Financial Warning Signs at NC Colleges Expose Existing Problems

Amid COVID-19, nearly every college—whether a community college or a four-year institution—is facing an unusually tight budget this year. As the economy takes a hard hit, key sources of higher education funding, such as donor grants and government aid, are likely to be affected.

But for many institutions, the most crucial sources of funding are student enrollment and retention—which might be most affected by COVID-19. According to a survey conducted by the American Council on Education in April, 86 percent of college presidents put “fall or summer enrollment numbers” as the most pressing issue their campuses face during the pandemic.

As a result, experts and researchers predict possible waves of colleges shuttering their doors.

“Think of the revenue shocks these universities are suffering…I don’t want to sound too alarmist, but this could possibly be devastating,” said Gregory Price, an economics and finance professor at the University of New Orleans. “A lot of underendowed, financially fragile institutions are going to have to shut their doors, unfortunately,” he added. “COVID-19 will kill off some schools,” predicted Ohio University economics professor Richard Vedder.

In North Carolina, some colleges and universities are more likely than others to weather the financial storm. Most of North Carolina’s institutions of higher education were included in a recent “financial fitness” database compiled by the Hechinger Report. In its Financial Fitness Tracker, the Hechinger Report analyzed the financial health of 2,662 colleges and universities nationwide—using methodology outlined in the book The College Stress Test.

In its analysis, the Hechinger Report evaluated the latest publicly available data, which predate the pandemic (schools have delayed releasing their most recent data). It then analyzed each institution based on three or four categories and assigned a rating or “value” to each category. “The values, which are based on publicly available data for the 2009-10 to 2016-17 academic years, are then projected three years out, to 2019-20,” the Hechinger Report explains.

Each category is rated on a scale of 0 to 3, “0” meaning that the projected values are not in the “alert threshold” (and are in the top 80 percentile for that category). A score of “1” indicates that a school has reached the “alert threshold” for a particular category; a score of “2” indicates that a school has crossed the alert threshold, but has not reached the “warning threshold.” A score of “3” means that a school has met or crossed the warning threshold (and is in the bottom 10 percentile in that category).

Institutions with a rating of 1, 2, or 3 in any category are marked with one or more “warning signs.”

For private universities, the Hechinger Report evaluated four categories:

  1. enrollment of first-time undergraduate students,
  2. retention rate,
  3. change in the average tuition-and-fees revenue per student, and
  4. change in the ratio of endowment to total expenses.

Of the state’s 36 private non-profit colleges and universities, 20 of them received at least one rating of  2 or 3 for at least one category. By far, private schools in North Carolina are struggling the most with retention—keeping students enrolled from year to year. Of the 20 private schools, 16 of them received at least a 2 rating for retention:

  1. William Peace University (2)
  2. Warren Wilson College (2)
  3. North Carolina Wesleyan College (2)
  4. Methodist University (2)
  5. Lees-McRae College (2)
  6. Montreat College (2)
  7. Mars Hill University (2)
  8. Belmont Abbey College (2)
  9. St. Augustine’s University (3)
  10.  Shaw University (3)
  11.  Brevard College (3)
  12.  Bennett College (3)
  13.  St. Andrew’s University (3)
  14.  Chowan University (3)
  15.  Livingstone College (3)
  16.  Greensboro College (3)

The private colleges are also struggling with tuition revenue and endowment-to-spending ratios. Eight schools received a 2 or 3 for the “average tuition revenue per student” category and seven schools received a 2 or 3 for the endowment category.

For public four-year colleges, the evaluated categories were

  1. enrollment of first-time undergraduate students,
  2. retention rate,
  3. change in the average tuition-and-fees revenue per student, and
  4. change in state appropriations.

Only three of the state’s public four-year institutions received any negative rating, with all three of them receiving a 2 for “change in state appropriations.”

  1. UNC-Chapel Hill
  2. North Carolina Central University
  3. Elizabeth City State University

Elizabeth City State is the only public four-year institution in the state flagged for first-time enrollment. It received a 3 for that category.

And for public two-year colleges, the Hechinger Report evaluated

  1. change in entering student enrollment,
  2. change in the ratio of tuition-and-fees revenue to instructional costs, and
  3. change in state and local appropriations.

The majority of the state’s community colleges received poor enrollment scores. Of 58 colleges, 27 scored a 3 in the enrollment category, and five colleges received an enrollment score of 2:

  1. Montgomery Community College (2)
  2. Guilford Technical Community College (2)
  3. Wayne Community College (2)
  4. Brunswick Community College (2)
  5. Johnston Community College (2)
  6. Roanoke-Chowan Community College (3)
  7. Southeastern Community College (3)
  8. Stanly Community College (3)
  9. Catawba Valley Community College (3)
  10.  Cape Fear Community College (3)
  11.  Caldwell Community College and Technical Institute (3)
  12.  Bladen Community College (3)
  13.  Beaufort County Community College (3)
  14.  Asheville-Buncombe Technical Community College (3)
  15.  Alamance Community College (3)
  16.  Edgecombe Community College (3)
  17.  Durham Technical Community College (3)
  18.  Craven Community College (3)
  19.  Mayland Community College (3)
  20.  Lenoir Community College (3)
  21.  James Sprunt Community College (3)
  22.  Isothermal Community College (3)
  23.  Haywood Community College (3)
  24.  Halifax Community College (3)
  25.  Robeson Community College (3)
  26.  Rockingham Community College (3)
  27.  McDowell Technical Community College (3)
  28.  Piedmont Community College (3)
  29.  Tri-County Community College (3)
  30.  Western Piedmont Community College (3)
  31.  Vance-Granville Community College (3)
  32.  Martin Community College (3)

The fact that the majority of North Carolina’s community colleges received warning signs for enrollment shouldn’t come as a surprise. For over a decade, North Carolina community college enrollment had been falling. According to a report from EdNC, statewide community college enrollment decreased by 6 percent in 12 years (the calculation excludes Wake Technical Community College, which experienced an exceptionally high enrollment boost of 60 percent).

Up until 2019, only 19 of North Carolina’s 58 community colleges had seen an increase in enrollment in 12 years’ time. However, according to a February North Carolina Community College system press release, enrollment increased for the fall 2019 semester. According to the release: “Enrollment climbed 4.4 percent across North Carolina’s community colleges in fall of 2019, the first increase in nearly a decade.” Fifty-three of the 58 colleges reported increases. Only time will tell how COVID-19 will affect that new enrollment growth.

As the Hechinger Report’s data show, many colleges’ financial struggles began long before the onset of the pandemic. Though there isn’t one cause of financial instability, it’s clear that getting students to enroll—and stay enrolled—is a major factor affecting North Carolina institutions.

And college leaders should prepare for enrollment numbers to drop even more.

More students are opting to delay their college education due to financial concerns, fear of contracting the virus, and the fact that many colleges are going partially or completely online for the foreseeable future.

Surveys show that students place a great deal of value on living the “college experience”—an experience which, despite administrators’ best efforts, virtual learning simply cannot replace. For some community college students who live in rural areas, the lack of internet access for online classes could put their education on hold.

In order to keep their doors open and return to financial health, colleges—more than ever—need to strategically cut costs and rein in their spending. In some cases, colleges on the brink of collapse should consider merging with a neighboring institution. It might be their best hope for survival.

Shannon Watkins is senior writer at the James G. Martin Center for Academic Renewal.


Editor’s note: The original publication of this article did not include data from the North Carolina Community College system’s February press release. That information is now included.