Will Colleges Survive 2020?

Published by Wendy Nelson on

Will colleges survive 2020? This is a question on the minds of families, college counselors and others with an interest in the college landscape.

Determining a college’s financial health before committing to send your student there has become very important in 2020. As colleges struggled with financial losses from sending students home in Spring of 2020, they hoped to have COVID-19 off the radar for Fall of 2020 so that it would be a normal return to campus. As I write this in July of 2020, many colleges expect not to have student back on campus at all this Fall, while others are limiting the students allowed back on campus. There will not be an end to the financial strain colleges are seeing for a while.

As a parent about to shell out tens of thousands of dollars for your student’s college education, you want to know that the college’s financial health is good so that you don’t need to worry about program cuts or closures.

College Closures

To date, there have been 11 colleges that have closed or are in the process of closing this year. Here’s the current list:

  • Concordia (OR)
  • Urbana (OH)
  • MacMurray (IL)
  • Lindenwood-Belleville (IL)
  • Nebraska Christian
  • Johnson & Wales – Denver
  • Notre Dame de Namur (CA)
  • Pine Manor (MA)
  • Holy Family (WI)
  • Johnson & Wales – Miami
  • Mercyhurst North East (PA)

These were all small schools that were not on the radar of most college search families, however they represent a significant increase over the small number of colleges that have closed each year over the last decade. They are an indication that the pandemic has done some serious damage in higher education and there will probably be more to come.

The school year of 2020-2021 may be a make or break year for many other small colleges that are teetering on the edge financially and were hoping for strong enrollments this Fall.

Admissions consultant, Hanna Stotland, JD, says, “The one thing that I’m confident about, sadly, is that this is going to kill some colleges. We don’t know which ones, and we don’t know exactly how many. We can do some predicting of who is likely to be most badly injured by this uncertainty, but changes in the landscape of available options is going to force changes in family decision making. And it would not surprise me if we lose dozens, or even hundreds, of small private institutions over the next couple of years.”

Cuts to Athletic and Academic Programs

As parents in the college search process, we wonder how we will know that the school our student picks is set up for financial success, at least over the next 4 years. Are the majors all safe? Are the sports safe? Is the campus going to see growth in new buildings for academics and housing?

A good indicator that a school is facing financial woes is when they start cutting athletic and/or academic programs. Unfortunately this hasn’t been limited to small relatively unknown colleges this year.

Stanford recently announced it was cutting 11 sports. Dartmouth cut 5 sports. Brown cut 8 sports. In total, 49 colleges have announced athletic program cuts this year. Tennis, swimming and cross country have been among the first to go.

Some colleges are cutting academic programs too. According to a recent CNBC article, “As colleges and universities across the country face extreme financial distress, some institutions are cutting the academic programs that were once central to a well-rounded education.”

Topping the list, the University of Alaska system is cutting 39 academic departments. Elmira College in New York is cutting at least 9 academic programs in addition to cutting athletic programs and reducing staff. There are many other colleges making similar cuts.

In general, the trend seems to be to cut liberal arts departments in favor of higher-paying majors. Colleges are banking on students wanting to go into the careers that pay the most and offer more job security during this uncertain time.

College Furloughs and Pay Cuts

The first cuts that tend to be made as colleges deal with declining revenues, are staff pay cuts and furloughs. The furloughs often go hand in hand with cutting academic programs, but the pay cuts tend to be across the board. State universities are experiencing these cuts as well as private colleges, as states announce budget cuts. For example, the University of Arizona enacted pay cuts for nearly all employees until the Summer of 2021.

All you have to do is Google “college pay cuts” or “university pay cuts” and you will see big name and small name schools, public and private alike, that announced pay cuts this Spring and those that continue to announce pay cuts now as Fall enrollment numbers come into focus.

Even scarier, as colleges look at their enrollments for Fall and their plans for on campus vs online learning, layoffs are starting. According to the New York Times, the University of Akron became one of the first colleges in the country to make deep cuts to their number of full-time professors this past week.

