Study says one-third of colleges are financially 'unsustainable'
- A new tool developed by Bain & Company and Sterling Partners measures a college's financial sustainability based on two factors: an "equity ratio" (the change in value of an institution's assets relative to its liabilities) and an "expense ratio" (changes in expenses as a percentage of revenue).
- One-third of the 1,700 public and private colleges (including Cornell, Harvard, and Princeton) in Bain's initial study with the tool were found to be on an "unsustainable financial path." Users can view the findings on an interactive website open to the public.
- Bain partner Jeff Denneen admits that the study may be skewed due to record endowment losses suffered at the end of fiscal 2010.
From the article:
An analysis of nearly 1,700 public and private nonprofit colleges being unveiled this week by Bain & Company finds that one-third of the institutions have been on an "unsustainable financial path" in recent years, and an additional 28 percent are "at risk of slipping into an unsustainable condition." At a surprising number of colleges, "operating expenses are getting higher" and "they're running out of cash to cover it," says Jeff Denneen, a Bain partner who heads the consulting firm's American higher-education practice. Bain and Sterling Partners, a private-equity firm, collaborated on t...
- Chronicle of Higher Education Read More
Follow Roger Riddell on Twitter