Parents and students have become obsessed by the rapid-fire growth in tuition demanded by the nation’s colleges and universities. And, it’s easy to see why. Over the last 30 years, tuitions and fees have risen twelve-fold. But the steady march of higher college costs has obscured a fact that students and their parents should be focused on: A not insignificant proportion of the nation’s 4,500 degree granting institutions are financially stressed. Though they charge higher and higher fees, student bodies are thinning and a large proportion, particularly private schools, are being forced to slash prices.
The problem began to get national attention when Sweet Briar College, an all-women institution located near Lynchburg, Va., announced it would close its doors. The 114-year old liberal arts college for women that started as a finishing school cited “insurmountable financial challenges” as the reason for its abrupt announcement earlier this year that it would close at the end of the academic year.
Financial woes aren’t limited to all-women colleges. Smaller schools have been merging with larger rivals for some time. And, according to Moody’s, a bond rating agency, operating revenue for four-year schools is on the decline. “We maintain a negative outlook for the U.S. higher education sectordue to lingering stagnation of operating revenue, coupled with mounting expense pressures and anticipated weakening of overall operating performance,” Moody analysts wrote in a recent report.
The agency reports 18 institutions that are “financially stressed,” listed below:
- Alabama State University, AL
- Ashland University, OH
- Bard College, NY
- Birmingham-Southern College, AL
- Clark Atlanta University, GA
- Dowling College, NY
- Franklin Pierce University, NH
- Glenville State College, WV
- Life University, GA
- Marymount University, VA
- Mount Saint Mary’s University, MD
- Regent University, VA
- Sage Colleges, NY
- St. Joseph’s College, NY
- University of Puerto Rico, PR
- Vermont Law School, VT
- Wittenberg University, OH
- Yeshiva University, NY
To be sure, the Moody’s designation does not mean these schools will shutter tomorrow. It simply means that at this time they are financially troubled. Unfortunately, even this list doesn’t tell the whole story. Bond rating agencies only cover the largest and best known universities in the country. Moody’s tracks just 560 schools, a fraction of the total. Much more trouble lurks at the thousands of smaller institutions that have a much lower profile. Private schools that rely on tuition for 80 percent or more of their funding are most prone to financial problems.
Parents, though, will want to identify problem schools this spring as they prepare to choose a school with their child by National Decision Day May 1. Moody’s rates just 30 schools Triple AAA, their highest rating. Those schools tend to be market-leading research universities, sometimes with highly profitable hospitals affiliated with the campus. Harvard University, the University of Virginia and Pennsylvania State University are the sorts of schools that are part of this elite club. Most troubled are smaller, regional schools some of which specialize in narrow fields of study. They rely on tuition for a large proportion of income.
Getting your hands on bond rating agency reports can be difficult. For that reason, check out the Department of Education annual watch list here: https://studentaid.ed.gov/about/data-center/school/composite-scores which contains the names of schools that have failed the department’s financial responsibility test. Even this list, though, is not perfect. Sweet Briar rated high on these tests in recent years. Another way to spot trouble: If a private school’s average discount on tuition is higher than 46 percent, trouble could be ahead. Slashing prices demonstrates financial stress. Also, ask whether the college is making its enrollment goals. Declining student body size is a sign of trouble.
Ultimately, the responsibility will fall to parents to make sure they are sending their dollars to a school that has the financial heft to hold up over time. Choosing a college or university is a decision that will impact your child for the rest of their life, responsible not just for the quality of their education, but what kind of jobs they land and the professional relationships they make.
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