As higher ed budgets dwindle, will smaller institutions survive?
- Wheelock College's recent announcement that leaders were considering a merger with Boston University is reflective of a larger trend of smaller colleges engaging in mergers, dropping programs, and selling assets — which has experts questioning the survival of these institutions in the industry.
- Data from Inside Higher Education and Gallup this spring shows only 51% of finance officers at small, nonprofit institutions said their campuses were financially stable, while that number was 65% last year. And Moody's data indicates more than one-third of colleges with fully enrolled student bodies below 3,000 had budgetary deficits in 2016, which is up from 20% in 2013, reports The Wall Street Journal.
- Accordingly, from 2010 to 2017,there were approximately two dozen mergers and acquisitions in the industry, according to data from Parthenon-EY.
Funding woes and tight budgets are not just plaguing small institutions throughout the industry — all stakeholders in higher education have been affected by dwindling resources, especially those institutions that are looking for outside support. In fact in terms of public funding, research shows states are currently spending around $9 billion less on higher education than they were in 2008, and other data from this year shows that about 33 states had garnered revenue below their original projections, which resulted in their cutting higher ed budgets, a reality which impacted institutions in states such as North Dakota, West Virginia and Wyoming.
As this trend of dried up resources continues to affect the industry — for instance, Stephen Jordan, president of Metropolitan State University of Denver, recently said that “somewhere around 2025, there will be no funding in higher ed.” — states are going to increasingly look toward the possibilities of mergers between universities and colleges as a way to reduce spending costs, meaning institutions are going to have to try even harder to prove their relevancy and stay afloat. Within this dynamic, the industry has already seen a number of these transactions happen, in addition to some institutions closing altogether, which calls into question whether these smaller players will be able to survive.
In addition, cutting programs and selling assets to stay ahead as the landscape of higher education changes, executive leaders can also work together with state policymakers to make sure that they are getting the resources they need and not getting saddled down with too many mandatory costs. They can also look toward alternative sources of revenue, like renting out parts of campus to other industries. And, they may find that merging with other groups or even partnering up on certain initiatives can help them stay in the game.
- The Wall Street Journal Some Cash-Strapped Private Colleges Cut Programs, Sell Assets
Follow Shalina Chatlani on Twitter