Report finds many small, private colleges are in strong financial shape
Despite constant discussion of an industry in crisis, a new study from the Council for Independent Colleges, in conjunction with the TIAA Institute, reports the opposite: many of the economic indicators for small, private institutions continue to improve in the aftermath of the Great Recession. In all, 88% of such institutions have improved their financial standing, including in the aftermath of the economic downturn.
Amy C. Novak, president of Dakota Wesleyan University, located in Mitchell, a town in central South Dakota, said the anxious analysis of the financial state of these institutions and the industry-wide concern when a small school faces closure is inconsistent with the actual state of her campus.
“Because small colleges are tuition-dependent, those stories can garner headlines in ways that do not reflect the true nature of how small colleges are run,” she said. “There’s a great amount of fiscal management in private institutions, and they weather the storms of the ups and downs of our financial markets with a bit more stability than given credit for.”
The report utilized data from 559 baccalaureate and master’s-level private nonprofit institutions, most of the schools in the CIC, using 14 years of financial data to construct a picture of economic health. The analysis included many smaller schools like Dakota Wesleyan, which was founded in 1885 and enrolls approximately 900 students. Novak noted that administrations at smaller schools may be more financially stringent when it comes to construction and refinements; a larger public or private school may have access to a large endowment, public funding, or extensive borrowing mechanisms, but at Dakota Wesleyan, construction does not start on new facilities until the funding is secured.
The report used the Composite Financial Index to chart discrepancies between regions, financial resources and enrollment sizes, finding varying levels of impact, but often the report concluded that these individual attributes were not likely a determining factor in the financial viability of a particular institution. The report found that most CFIs for schools declined precipitously in the immediate aftermath of the crash, and again in 2011-2012 when there were concerns about the sluggish pace of the recovery. Of the schools included in the study, 29% had gained two points or more and achieved higher than a 3.0 on their CFI, while other schools were “maintainers,” which meant they stayed above 3.0 while achieving less than a two-point increase. The report also found that of the 12% of schools that declined, there was a larger contingent located in the Southeast, though even in this region, most institutions had gained or maintained their financial status.
One way small colleges and universities can better sustain campus operations in the midst of economic uncertainty is through partnerships with local industries, which Novak said Dakota Wesleyan strived to achieve. Such schools could often act as a kind of “labor force incubator,” and with close proximity to local industries, these schools could be more adept and changing the classes and services they offer to fit the needs of the surrounding workforce. Those industries, Novak said, were often supportive of the university through high points and downturns.
Partnerships matter most for smaller institutions
“They tend to be strong in supporting the school when there may be economic vulnerability. They’re investing essentially in their labor force,” she said. “I often champion the fact that small [schools] can be very good, and we have an agility to changing market conditions and demands that larger public institutions may not have.”
The university offered additional support to departments which found ways to collaborate with industry to work job experience into the instructional model. Students pursuing a degree in nursing who worked in assisted living or other medical facilities were asked to identify something they’d like to improve in their workplace. The initiative proved beneficial for the student, the school and the student’s employer, and Novak asserted that it was vital for schools like Dakota Wesleyan to be “responsive to their region,” working as collaborators with the surrounding community to create a reciprocal relationship that could benefit both. The school was expecting about 100 business leaders from numerous industries to visit the school in the coming fall, to get a better assessment of what their graduates are doing well from those who have employed them.
“The reality is most students can speak well and articulate their ideas, but perhaps we haven’t as intentionally as we need to tell [students] how those skills transfer into the workplace,” she said. “I think for a long time we haven’t listened as well as we’ve asked our students to listen.”
The report detailed a number of ways in which smaller colleges and universities had successfully maintained or improved their economic standing, including restructuring academic programs or creating new viable ones, investing in online courses, renting out campus facilities, expanding athletic programs and putting more emphasis on international student recruitment. A third of the colleges and universities that reported for the survey indicated they were trying to follow strategies of “cost containment and reduction,” as well as “revenue enhancement and diversification."
- The Council for Independent Colleges The Financial Resilience of Independent Colleges and Universities