When Greensboro College, a small Methodist school in North Carolina, cut faculty wages by 20 percent, lost its president in a sudden resignation, and used its historic campus and president’s house as collateral for a $16 million-dollar loan, people took notice.
It wasn’t just Greensboro’s plight that aroused national attention—it was fear that Greensboro’s troubles may foreshadow an unprecedented increase in the rate of private college and university closures. Indeed, at about the same time, two education entrepreneurs wrote a column in the Chronicle of Higher Education suggesting that colleges might be in a “bubble” that may burst, just as the housing bubble burst in 2008.
Available statistics suggest that closures are on the rise, especially among small private colleges and universities. That increase may be temporary and perhaps nothing more than is to be expected in a deep recession. But it is also possible that the higher education market may be in the midst of a dynamic restructuring process—a process that may leave many small, independent institutions lying on the ground.
The terms “higher education” and “financial instability” are rarely found in the same sentence. Colleges have long been known for their endurance, riding out one recession after another. The Department of Education’s Digest of Educational Statistics indicates that only 185 independent four-year institutions shut down between 1977 and 2007. That’s about an 89 percent survival rate over three decades, and most of the 11 percent comes from the closure of small, relatively unknown colleges with enrollments of fewer than 100 students.
When it comes to large, well-endowed colleges, stability is spectacular. Of the top 25 colleges ranked by the U.S. News & World Report in 1989, 23 of the 25 remain on the list today. This is in sharp contrast to the Fortune 500; only eight of the top 25 businesses listed in 1989 are still there.
The college shakeup seems to have begun in 2007, the most recent year for which the Department of Education has closure statistics. In that year, 26 private institutions shut their doors via closure, merger, or takeover, according to the Digest of Education Statistics. Though that is less than two percent of the existing 1,600 private colleges and universities, it is still the largest number of failures in over a decade, and the third highest since 1969.
In assessing the seriousness of the current problem, a recent study offers some context.
Stephen R. Porter and Trina J. Ramirez—both from Iowa State University’s Department of Leadership and Policy Studies—explored why private colleges closed from 1975 to 2005. The researchers wanted to determine what role certain factors—such as endowment and curriculum—had on colleges’ survival. They found that schools with large endowments and greater selectivity of students survived the best.
“Colleges and universities with limited resources and small enrollments were at greater risk of closure because of the narrowness of their margins,” Porter told the Pope Center. Selectivity mattered because less selective schools had trouble keeping their enrollments up and thus endangered their revenues and chances for survival.
The reliance of small independent schools on enrollments has led to concern about whether enough students will show up this fall. Some universities are concerned that they may see a dip, but overall enrollments seem to be holding up. The National Association of Independent Colleges and Universities (NAICU) conducted a survey of nearly 300 private nonprofit colleges and universities last spring to gauge the recession’s impact on enrollment. The result was that undergraduate enrollment is expected to be 0.2 percent higher than in the fall of 2008. NAICU said that an increase in federal Pell grants and other student aid appear to be shoring up this fall’s numbers.
Some schools haven’t stopped there. Beleaguered Greensboro College has implemented an aggressive enrollment program, offering free tuition to honors students; all they have to do is cover room and board. Facing high fixed costs, Tim Jackson, dean of enrollment, told the Pope Center that Greensboro is concerned about “empty beds on campus.”
But stable enrollments for fall 2009 don’t eliminate uncertainty about the future. This uncertainty is reflected in strikingly different forecasts made by representatives of two organizations, NAICU and the Council of Independent Colleges (CIC).
Richard Ekman, president of the Council of Independent Colleges, was upbeat in an interview. CIC, which has about 600 members, provides services such as seminars and workshops for independent, liberal arts colleges and universities.
“Given the assumption that the economy will recover this year or the next, I don’t think we’ll find many more mergers, or closures above average,” he said. “Again, it depends on the duration of the recession but I think the measures taken this year by most small colleges should help them get through.”
Roland King disagrees. He is the vice president of public affairs of NAICU, which represents private colleges in Washington, D.C. He thinks that the worst part of the crunch may be yet to come.
King told the Pope Center that some schools believe that the 2010-2011 academic year could be “much more problematic than 2009-2010.” One reason is that private colleges reduced costs “by implementing one-shot changes, but they may have a hard time sustaining them in following years.” He cites “dramatic increases in student aid for enrollment, furloughs, layoffs, cutbacks on benefits and programs.” All of these address immediate problems “but may not be options in the 2010-2011 year.”
Furthermore, changing national events keep the uncertainty alive. President Obama’s plan to boost community college enrollment through his American Graduation Initiative is designed to make community colleges more attractive—but may deal a blow to small colleges.
While community colleges do work with nontraditional students, there is some overlap between students at community colleges and less-selective private colleges—the ones that, according to the Porter/Ramirez study, are most vulnerable. President Obama’s proposal puts a lot of money into community colleges, making it easier for students to transfer to state colleges and universities and leap-frog private colleges altogether.
Richard Ekman of the CIC said that “we welcomed the President’s expansion of access to higher education through community colleges,” but “we are concerned that the proposed funds for community colleges may come at the expense of four-year [independent] colleges.” He emphasized independent colleges’ “excellent track record of accepting transfer students and helping them complete their degrees” and added that private colleges, “deserve federal support for their effectiveness in degree completion rates.”
Whether private colleges deserve federal funding or not, Roland King of NAICU doesn’t suspect they’ll be waiting around to see if it comes. Rather, he believes colleges may turn to each other for help.
“We’re likely to see more co-operations and collaborations between universities in the future for things like back office operations and improvements to universities’ economies of scale and purchasing power,” he said. So, to withstand the recession, however long it lasts, perhaps Greensboro College should look to cooperation with the other four colleges that call Greensboro, North Carolina, home.