A bold experiment is being watched by North Carolina’s private colleges

(Editor’s note: This article was first published in the January 2015 edition of Business North Carolina, a magazine that explores business trends in the Tar Heel State.) 

The Benedictine monks who founded Belmont Abbey College 138 years ago are better known for peacefulness than for trend-setting. But the Gaston County campus is the scene of a bold experiment watched by other private liberal-arts colleges in North Carolina. Belmont Abbey cut its annual tuition and required fees by a third in 2013 to $18,500 and didn’t raise the price this year, putting the college well below the $25,000 to $33,000 a year that many of its peers charge. William Peace University in Raleigh cut its tuition by nearly $2,000, to $23,700, in 2012. So far no other private or public university in the state has made a similar decision. Tuition at North Carolina’s public colleges is much lower, ranging from about $4,500 per year at Elizabeth City State University to $8,100 at N.C. State and UNC Chapel Hill. Belmont Abbey wants to make the school more accessible to students from low- and middle-income families and to narrow its academic focus, President William Thierfelder says. Along with the tuition cuts, Belmont Abbey eliminated 16 of 85 administrative employees in April, cutting $1 million from its $26 million annual budget. The lower costs should help push enrollment from almost 900 traditional students this year to 1,000 over the next few years, college spokesman Rolando Rivas says. (The school offers a separate program for older adults.) Belmont Abbey didn’t act out of desperation, Rivas says. Enrollment has remained steady as the school renovated its student center and added two new residence halls, a dining area, and a fitness center over the last three years. But Belmont Abbey’s finances aren’t flush, with an endowment of about $11.9 million. Similarly sized Catawba College in Salisbury has a $53.3 million fund, while Raleigh-based Meredith College has $93 million. Thierfelder wants donations to be directed toward Belmont Abbey’s endowment and special projects rather than for operating expenses — most donors prefer to give for a building than to pay the electric bill.

Tuition-revenue growth has declined at virtually all colleges, public and private, according to a November report by Moody’s Investors Service Inc., the New York-based ratings agency, which downgraded credit ratings of 36 U.S. private colleges and issued a negative forecast for the entire sector in 2013. “What we’re concerned about is the death spiral — this continuing downward momentum for some institutions. We will see more closures than in the past,” Moody’s analyst Susan Fitzgerald told Bloomberg News in April. “I’d be very surprised if in 10 years we don’t see hundreds of universities in bankruptcy,” Harvard Business School professor Clayton Christensen, famous for coining the phrase  “disruptive innovation,” said in a June 2013 interview with The Economist. Hope Williams, president of North Carolina Independent Colleges and Universities, a Raleigh-based nonprofit that advocates for 36 of the state’s private colleges, says such strife isn’t happening in North Carolina, where no private colleges have closed in the last decade. (St. Andrews College in Laurinburg merged with Babson Park, Fla.-based Webber International University in 2011, and the school was renamed St. Andrews University.) Belmont Abbey is among many schools “constantly looking at different ways to approach limiting cost increases,” she says. Measures include increasing private fundraising and eliminating programs, staff, or degree options. Her organization helps by seeking bulk discounts for its members on items such as technology, office supplies and laboratory equipment.

Saint Augustine’s University in Raleigh, which like Belmont Abbey has a $26 million annual budget, has taken drastic steps to mitigate steep enrollment declines and budget woes. Last spring, it said its tuition revenue had declined $3 million from the previous year. The historically black university, which was started by Episcopal priests as a high school for freed slaves in 1867, enrolled 1,016 students in fall 2014, down from about 1,500 in fall 2011. Under interim President Everett Ward, who took the helm in spring 2014, the school cut 43 positions, moved some of its remaining 300 workers to a 10-month schedule and required two one-week, unpaid furloughs — the last of which cut annual operating costs by more than $1 million, getting the university out of the red, says Shelley Willingham-Hinton, vice president of marketing. “We are tightening the belt campuswide.” 

Five miles away, former women’s college Peace started accepting male students in 2012 as it reduced tuition, eliminated 13 of about 50 faculty positions, and cut some programs. To generate revenue, the university invested two-thirds of its then-$33 million endowment in Seaboard Station, a nearby shopping center anchored by an Ace Hardware store. The actions prompted a backlash from alumni, professors and students; a faculty majority sent Peace President Debra Townsley a strongly worded email, complaining that the university had become “driven by mediocrity” and “desperate for tuition dollars.” Students circulated a petition calling for Townsley’s resignation. But she contends that the bold moves have paid off. Enrollment has increased by 47 percent since 2010, and Seaboard Station is completely occupied and generating revenue. The university has upgraded its technology, renovated its dining hall and added men’s sports teams. It also raised tuition and fees 3.2 percent this year to $24,450. But Townsley, 60, who earned $452,887 in 2012-13, won’t be around to see if Peace can avoid the death spiral — she is retiring this summer after five years at the school.

Show me the money