In reply to: More colleges closing (link) posted by irishnyer
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).