Another Small College Bites the Dust

There has been a disturbing uptick, most notably in New England, as small colleges continue to close. Following the closures of Mt. Ida in Newton and Wheelock in Boston, The College of St. Joseph in Vermont and Newbury College in Brookline recently announced that they are likely shutting down over the next year.

Newbury, with 627 students and annual tuition of about $34,000, is closing because the financial numbers make no sense with prohibitive financial aid discounts and declining net tuition revenue. The college has been running a deficit, sold off buildings in its tony Boston area enclave, and had explored a merger with other institutions. Enrollment has declined 24 percent over a five-year period and it depends on tuition for 74 percent of its revenue.

Not alone in U.S. higher education, Newbury has continued to operate on an archaic financial model that no longer makes sense.

Orderly Closure May Protect Against State Regulation

The reaction from state politicians has been significantly more muted than in the recent blow up at Mt. Ida College’s abrupt closure earlier this year. Laura Krantz and Deirdre Fernandes noted in the Boston Globe that Attorney General Maura Healey observed: “Closing a school is never an easy decision, but sometimes it is the right one to protect students.”

Newbury is working with other institutions to smooth the transition for its students who must transfer. No specific date has been set for the closure, making it a far more orderly transition than in the Mt. Ida debacle.

Richard Doherty, president of the Association of Independent Colleges and Universities of Massachusetts, suggested that the Newbury example demonstrates that higher education in distress can work through an amicable process about how to close without state interference. The Globe notes that Mr. Doherty believes that Newbury came forward on its own and is shutting down responsibly, proving that additional state regulation is unnecessary.

There are a number of lessons to draw upon from the recent spate of New England college closures:

  • Not all colleges closures will likely be in rural areas.
  • The operating model on which most colleges function, cobbled together from the rapid enrollment expansions of the 1970s, no longer works.
  • Smaller colleges with high tuition discount rates, low endowments, a heavy dependence on tuition, and an undifferentiated program are especially vulnerable.
  • While small colleges may feel the early effect of shifting academic priorities, funding approaches, and demographic change, they are more a harbinger than an exception.
  • Public institutions and better situated private colleges and universities should understand the lessons from these closures and learn from them.
  • Colleges must be creative, entrepreneurial, and agile before they are caught, like Newbury, in a death spiral driven by an unsustainable operating model.
  • In deciding to close or merge, colleges must attend to their students’ needs and future plans in a carefully orchestrated teach out and communications plan.

College Closures Should be Wake-up Call for All Trustee Boards

There are other lessons as well. The projected Newbury closure is a telling statement that America’s colleges cannot operate as independent, isolated “cities upon a hill.” Rather, they must have boards of trustees who understand the systemic nature of the problems that they face.

Colleges with a failing operating model cannot make incremental choices about how to become sustainable. Governance can sometimes be the root problem that leads to college closures.

Government Officials Should Learn More about Higher Education Industry

Mr. Doherty is likely right to suggest that a restrictive regulatory environment is not a panacea either. Recent history suggests that the state and federal government do not understand how colleges work. Fueled by tax dollars, they are spectacularly inefficient examples of how to run a business. Legislators and administrators do not appreciate how the high fixed costs of labor, land, and capital offers little discretion for most colleges.

And as they govern seemingly by anecdote and polling, state and federal governments are episodic and sporadic in their own contributions to higher education which they established as a public good.

At the institutional level, it is clearly time to begin to imagine how we build new budgets in higher education. What are the building blocks going forward? It starts with an understanding that colleges must seek a long-term solution to their budget woes. They cannot assume that a booming economy will support an incremental approach permitting them to kick the can down the road or that this economy will continue.

Demographics and the national political dysfunction will not likely produce global pools of new students to grow institutions and disguise their failing operating models.

Reimagining a New Financial Model for Higher Education

Two directional approaches might work. The first is a re-imagining of how colleges and universities might partner together to create efficiencies and differentiation among them. Institutions must ask themselves whether they can afford their current physical footprint, what tools they must manage to support their mission, and what efficiencies in facilities, programs, and operations can lessen their dependence on net tuition revenue. Even more critically, they must support the development of new products in areas like student aid that lessen their reliance on an antiquated tuition model.

As Dr. W. Joseph King and I argue in How to Run a College:A Practical Guide for Trustees, Faculty, Administrators, and Policymakers, the sky is not falling on higher education despite the uptick in closures.

We need an orderly, agile, and structured approach that permits colleges to move to a more sustainable operating model. America’s colleges and universities remain a public good, whether public or private. But time is running short to offset the unnecessary constriction caused by choosing incremental change.

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