Last March we wrote on how a growing number of small liberal arts colleges were facing major financial challenges with the risk of shuttering operations. Since last spring, the number of small private school closures has grown to include: St. Gregory’s University, Grace University, Concordia College, Marygrove College, Atlantic Union College, and Moody Bible Institute.
These small schools share specific traits: high tuition, minimal endowments, religious affiliations and locations in rural or suburban areas. Roughly one-third of the small private colleges rated by Moody’s Investors Service generated operating deficits in 2017, an increase from 20 percent in 2013.
Today’s students continue to shy away from expensive liberal arts schools that leave them in debt and are considering larger, public universities. Moody’s recently released a report about college closures and said the amount of colleges closing in 2017-18 is expected to triple with small colleges the most at risk.
Increased tuition has forced many students to think more about value. In recent years, larger schools have been able to offer better rates of financial aid and lower tuition. With fewer students choosing smaller, more expensive universities, revenue from tuition has fallen. Bigger schools have bigger endowments, allowing for flexibility. Smaller, private schools don’t always have the assurance of large endowments to fall back on. When budgets are stretched, the first thing to go are specialized programs and facilities. Eventually smaller schools may be forced to lay off faculty and staff, thus decreasing overall value in the eyes of potential students.
Last year, due to ‘financial challenges’ St. Joseph’s College announced that it would cease operations at the end of its spring semester. The school lost $4 to $5 million each year in revenue since 2012. Board Chairman Benedict Sponseller said the school took out a large mortgage in hopes of increasing enrollment. When enrollment did not increase, St. Joseph’s began to spend its endowment, around $24 million in 2015, to stop the bleeding. It did not work.
St. Joseph’s is not alone as St. Gregory’s University hoped a $12.5 million loan from the Citizen Potawatomi Nation – through the US Department of Agriculture – would keep it from closing. Despite de-annexing from the city of Shawnee to qualify, the loan was denied. Board Chairman of St. Josephs, Rev. Don Wolf said, “”Without this component in the financial plan, the ability to sustain the university at this point is not possible.” The university suspended operations in the fall.
Dowling College, St. Catharine College, and Marian Court College are among others who have shut their doors in recent years. David Warren, head of the National Association of Independent Colleges and Universities, says small schools must understand their own value and cut costs to survive. With larger schools offering what today’s students want- generous financial aid, access to urban areas, and numerous school programs backed by large endowments – small liberal arts schools have a lot of value to make up.
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