TRANSCRIPT 🔗
Gary (00:02.994)
It's the November 20th, 2023, this week in College Viability Podcast. Hi, my name is Gary Stocker. Now upfront, today's podcast includes a discussion of does a high tuition price indicate a high quality college? Some ugly enrollment increase announcements. Lyon College in the middle of nowhere Arkansas wants to build a vet school and a dental school.
Fitch Ratings continues to frown on higher education finances, a story out of Pittsburgh about the local challenges of colleges in that region, and two more colleges try a sports as a financial lifeline.
strategy. We'll talk about that as well. Last week we started with awarding leadership attaboys and through the countless stories I get access to during the course of the week. Sadly, I have none to add this week. I'll look forward to adding those in the next couple weeks. But we do have what we started last week with our cutbacks and layoff lists. Instead of boring you with the same story details time after time, we're going to do this in a quick list. And most of the links today come from Rick Seltzer at the Chronicle for Higher Education. Like me, he noticed a pattern
had one in his emails last week list most of the ones I'm going to share with you. I'm just going to read those out. And we start with the University of Arizona. It predicted drag draconian athletic cuts after officials found its cash on hand rapidly dwindling. I don't know how you find that out, short notice. Some sports programs the University of Arizona says could end because the athletic department failed to quickly pay back a $55 million pandemic error loan.
Fresno College dropping 16 programs and consolidating five schools to two.
Gary (01:46.134)
The University of Nebraska at Lincoln seeks $12 million in cuts. The reductions are proposed for instructional, administrative and operational costs according to the local news affiliate, KOLN. Next is the University of Wisconsin Parkside expects to slash its workforce by almost 10% in the next year with the combination of the typical voluntary separations, attrition and layoffs. The source of that is the Milwaukee Journal Sentinel and Fontbonn University. I think we talked about this last week.
20 plus degree programs on the chopping block, along with 18 faculty members. We're also going to talk about their sports as salvation story in a minute. And Warren Wilson College in North Carolina is discontinuing five majors. Will terminate 14 faculty lines. So again, through retirement, attrition, and layoffs, and that's from the Black Mountain News. And then over the weekend, from my sources, Park University in Missouri and the Kansas City area is going to cut 16 faculty, three graduate degree programs.
about a dozen total majors, certificates, concentrations, and minors. Students can finish the same stuff we always hear. The students that are there can finish and then they'll take those programs away. A map.
on the school's website, a map on Park University's website. Listed 24 campuses in 16 states, down from 39 in 21 states just this past September. Parks enrollment, the story goes on, dropped more than 30% from 11,300 students in the fall of 2019 to not, to just 7,400 students in the fall of 22. That's what we call precipitous. Folks, the market's adjusting.
how many of these private colleges will not survive, and a separate question, what programs, majors, faculty, and staff will be cut at public colleges? They're all happening. The market's adjusting. It's tough to know when that tipping point will be reached, but it's out there, and we wanna make sure we provide you with information to make good decisions on the colleges that are strong and those colleges that are much less strong. In our college viability app.
Gary (03:52.982)
provides you with that resource to compare the private and public colleges you're considering. I'll have the links posted in the show notes as always, along with an end of the year, end of the data year promotion. And so let's talk about does high tuition price equal academic value? So a Lexus car or BMW or Jaguar has a high price, but it's generally acknowledged that the high price provides value.
with features and benefits and longevity and all those kind of things. But can the same be said can the same be said for a college who has a high list tuition price only to be discounted something along the lines of 50 percent just to get students enroll also provide academic value. So in the crazy tuition pricing world of higher education annual
tuition prices are set, for example, at 40 to 50,000, just for sake of example. The intent of most of those colleges is to create the perception of value simply based on the high price alone. With the average tuition discount averaging something in the vicinity of 50 percent, students on a 40 to 50 thousand dollar list price typically pay 20 to 25 thousand dollars for those same colleges.
And while there might be some slight discounting for high priced, high valued cars like Lexus or BMW or Jaguar, it won't approach anything close to that 50 percent that colleges do. So does the high price mean there's academic value? I'm sorry. Does it mean there's academic value attached to it?
