Struggling Colleges in Survival Mode

    Thursday, December 5, 2019



    Some of the top colleges and universities in the US are struggling to survive.

    What tactics are these colleges and universities using when they are in survival mode in order to lure more students?

    When Steve Thorsett, president of Willamette University, crunched the numbers recently he realized that business was looking grim. The flow of customers to the university had fallen to a new 10 year low, down as much as 20 percent since 2015. The year after that, annual expenses outpaced operating revenues by nearly $14 million. Mr. Thorsett needed to do more than just figure out how to adjust margins. He could make cuts, but university budget cuts can cause serious complications. He wanted his operation to grow bigger, not smaller.

    He decided to find a partner on shakier ground. The following acquisition would bring several hundred new customers for the university, allowing efficiencies of scale that lower costs.

    The higher education sector grapples with a sharp decline in enrollment and financial challenges that cry out not for small, incremental changes, but for radical solutions. The colleges and universities that fail to adapt risk joining the average of 11 per year that the bond-rating firm Moody’s says have shut down in the last three years.

    Due to a decline in the number of 18-year-olds and low unemployment luring potential students straight into the work force. enrollment is down by more than 2.9 million since the last peak, in the fall of 2011, according to the findings of National Student Clearinghouse Research Center. More than 400 colleges and universities still had spots available for freshmen and transfer students after the traditional May 1 deadline to enroll for the fall semester or quarter, according to the National Association for College Admission Counseling reports.

    More colleges and universities are likely to go under; Moody’s estimates that the pace of closings will soon reach 15 colleges or universities per year.

    When asked what steps they would take to avoid closing, several campus leaders responded saying they would go on “[continuing] to graduate students who [would] make a tangible and constructive difference in the world.” Mr. Thorsett says that the crisis has gone beyond the point where those sorts of good intentions are enough. Higher education administration needs to actively search for concrete new ways to rebuild enrollment and produce much-needed profit revenue.


    One way this is possible is through acquisitions like the one that Willamette University did with Claremont School of Theology in California. The Claremont School is now being moved to the Salem, Oregon campus of Willamette. 

    Mergers and acquisitions will become highly frequent. High Ed Consolidation Solutions, the first self-described and full-service university and college merger consulting firm, dedicates itself to this business. 

    Colleges want to reduce the number of dropout students because it is cheaper to provide support required to keep tuition-paying students than to recruit more. A few top colleges and top universities are pushing job and on-time graduation guarantees. Some are also advertising the flexibility of online degrees through online learning portals so that students can earn their degrees online. Several colleges are looking into corporate training so that employers foot the bill for workers who do not need financial aid or fitness centers.

    Higher education institutions are adding programs tied to real-time workplace demand, including online courses that appeal to those who need flexibility to balance their education goals with families and work. Other colleges and universities make small amounts of income from things such as renting out dorm rooms in the summers on Airbnb, catering weddings, and licensing logos for products including caskets and urns. 

    Willamette is set on distinguishing itself. Its competitors are other small liberal-arts colleges such as Reed and Whitman. Willamette does, however, have several graduate divisions and a goal of increasing its enrollment from 2,700 to 4,000 over the next 10 years starting with 400 from the theology school. 

    SHORTER DEGREE TIMES
    Willamette positions itself as a school that is small enough to promise personal attention but big enough to offer lots of choice. Mr. Thorsett says that the university plans to ramp up money-saving accelerated programs through which students can get both undergraduate and graduate degrees more quickly than it would take them at another university. An example is the five-year combined BA and MBA. It may now add a joint BA and Master of Divinity degree with C.S.T.  

    Other colleges and universities are trying to cash in on the growing impatience that students and parents have when it comes to earning their degrees. According to federal figures, only 41 percent of undergraduates finish in four years.  

    Speeding up the graduation process is a promotional tool. Howard University, which suffered a nearly 28 percent drop in enrollment last year, is promising rebates equal to half the cost of their final semesters to students who graduate on time or early. Dr. Wayne A.I. Frederick, Howard University’s president, thinks that as many as 10 percent of his students can finish early. They will increase the number of credits that students can take at once and will include three-credit mini-semesters to make use of an otherwise unproductive winter break.

    EMPLOYMENT GUARANTEES
    Some universities and colleges offer employment guarantees. DePauw University promises job placement or a free additional semester to graduates who meet certain guidelines but don’t have jobs within six months. 

    Higher education institutions are trying to add subjects that connect with real-world demand. They added 55,416 new programs in the five years ending in 2017. These programs include cybersecurity, coding, public health policy, and more. 

    LOWERING THEIR PRICES
    Several universities have cut tuition costs by as much $20,000. Applications have gone up and the size of entering classes rose slightly. But cutting prices does not guarantee a constant rise in numbers. Gains were short-lived. 

    ENCOURAGING GRADUATE SCHOOL
    Colleges and universities are encouraging students to pursue their master’s and PhD degrees because these are revenue producers for them.

    TEACHING CORPORATE STUDENTS
    Colleges and universities are attempting to work with corporations to provide classes for their employers.