A crisis is looming for U.S. colleges — and not just because of the pandemic

More than 500 colleges and universities show warning signs of financial stress in at least two areas, The Hechinger Report’s analysis found.

This article about college financial health was produced in partnership with The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. This is part 1 of the Colleges in Crisis series.

Dozens of colleges and universities nationwide started 2020 already under financial stress. They’d spent the past decade grappling with declining enrollments and weakening support from state governments.

Now, with the added pressures of the coronavirus pandemic, the fabric of American higher education has become even more strained: The prospect of lower revenues has already forced some schools to slash budgets and could lead to waves of closings, experts and researchers say.

To examine how institutions were positioned to respond to such a crisis, The Hechinger Report created a Financial Fitness Tracker that put the nation’s public institutions and four-year nonprofit colleges and universities through a financial stress test, examining key metrics including enrollment, tuition revenue, public funding and endowment health.

Schools faring the worst in these areas — meaning that they are projected to dip under the 20th percentile in a particular category — are marked with warning signs in the tracker. A total of 2,662 schools were included in the analysis, and 2,264 had enough data to be evaluated in every category. All data predates the pandemic.

Our analysis of the stress test results found:

• Nationwide, more than 500 colleges and universities show warning signs in two or more metrics.
• The problems were not evenly spread among states. Combined, Ohio and Illinois have more than 10 percent of all the institutions potentially facing trouble. Ohio has 36 institutions with two or more warning signs. Illinois has 26.
• Roughly 1,360 colleges and universities have seen declines in first-year fall enrollment since 2009, including about 800 four-year institutions.
• Nearly 30 percent of all four-year schools brought in less tuition revenue per student in 2017-18 than in 2009-10.
• About 700 public campuses received less in state and local appropriations in 2017-18 than in 2009-10, and about 190 private four-year institutions saw the size of their endowments fall relative to their costs.

Many factors can cause colleges to struggle financially, according to a review of the data and interviews with 39 college finance researchers, student advocates, state officials, school administrators and faculty members. Over the last decade, enrollment slipped as the economy grew. Demographics are working against institutions in parts of the country as the number of teens — and thus the number of high school graduates — drops. State support still lags behind what it was before the Great Recession. Many colleges and universities have a history of mismanaging their finances, increasing spending even as enrollments fell or going deeply into debt to construct new buildings.

At worst, institutions under financial stress can fold — sometimes overnight, as government and accrediting oversight fails to prevent precipitous closures that throw students’ lives into disarray. Even in the case of orderly closings, students’ educations can be significantly disrupted — many drop out and never finish their degrees.

Our analysis of the stress test results found:

• Nationwide, more than 500 colleges and universities show warning signs in two or more metrics.
• The problems were not evenly spread among states. Combined, Ohio and Illinois have more than 10 percent of all the institutions potentially facing trouble. Ohio has 36 institutions with two or more warning signs. Illinois has 26.
• Roughly 1,360 colleges and universities have seen declines in first-year fall enrollment since 2009, including about 800 four-year institutions.
• Nearly 30 percent of all four-year schools brought in less tuition revenue per student in 2017-18 than in 2009-10.
• About 700 public campuses received less in state and local appropriations in 2017-18 than in 2009-10, and about 190 private four-year institutions saw the size of their endowments fall relative to their costs.

Many factors can cause colleges to struggle financially, according to a review of the data and interviews with 39 college finance researchers, student advocates, state officials, school administrators and faculty members. Over the last decade, enrollment slipped as the economy grew. Demographics are working against institutions in parts of the country as the number of teens — and thus the number of high school graduates — drops. State support still lags behind what it was before the Great Recession. Many colleges and universities have a history of mismanaging their finances, increasing spending even as enrollments fell or going deeply into debt to construct new buildings.

At worst, institutions under financial stress can fold — sometimes overnight, as government and accrediting oversight fails to prevent precipitous closures that throw students’ lives into disarray. Even in the case of orderly closings, students’ educations can be significantly disrupted — many drop out and never finish their degrees.

Both institutions have recently faltered. Their combined enrollment fell from 3,264 students in 2012-13 to 2,227 in 2018-19, according to federal data. The number of high school students in Ohio has dropped within the last decade, leading to fewer high school graduates, according to state and federal data. Those who do enroll at Rio Grande’s campuses often don’t stay; annual retention rates hover just above 50 percent for full-time students and are often even lower for part-time students.

In April 2019, Rio Grande faculty secretly held a vote of no confidence in the schools’ governing boards, alleging that administrators had kept spending as if the supply of new students would keep increasing. The board’s mistakes, the faculty argued, had led to “persistent and severe budget deficits.”

Shortly after that no-confidence vote, 18 professors — about a fifth of the full-time faculty — were told they would be let go, according to Rio Grande officials. (Two were brought back full-time and two will work as part-time adjuncts.) Programs that were deemed too small were eliminated entirely, such as the school’s music program.

Pines, who was among the 18 let go and will only be teaching part-time this fall, said many faculty viewed the budget problems as a “foreseeable train wreck.”

The reductions saved the school nearly $1 million, according to Ryan Smith, the university’s president, who assumed his role in October 2019, after the cuts had been made. He said he understood the frustration of faculty members, but that the downsizing had been necessary. “We kind of bottomed out as far as what we were offering before,” he said.

Pines says he can’t completely fault the prior administration for making the tough cuts, but he worries for recent and future graduates: “How would the bigger world perceive the value of our degree if, basically, you gutted most of your qualified faculty?”

Source: A crisis is looming for U.S. colleges — and not just because of the pandemic (nbcnews.com)