"The two-notch downgrade reflects our view of the college's deep full accrual operating deficits in each of the past three years, with another material deficit anticipated for the fiscal year ending Aug. 31, 2024, and expectations for continued, though moderating, operating deficits through fiscal 2027. This recent trend of weak financial performance has led to the rapid deterioration of Columbia's financial resources and has materially weakened its liquidity," said S&P Global Ratings credit analyst Nicholas Fortin. "We believe a recent adjunct faculty strike has caused financial, strategic, and reputational damage that could disrupt the timely implementation of the college's strategic plan, making stabilizing enrollment and operations difficult over the two-year outlook period."
They have over 6,000 students. Their financial troubles are a bigger deal than some of these tiny colleges. They are doing ongoing layoffs.
College - the one closing in the Cleveland, Ohio area. He submitted it to Inside Higher Ed a couple weeks ago. I thought he really nails it on many issues, especially the need to be proactive which is not generally in the education DNA. He is the one winding down the school now.
and proactively. They also had valuable real estate to deal with. Fontbonne will be a similar story. Most are far more problematic with unexpected, quick closures.
The topic is becoming more mainstream and parents need to do their due diligence accordingly.
With a very large endowment in a tony residential area. Pretty unique set of circumstances.
Speaking of tony, feast your eyes on the recent Notre Dame Magazine class notes section, class of 1988
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He lived in Eating Raoul's section in 1984-85.
While enrollment may be declining, institutions are also getting less revenue per student or Net Tuition Revenue per student. Seems crazy with what you see for tuition rates, but its true.
I think we've talked about this before, there's big difference in Net Cost per student and Net Revenue per student. While tuition rates do go up, the average discount rate is climbing at a higher % per year. At roughly 2-3% per year, the average discount rate has climbed from about 40% a dozen years ago to almost 56% today. That's just not sustainable as eventually that rate gets to 100%.
For the highly endowed schools, they can fund financial aid through endowed and gift fund. Schools without that luxury must simply provide aid by lowering the cost. They will have some fancy name for the scholarship, but its essentially discounting the sticker price.
An example of this would be:
Take a highly endowed Ivy institution. Because they can fully fund need, mainly through endowed aid, the Net Tuition Cost per student may be like $9k...but the Net Tuition Revenue for that same student will be $65k. That same student for a school without a trove of endowed aid may have a Net Tuition Cost of $20k, but the school will only recognize Net Tuition Revenue of $25k. The difference from the $25k to sticker (say sticker of $60k) is just lost revenue.
The privates that will survive this wave are those with high endowments that can fully fund need, those with another source of revenue such as a health system, or those with high demand graduate degrees that can command a high Net Tuition Revenue without much or any discounting.
I fear the wave of troubled schools is still at its infancy state.
mean pricing will continue to come under pressure for all but the strongest. For most privates and most students headline tuition is meaningless. Like airlines advertising the most expensive seat on the plane for any given trip.
The whole thing is a horrible conundrum and leaders who try to be proactive get incredible pushback - at least right now.
The whole education system would be better off with 500-1,000 fewer universities and for state schools to do a better job of dividing up their areas of programmatic focus and if possible consolidating administrative oversight. Not sure it can be done fast enough hence we face a Chinese water torture future among those with traditional models. But that is what is needed. But schools die very slowly and rarely with proactive leadership as with Cabrini. I salute them for doing it right, as painful as it is.
...and early 2000's. The writing was on the wall. The industry was shifting a major way and never coming back.
Those who chose to make a major change in their business model to adapt would find a way to succeed. Others would recognize the change but saw no way to adapt. Therefore, they looked to sell or merge with another entity to ensure its future. Finally, there were those that denied realty stating things like "people will always want their paper". Those companies suffered painful and public deaths.
I remember hearing that too. I doubt my daughter (in college) has ever read a paper daily. For that matter, all her books have been digital. She takes notes with an Ipad - never paper.
NYT and WaPo at least survived - not sure if they make money online but they exist which must feel like a big success and arguably they are bigger names today if not more profitable.
WaPo had Newsweek (failed not) and then they had Kaplan as well. Print Media + Education. Great combination.
Purdue picked up the remnants of Kaplan and seems to have done as well as anyone in education.
Paper new media with all its big printing equipment and fixed delivery infrastructure definitely shared a business structure with education. Only the biggest, best brands managed to survive. A few niche magazines do well, too, even in print form.
hit.
local taxing authorities asking for/demanding voluntary payments to the cities/counties to help pay for local services. The endowment tax hits a few wealthy universities (depending on how designed). But when things were going better many schools did pay up to "help" local cities and counties in lieu of property taxes not paid. But increasingly they cannot afford to do it. Attached is an article about Quinnipiac University not paying $300K to its local cities as it had voluntarily done in the past. No explanation but budget problems are highly likely the issue. You will see more and more of this going forward.
Cities best hope they have a well-funded university in their town. At some point payments in lieu of taxes can stop and worse you end up with an incredibly lifeless eyesore of empty property.
If you live near a university, especially a private U, you should take special interest in their financial health as it could affect you. Cabrini's property can always be sold for beautiful home lots in a desirable town (had it not been sold to Villanova) but that is not always the case. In Hancock MI in the area where my wife is from the failure of Finlandia University last year left many closed, empty husks of old buildings that the city is trying to maintain (and hoping for state grants, etc).
The hechinger’s near us turned into a home depot 20 years ago, and then the parking lot got hit by the sniper.
times were so good for so long that people can't believe it is happening. There is also the hope for a white knight. Traditional businesses have no last ditch donor option. Even now, there are schools teetering on the brink like Northland College thinking they can gather the funds from outside. And maybe they can. But in most cases they cannot. And frankly, many colleges need to shrink and/or go away. We have too much capacity for the future demand. Elementary schools and High Schools were hit by the Baby Bust in the 1970's and early 1980's. Colleges for the most part avoided that fate. This time when the enrollment cliff happens (and it hasn't even happened yet) colleges are in worse shape.