According to a recent article in CNBC’s website, Moody’s Investors Service estimates one in five small private colleges are facing fundamental stress. This is due to declining revenues, rising expenses and very little pricing power when it comes to raising their tuition. The current COVID-19 crisis is only going to add additional financial stress.
Many of the closures are concentrated in the northeastern and midwestern parts of the United States. Not surprisingly, these are the areas that have large demographic pressures such as an aging population and young people moving away to southern areas of the United States.
How can you tell if your chosen college is showing those warning signs?
- It’s usually small colleges that are typically enrolling less than 1000 students that face the biggest risks. Do a search for your colleges Common Data Set on the web. Included in that document which many colleges fill out each year is information about their annual enrollment. Look for a pattern of regular declines.
- Check for deferred maintenance. When you take your college tour, look for signs that some of the buildings might be falling into disrepair, or the landscaping has been neglected. Are students complaining that air conditioning and heating is not working well? Don’t be afraid to ask if the college is investing in new technology for classrooms.
- Tuition discounting. According to the National Association of College and University Business Officers, the average tuition discount for freshman at private colleges and universities is now 52.6%. Go to a website such as www.collegenavigator.com and see what the net price is that families are paying compared to the retail price. If you see the discount rate exceeding 75%, that might be a sign to worry.
- Do a news search. Use a tool like google news to read a lot of the articles written about your chosen college. Get a sense of some of the issues they are dealing with. Look for a change in the colleges mission. Have they started offering online programs or master’s degree programs? That isn’t automatically a warning sign, and in fact could be promising. You want to make sure however that the undergraduate program priority remains strong.
Your family is about to spending a significant amount of money on this four year adventure. What you don’t want to have happen is an unexpected closure change your and your students plans. So do your homework!