And now comes the latest trend by an increasing number of private colleges to lower that high list price with something typically called tuition resets or they come up with fancier names. And those colleges take that high price and lowered about 50 percent of what it was, almost exactly mimicking the high price, high discount cost. And folks are trying to trick you.
Gary (06:02.882)
They're trying to trick you to believe that $50,000 list price gives you a $50,000 worth of academic value and you're only paying $25,000. Think about that. The next time you're looking at colleges and you're looking at the high list price, medium list price, and lower list price colleges, think about the value you're getting and you know where you go and you know where I'm
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headed with this. I don't think the high list price discounts or lower list price, either one is better. I'll argue that...
Neither of those is the question to ask. And if you want to look at value, if you want to look at quality in higher education, look at the four and six year graduation rates at colleges, especially those with high tuition prices. If those four and six year undergraduate graduation rates are below 50% at four years and 70% at six years, that's an indication.
that those colleges don't provide high academic value simply based on their price because they're not graduating students for whatever reason. And there's a long list of reasons. So don't get fooled by high price is the same as high academic value. It's just not true in all cases. In say a hundred, a few hundred cases even, it's probably true, but not in most cases. Take a look at those graduation rates to know.
And we're still seeing, I'm still seeing, enrollment increase announcements is what is heading toward the Thanksgiving holidays here in mid November. And here's my guidance for what it's worth. Please take with a proverbial grain of salt these increased enrollment announcements that continue to trickle out of these college public relations departments.
And while certainly some are gaining enrollment, in my experience, most of these announcements are so heavily qualified by something like time frame or the type of the increase in enrollment or the comparison source.
Gary (08:04.222)
As tonight, it'll be valid news. It's again, an example of a college that I've shared many times, engaging in management by public relations. And too many colleges, too many colleges, are desperate to find good news. So they take some significant poetic license with the news they do share. You wanna find a good college? Ask them about their four and even six year graduation rates.
There's no hiding there, no PR delusion or tricking, tricking can be easily taking place there, outside of maybe citing a single year increase in the rate. Lyon College, the story reads, Lyon College still plans to build veterinary and dental schools despite a property deal falling through with some partners. And this is from Brooke Buckner. This is from CVSTHV Channel 11 in Arkansas.
All right, so why in college wants to add a dental school and a vet school? First of all, let's go to the data as we always do in college viability. In the last eight years, again, 2014 through 2021, their fall FT enrollment is down 120 some odd students. It went from almost 700 in 2014 to down to just a little under 600 in 2021. Their four-year graduation rate is down 12 points.
And it was bad in 2014 at 49, and it's even worse in 2021 at 37%. And their six-year graduation rate in just 2021, 46%... 46 out of every 100 students who started at Lyon College six years ago, graduated.
Not good, not good. They have had some modest increase in tuition fees, not even a half million dollars over eight years, so that's not much more than couch money. Their endowment assets did take a big dump. As I recall a story of talking to someone, there was a donor, and then the endowment has gone up 52 million in those reported years. It was 45 million in 2014, and it was up to almost 100 million in 2021.
Gary (10:12.45)
But let's go back to the veterinary school and the dental schools. All right, I'll give them a big maybe. You've heard me say this before, though, and I'll say it again. The only guarantee is startup costs. Any expectation of materially significant new net revenue is one heck of a gamble.
And Logan, and not Logan, Lyon College, Lyon College has already hired two deans to build out the two programs that will start at the earliest in 2025. I gotta think there will be more to this story in the coming months. And of course, we'll share those story details with you.
Starting new stuff may work, but man, there is no guarantee. There's such intense competition for students. And we talked, I think, about STEM examples before. Every college wants to start a STEM program. Well, fine, go for it. But what if every other college has started a STEM program and you face the same tuition discounting pressures on new programs that you face on old programs? It's not helpful. It's not going to work.
There needs to be consolidation in higher education. Those colleges with bad finances need to raise the white flag and let this country move forward. As I've said before, this is not an issue of low enrollment or bad enrollment or bad graduation rates. This is a national issue. This is a national security. This is a national economic issue. And colleges that can't provide strong education and graduate students, in my mind, need to step aside yesterday.
