of one or two colleges. They'll need to do that to much larger scale. Page 3, how about another LinkedIn post? Matt Hendricks, good friend and partner Matt Hendricks, on May 6th. Has a story about Everett University is suing its former CFO, an endowment fund investment manager. Part of the complaint appears to be that the CFO and investment firm allegedly presented misleading reports to Everett's board and to hide endowment withdrawals. Mr. Hendricks— excuse me, Dr. Hendricks— goes on to write, however, the endowment draws were clearly presented and average its own audits. All boards, he writes, should be regularly reviewing the audit and ideally benchmarking financials, including endowment draws. And you can do that with his app, the Private College Advanced Financial Compass. I can give you access if you drop me a note. You got to do comparisons, you got to compare it over time, and you got to do it relative to your peers. If you see a need for that, reach out to me through my contact information that I'll post on the show, and we can set up a time for me to show you how that works. But Matt Hendricks writes, had they been following this practice of look at the audits, they would have spotted the first major withdrawal from the endowment around October 2022. So I'll have a link to the Everett story, and I, I read the story. I, I don't know what the misleading reports were. I couldn't quite tell from the story. You can look at it on your own. You can wade through the myriad of accusations and counteraccusations in this story. Not a pretty story at all. Page 4, the Wall Street Journal writes, this was on May 2nd, the Wall Street Journal writes, the end of the free college lunch, the end of the free college lunch. Republicans begin to rein in student loans. And forgiveness plans. Now, from this story, a report last week by the Bureau of Labor Statistics— listen carefully now— a report from the Bureau of Labor Statistics found the unemployment rate for recent associate degree graduates, community colleges or vocational schools, in their 20s, 20 years old give or take, was 2.1%. The graduation rate for 4-year college graduates was 15.3%, and for those with advanced degrees, the unemployment rate was 8.4%. So the, the Wall Street Journal writes in their editorial, mull that one over. You have a higher chance of being unemployed these days if you go to college. Not Gary Stocker, that's the Wall Street Journal. We have a higher chance of being unemployed these days if you go to college than if you don't. I added that part. But the bill, they go on to say, would require in the future— require colleges to pay a share of the debt that borrowers don't repay, student borrowers don't repay. If a grad repays, for example, only a quarter of the debt he or she owes, the college will be on the hook for some share— is yet to be determined— for some share of the other 75%. This would give colleges an incentive to eliminate or improve programs from which grads earn too little to repay the loans. I've talked about this the last few weeks. I'll have the story link, it's behind a paywall, to the Wall Street Journal. So, so there was a comment from somebody on this Wall Street Journal because I read through not 100 but dozens of comments on this. One said, make the colleges This is a comment to Wall Street Journal article. Make the colleges and universities responsible for collecting their students' education debts by whatever means. This would help stiffen— this commenter writes— this would help stiffen the institution's attention to value in education and students' understanding of responsibility in a business transaction. This is from the Wall Street Journal commenter from the story in the Wall Street Journal about the end of the free college lunch for May 2nd. Make the colleges and universities responsible for collecting their students' education debts. That's not gonna happen. And even if it does, in a scenario where it does, the number of students colleges accept will plummet. They're not gonna take a risk on having to pay back a student's loan. It's just— I've talked about this, I've written about this many times. Public and private colleges in this country will not willingly be a party to giving money back to either public or private entity. The Wall Street Journal story simply reinforces the pressures mounting on colleges to provide value or pay back And as I've said a couple times in this show and many other times, we are in that higher education consolidation period. Closures now, and in the next 1 to 2 years, something like that, followed by significant and I believe large-scale mergers. So let's wrap this episode of This Week in College Viability, and I'm going to give you a sarcasm alert up front. We are headed into the annual college period of wasted time. The annual college period of wasted time— those 3 months when learning could take place, and it does on a really small scale, but when learning could take place on a much larger scale. However, higher education as an industry views those 90 days differently than every other industry that works 12 months out of the year. I guess, why work 12 months, they say, when you can get by with something like 9 casual months, 9 short months, and that includes extended time off for Christmas, spring break, and other items. Yeah, and I know there's sarcasm involved there with intent. And as usual, this summer I'm going to be watching those college spinner announcements spinning the news that cite what's usually heavily qualified enrollment numbers the largest increase of females over 6 feet tall. I'm making that up. It's a heavily qualified enrollment number. I will also be tracking those colleges who don't say anything, who have no news about their fall enrollment because they don't want to share with the world that they have declining enrollment. In this scenario, it's no news about enrollment increases. No news is bad news. And we typically don't see hardly any college closure announcements in the summer months. I'm going to continue to focus on the enrollment news over the next 3 months or so, and I'll keep listeners updated on what public and private colleges are saying about their fall 2025 enrollment. And I'll hold those comments for another show, um, because I think I know what's going to happen. So let's call it a wrap, and until next Monday, Again, many thanks for making time to listen. I'm grateful for each and every one of you. This is Gary Stocker for College Viability. I'll be back next Monday. We'll talk then.