College Financial Health Data

All the cuts to staff, academic programs and athletics are in hope of keeping a college financially sound during this troubled time. College enrollments were already on a downward trend over the last several years, so financial troubles are not something new for many schools. Before COVID-19 existed, Forbes did a study on private college financial health, giving each college a letter grade. You can access this information through the article, “Dawn Of The Dead: For Hundreds Of The Nation’s Private Colleges, It’s Merge Or Perish“.

Keep in mind that this was written in 2019 so it does not take the pandemic into account at all. What it will do is give you a good idea of how these colleges were doing financially before the pandemic. Those that were struggling a year ago will have an even harder time surviving COVID-19.

Based on the letter grades assigned to schools in this study, my advice is to be wary of schools graded “D”, and to do more research for those graded “C-“.

A Study on College Survival

Scott Galloway, Professor of Marketing at NYU Stern, presented a study of 436 universities included in US News & World Report Top National University and College Rankings college rankings to plot these schools by “Value” and “Vulnerability” using publicly available data. There were 4 quadrants of colleges based on low or high Value scores and low or high Vulnerability scores. The quadrants are Thrive, Survive, Struggle and Perish. The quadrants for the 436 universities broke down like this:

  • Thrive – 88 schools – Elite schools and others that offer a strong value proposition
  • Survive – 128 schools – Schools that are more vulnerable due to lower demand and lower revenue, but still offer a high value proposition and will be fine
  • Struggle – 131 schools – These are Tier 2 schools with high admit rates, high tuition, and/or low endowments. These are seen as having a lower value than the groups above,  but remain less vulnerable than the group below.
  • Perish – 89 schools – These tended to have high admit rates, high tuition, low endowments, rely on a large number of International students, making them most vulnerable. They also have low brand perception, putting them on the lower end of value.

You can link to the spreadsheet of data collected for this study in order to see specifics for each of the 436 universities included. A lot of useful data went into the calculations, such as the undergraduate admissions rate, the Niche.com Student Life Score, 15 & 30-year net present value of a degree from the school, average undergraduate tuition, endowment per full-time student, and percent of international students.

Scott Galloway has many critics who do not put stock in this study, but a lot of the data makes sense. My recommendation here is to be wary of schools that fall into his “Perish” quadrant. I’m not saying don’t let your student put these schools on their college list, but I do believe it’s a good idea to have a variety of schools to choose from that don’t share the same characteristics.

Tips for Searching for Colleges in 2020

As a college search parent, what should you do with all of this information? Should you be worried about your kid’s college search? I believe it just requires some extra diligence to pick the right colleges during this crazy time. Here are my tips:

  1. Have your student build a larger list of colleges to apply to than they would have prior to COVID-19.
  2. Look for colleges that offer “automatic” merit aid or colleges that are advertising a reduced tuition rate for all students for Fall of 2021.
  3. Check the college’s Pre-COVID enrollment trends – was enrollment going up or down year over year? If enrollment was already going down this may signal a college that will have a harder time meeting financial targets now.
  4. Research state budget cuts impacting the state’s universities.
  5. Research private colleges pre-COVID financial health through the Forbes link shared above.
  6. Research endowment per student – higher endowments per student mean a more financially secure school.
  7. Have your student balance their college list between schools that are more competitive and admit fewer students and those that admit most applicants.
  8. If your student has taken the ACT or SAT, include several colleges where your student’s scores are above the school’s mid-50% range.
  9. Monitor the colleges your student applies to through to May of 2021 to make sure they are still in good shape.
  10. Try to relax and know that there will be plenty of colleges that will remain financially secure through the pandemic and there will still be plenty of deals if you look in the right places.

 


1 Comment

NP · September 10, 2020 at 11:54 am

“Research endowment per student – higher endowments per student mean a more financially secure school.”

Not necessarily true. Universities can’t just repurpose endowment funds to help cover declining tuition costs or pay electric bills. Most endowment funds are restricted for specific purposes like research, library, etc. Sadly, Universities don’t report how their endowment funds are to be used. While Universities may flaunt their massive endowment treasure chests to the public, we can’t just assume assume those funds can be repurposed to keep a college afloat.

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