http://www.msn.com/en-us/money/care...ill-go-under-in-the-next-few-years/ar-AA9ZDtl
When officials at Sweet Briar College announced earlier this month that the Virginia women's’ school would close at the end of this year, the news drew the attention of countless national media outlets and panicked alumnae looking for ways to save the school.
After all, how often does a “rich girl’s school,” as one student described Sweet Briar in the New York Times, just suddenly shut down?
It’s pretty rare for a more than 100-year-old school with a national reputation for a beautiful campus, close-knit community and accessible professors to just up and close. In the 10 years leading up to 2013, five nonprofit colleges and universities closed a year on average, according to a study from higher education researchers at Vanderbilt University. But the trend is likely to accelerate in the coming years, as colleges cope with lower tuition revenue due in part to lackluster enrollment, student worries about employment prospects and being saddled with debt after graduation.
“We expect that there will be more college closures over the next three to four years,” Susan Fitzgerald, a senior vice president at Moody’s. “I don’t think it’s going to be a landslide of college closures, but we are coming through a very tough period of time.”
About one-third of all colleges and universities in the U.S. are on an unsustainable financial path, according to a 2012 report from consulting firm Bain & Co. While some of the schools on that list have resources, like a large endowment and a steady enrollment base, that could help them stave off closure, smaller, private colleges “need to be on the lookout,” Jeff Denneen, the leader of Bain’s higher education practice and one of the authors of the report, said in an interview.
“They have many fewer degrees of freedom and a much shorter runway to get things in order and I think that’s a little bit of what you saw at Sweet Briar,” he said.
Declining enrollments fueled by relatively flat high school graduation rates and increased competition from online competitors are squeezing private schools with fewer than 5,000 students, particularly those that draw on their local region in areas like the rural northeast and some of the Midwest, Fizgerald said. But one of the biggest challenges facing this group of schools is the crisis in college affordability.
About 40 million Americans are already saddled with student loan debt and the heightened attention on the issue has made prospective college students wary of taking on more.
“In the post-Great Recession era, there’s more and more focus on the return on investment on what one gets from an education,” said Jason Lane, a senior fellow at SUNY’s Rockefeller Institute of Government. The concern from students and families is so great that the Obama administration is developing a ratings system to help students better understand the relative value of their degree.
During this fiscal year, public and private universities in the U.S. are expected to experience the slowest net tuition revenue growth in more than a decade, according to Moody’s U.S. higher education outlook. That’s in part because they’ve had to expand tuition discounts to draw in more students. For small, private schools that rely heavily on tuition revenue, that sort of arrangement can be hard to keep up for a long period of time.
“That’s why these colleges then end up in these really financial stressed situations,” said Fitzgerald. Indeed, Sweet Briar’s interim president, James F. Jones Jr., called an uptick in the school’s aid dollars as a share of tuition and fees — known as the tuition discount rate -- “financially unsustainable” in a statement announcing the school’s closing.
A group of the school’s faculty and alumnae is trying to stop the school from shutting down, in part by alleging that Sweet Briar officials violated state law when they solicited donations, even as they were planning to close the school.
To be sure, Sweet Briar’s financial woes may be specific to the school. While changing demographics and the recession are challenging schools of all kinds, many private, liberal arts schools are doing just fine, according to David Warren, the president of the National Association of Independent Colleges and Universities, an group representing more than 1,000 nonprofit private schools.
“Just because they’re small, just because they have the modest faculty or just because they’re rural, that doesn’t mean that closings are in sight,” he said.
Many of these types of schools have innovated successfully to adapt to changing demands by finding a specific niche such as health sciences or art and design, reaching out to non-traditional college populations, or including some kind of online learning in the mix.
“For a lot of these smaller private liberal arts institutions that were largely dependent on tuition and serving students that were fairly college ready, there’s a lot more competition for that demographic and it’s shrinking pretty significantly,” said Lane.
When officials at Sweet Briar College announced earlier this month that the Virginia women's’ school would close at the end of this year, the news drew the attention of countless national media outlets and panicked alumnae looking for ways to save the school.
After all, how often does a “rich girl’s school,” as one student described Sweet Briar in the New York Times, just suddenly shut down?
It’s pretty rare for a more than 100-year-old school with a national reputation for a beautiful campus, close-knit community and accessible professors to just up and close. In the 10 years leading up to 2013, five nonprofit colleges and universities closed a year on average, according to a study from higher education researchers at Vanderbilt University. But the trend is likely to accelerate in the coming years, as colleges cope with lower tuition revenue due in part to lackluster enrollment, student worries about employment prospects and being saddled with debt after graduation.
“We expect that there will be more college closures over the next three to four years,” Susan Fitzgerald, a senior vice president at Moody’s. “I don’t think it’s going to be a landslide of college closures, but we are coming through a very tough period of time.”
About one-third of all colleges and universities in the U.S. are on an unsustainable financial path, according to a 2012 report from consulting firm Bain & Co. While some of the schools on that list have resources, like a large endowment and a steady enrollment base, that could help them stave off closure, smaller, private colleges “need to be on the lookout,” Jeff Denneen, the leader of Bain’s higher education practice and one of the authors of the report, said in an interview.
“They have many fewer degrees of freedom and a much shorter runway to get things in order and I think that’s a little bit of what you saw at Sweet Briar,” he said.
Declining enrollments fueled by relatively flat high school graduation rates and increased competition from online competitors are squeezing private schools with fewer than 5,000 students, particularly those that draw on their local region in areas like the rural northeast and some of the Midwest, Fizgerald said. But one of the biggest challenges facing this group of schools is the crisis in college affordability.
About 40 million Americans are already saddled with student loan debt and the heightened attention on the issue has made prospective college students wary of taking on more.
“In the post-Great Recession era, there’s more and more focus on the return on investment on what one gets from an education,” said Jason Lane, a senior fellow at SUNY’s Rockefeller Institute of Government. The concern from students and families is so great that the Obama administration is developing a ratings system to help students better understand the relative value of their degree.
During this fiscal year, public and private universities in the U.S. are expected to experience the slowest net tuition revenue growth in more than a decade, according to Moody’s U.S. higher education outlook. That’s in part because they’ve had to expand tuition discounts to draw in more students. For small, private schools that rely heavily on tuition revenue, that sort of arrangement can be hard to keep up for a long period of time.
“That’s why these colleges then end up in these really financial stressed situations,” said Fitzgerald. Indeed, Sweet Briar’s interim president, James F. Jones Jr., called an uptick in the school’s aid dollars as a share of tuition and fees — known as the tuition discount rate -- “financially unsustainable” in a statement announcing the school’s closing.
A group of the school’s faculty and alumnae is trying to stop the school from shutting down, in part by alleging that Sweet Briar officials violated state law when they solicited donations, even as they were planning to close the school.
To be sure, Sweet Briar’s financial woes may be specific to the school. While changing demographics and the recession are challenging schools of all kinds, many private, liberal arts schools are doing just fine, according to David Warren, the president of the National Association of Independent Colleges and Universities, an group representing more than 1,000 nonprofit private schools.
“Just because they’re small, just because they have the modest faculty or just because they’re rural, that doesn’t mean that closings are in sight,” he said.
Many of these types of schools have innovated successfully to adapt to changing demands by finding a specific niche such as health sciences or art and design, reaching out to non-traditional college populations, or including some kind of online learning in the mix.
“For a lot of these smaller private liberal arts institutions that were largely dependent on tuition and serving students that were fairly college ready, there’s a lot more competition for that demographic and it’s shrinking pretty significantly,” said Lane.
opcorn:
