The College Viability app uses a three-color system to assess private college financial health. Green means strong enrollment and endowments over $75 million; yellow signals moderate risk with endowments around $50 million; red flags high risk of closure with endowments under $50 million and low graduation rates.
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When you look at our College Viability app, we use green, yellow, and red battery indicators. Our green, yellow, and red battery indicators are comparisons among a selected set of private colleges, usually from the same state. These financial health and viability comparisons are are not intended to be any reflection on a college's quality of educational offerings. Readers and viewers can make their own judgments on quality. These comparisons do provide students and families and college employees and others with a tool to more easily make judgments about the financial health and viability of private colleges they may be considering. Let's take a look at the 3 battery indicators and how I define them. A green battery indicator indicates that the overall financial health and viability outlook is much stronger than that of its competitors. And I'll point out here, this is always a comparison green, yellow, and red indicator. We usually combine somewhere between 5 to 10 private colleges, usually from a given state. It's that comparison that suggests the viability, the comparative viability of each. Some of the information that we use to make that green battery determination, as well as yellow and red, is stable to growing enrollment. And I'll give you an example in a second. A 6-year bachelor graduation rate greater than 70%. An endowment something greater than $75 million, although the higher the better. Some growth in the tuition and fees collected each year by these colleges. And an expense-to-revenue ratio that is not awful. And it's a comparison, so awful is kind of a subjective term. I do look at the expense-to-revenue in conjunction with the endowment. The larger the endowment, the less consideration I give to that expense-revenue ratio because the endowment provides more resources if needed. Note, however, that not just in the green battery indicator, but really all of the others, that the expense-revenue ratio is a good indicator of when a college might cut programs or majors or faculty or staff. A college's inability to align their expenses to their revenue over the 6 years that we use to review these colleges makes for a somewhat riskier decision for students and families. Here's an example of a green Battery Indicator College. It's Macalester College in Minnesota. There are many others. Their FTE student enrollment is up about 300 students from 2014 to 2019. The tuition and fees they collected are up more than $9 million. The expense-to-revenue ratio is not good. It's really not good at all at negative $84 million. That means they have $84 million in expenses than in revenue over the reporting period. But the 2019 endowment is strong at $750 million. Macalester is not going to close. But make sure if you're considering them to ask them about recent activity or plans to cut faculty, staff, majors, or programs. It's also important to note that their 2019 6-year bachelor graduation rate is an outstanding 91%. For comparison purposes, a yellow battery indicator suggests a college is less likely, by comparison, to have a risk of closing rather than a college we'll see in a minute rated red, red battery. It does, however, have a higher risk of cutting programs, faculty, majors, and staff than those that we rate with that green battery indicator. There is always a concern when enrollment, and we use FTE, or full-time equivalent enrollment, decreases over our 6-year reporting period. I like to watch that enrollment in conjunction with how much in tuition and fees a college is collecting over the same period. We also like to look at 6-year graduation rates for this yellow battery indicator in that 55 to 69% range. That helps me lean toward a yellow battery indicator. Again, above 70% is our threshold, our good target. Anything below 55, 50% is not good at all. If a college can't graduate its students, on average, in 6 years, it strongly suggests a lack of internal systems and processes to graduate those students. That's what we pay colleges to do, is to graduate our students, not just give them courses that don't lead them anywhere. And then lastly, for that yellow battery indicator, if the endowment is hovering somewhere in the $50 million range— and $50 million is kind of the soft threshold that I use— we take that into consideration for a yellow indicator as well. Here's an example of a yellow battery indicator private college, and it's Rider University in New Jersey. Their full-time enrollment, or FTE enrollment, is down almost 500 students, 483, over 6 years. Their tuition and fees that they have collected have decreased increased from 2014 to 2019 by about $9 million. Their expense-to-revenue ratio is a negative $3 million, not as bad as we saw from Macalester College, but in the overall scope, still a negative number. Their 2019 6-year graduation rate is okay, it really is, at 67%, but just a little bit below that 70% threshold that I use. And the 2019 endowment is at $66 million. Again, above the $50 million threshold that we use. It's important to remind viewers and readers that the data we use here is the most recent available from the National Center for Education Statistics. It's from the time period 2014 to 2019. I would like to see more recent data. That's just not the nature of higher education to report its data in a timely manner. Don't ask me why, it concerns me, but nonetheless, the comparisons that we use are still legitimate. It's still an apples to apples comparison. And if there's a 6-year trend to the positive or to the negative, that means something. And finally, let's look at comparing what a red battery indicator looks like in our system. And again, we use the College Viability App that uses data from the National Center for Education Statistics to provide these comparisons. When comparing a set of private colleges, I give a red battery indicator to those for whom my judgment, my subjective judgment with objective data, gives a higher risk of financial failure and a risk of closing. Keep in mind, this is a comparison to those colleges being reviewed. There is no effort on my part to suggest a green college is better than a red college. We're simply using the data to compare financial health and projected viability for these colleges. If you want to find if a college is better or not, I would suggest using that 6-year or even the 4-year graduation rates. The higher the graduation rates, the better the systems and processes, and arguably the students, at this college to get high graduation rates. When we look at reds, significant decreases in full-time enrollment. Significant decreases in tuition and fees for the college. Significant decreases in tuition and fees along with a substantial expense-to-revenue imbalance is one of the criteria we use to categorize a private college as a red battery. 6-year graduation rates around 50% or sadly even lower. And endowments below $50 million. All of these increase the comparative risk that these colleges and their financial profile is riskier for closure than when it's compared to its peers in a particular set, and typically that's a state-by-state comparison. Example of a red battery indicator college is Thomas University in Georgia. There are others. Their enrollment has decreased about 370 students from 2014 to 2019. Their tuition and fees inched up a little bit, about $1 million. Their expense-to-revenue was negative, only $600,000, and I'll tell you why here in a second. The 6-year graduation rate was a really bad and sad 43%. It again suggests that colleges like Thomas don't have the systems and processes in place to graduate bachelor students in any semblance of a timely manner with any consistent success. And then finally, and the real indicator for me to make this a red, is the endowment for Thomas College is only, not even, $6 million. It's not just that the $6 million is a really low number, it's just that it suggests this college doesn't have the systems or the processes or the alumni or the community resources to raise that endowment. And finally, if you'd like to see financial health and viability comparisons of private colleges you're considering, go to YouTube, search for College Viability. You'll see a whole list of colleges that we have already reviewed, typically by state. If you have a specific set of colleges you'd like reviewed, list them in the comment section below, and I'll add them to the list for future reference. These battery comparisons are not predictions. They are simply comparisons of one private college to another. I don't do guesses. I just use the data that the colleges themselves have provided to the federal government to provide you with these comparisons. As a student, as a parent, as a community member, each of us deserve a quality college education. I want to give you information to help you make the best possible college decision that includes comparisons of those private colleges and their financial health. You will have already looked at the majors and the campus and the faculty and the online offerings, the amenities, the sports. Let's add a comparison of the college's finances to your decision-making process.
