Dive Brief:
- Colleges and universities needing more student housing but lacking adequate funds can go into debt to build, or they can finance new buildings with private capital from those interested in the steady revenues the buildings can produce.
- While private financing is fairly common at large, public institutions, The Chronicle of Higher Education reports a growing number of small, private colleges are doing the same, entering into somewhat risky deals that pledge guaranteed payouts to the financiers, who expect to collect for decades whether the student demand is sustained or not.
- St. Joseph’s College in New York and Middlebury College in Vermont are among those that have entered into such deals, but drawbacks include a years-long loss of steady housing revenue for the colleges and the prospect of additional costs if the new dorms can’t be filled with incoming students.
Dive Insight:
Much is uncertain at small, private colleges today. Large numbers of such schools struggle every year to fill their freshman classes, battling increasing competition from alternative post-secondary providers as well as shrinking population in some areas. While tough financial times makes it difficult to justify taking on major debt to build new dorms, these buildings can help attract more students.
Housing is one of the areas in which such partnerships can be lucrative for investors and still beneficial for colleges. Some schools have also privatized parking, turning over the profits of parking lots as well as the maintenance responsibilities.