And then let's go to Fitch ratings. And again, just a quick sidebar on this, Fitch, which is a rating agency that rates the quality and value of bonds, among other things, just over the weekend released a report saying, the growth prospects for colleges will constrain some higher US higher education margins, which means colleges aren't gonna make as much money.
Gary (12:19.934)
And this is just one more story in a long and increasingly lengthening list of new stories coming out that say higher education in general, there are exceptions, but higher education in large generalities is not in good shape. And those colleges that have not been financially successful or academically successful or enrollment successful in the last five to 10 years are gonna be faced with substantial challenges in the coming years. If for no other reason than the competition.
there's intense competition for a decreasing number of students. KWQC in the Quad Cities in Iowa.
has an interesting story. We recall that Iowa Wesleyan University closed this past spring. It appears that KWQC reporting that the folks at Iowa Wesleyan left student financial documents in an unlocked room somewhere. That is a developing story. I don't know that I'll go back to it, but
this is an example of a college that didn't have the resources to survive, also doesn't have the resources to close very well. Although Iowa Wesleyan did quickly have a...
garage sale for their desks and computers and microscopes and stuff shortly after they closed. And in Pittsburgh, Jordan Hronick, as an associate editor of the Pittsburgh Business Times on November 16th, wrote a story, Cliffhanger, local universities are grappling with enrollment changes that are challenges that are poised to worsen.
What else is new? This is just a story out of Pittsburgh that cites specific Pennsylvania colleges. I'm not gonna go through the details. He does know with some graphics that the birth rates are down. We know that high school graduation numbers are down. We know that again, just like the Fitch story, this is simply another story contributing to the increasing public recognition of decreasing value in the traditional college education and college education process. And finally today,
Gary (14:17.154)
Two colleges throwing against the dartboard sports programs. And the first headline reads, our good friends at Fott Bond University thought football could boost enrollment is a story from the St. Louis Post Dispatch by Blythe Bernhardt and Steph Kuklashin. Half the team left instead. And the story goes on to say how this was supposed to be a life and financial saving program for the college.
And while the college still weekly defends the program, just another example of a college trying to run their business by public relations with no reasonable expectation of generating anything close to materially significant new net revenue. It has happened in the past. It's happening at FontBond.
It's going to happen tomorrow and Northern Kentucky University, same kind of story, adds six new sports seeking enrollment growth and a balanced budget. So I guess after decades, maybe centuries, I don't know when Northern Kentucky University started, they think six new sports is going to get them over the hump. When other colleges are adding sports. They're assuming that those new sports.
new sports students, student athletes, and I've got the list. It's just not in this story that I have here. And this is from Ryan Planalp, who's a reporter for the Cincinnati Business Courier. I will note that's behind a firewall, so even though the link will be in the story notes, in the show notes, you may not get access to it unless you have access to the business journals. So I get two more scenarios where colleges trying sports.
They're guaranteed startup costs, maybe not as many as for opening a dental school and a veterinary school like Lyon College, but nonetheless, trying something that's not going to work. And so the patterns continue. And as we wrap up this November 20th episode of This Week in College Viability, we'll continue to report on these stories, but here's, here's the big picture conclusion I think we can draw. We're in the middle of something and it's not good. I've shared that before.
Gary (16:18.934)
There will continue to be college closures, almost all private colleges. There will continue to be public colleges cutting programs and majors and faculty and staff. There's a retraction taking place. I don't know how long it's gonna be, how substantial it's gonna be, but the historical data and the real time economic news that we see suggests that prediction is correct.
It's really difficult to be able to nail a time frame down. I think we see continued closures month after month. I think we see continued program and major faculty and staff and public college reductions month after month. At some point, there will be enough college students available to fill the pipeline for those colleges to open. And maybe after this wave of closings and consolidations and cutbacks,
we'll see some serious mergers, some serious consolidation in higher education. I'm not hopeful yet, but so many other industries have had merger and acquisition activity. There's not going to be much acquisition in higher education. Merger activity, it's reasonable, and I think it's going to happen. It's just so difficult to tell the time frame.
So until we get together again on November 27th, this is Gary Stocker with the episode of This Week in College Viability. We'll talk next time.