Beyond the (College) Brochure for Jul 17, 2024

Mary McGrath (00:02)
Hello and welcome to the Beyond the Brochure podcast where we provide you with information and guidance about college financials and decisions. My name is Mary McGrath. I'm a rising senior at Linwood University and my cohost is Dr. Gary Stocker, who is the founder of College Viability. Dr. Stocker, welcome to the podcast.

Gary (00:18)
Mary, it's not as hot this week as it was last week, but it's always a pleasure to talk to

Mary McGrath (00:22)
Yeah, yeah, I'm very grateful for that. The heat was starting to get to me a little, so it's been nice, but yes. So to jump right into it, obviously on this podcast, we discuss a lot, mainly colleges that are in financial distress or on the verge of a college closure. So is it common for colleges that may not be in this situation? Maybe they're a little bit more better off. Are they at risk to cut certain majors or programs just depending on funding and things like

Gary (00:49)
absolutely. And as you might guess and the listeners might guess, I follow all sorts of college of higher education topics and almost daily, not quite daily. They're especially during the school year, not so much in the summer, Mary. There are both public and private colleges, both financially strong and financially weak colleges saying, hey, we're cutting back on these five majors. And they tend to be almost always low enrollment, majors, low enrollment programs, foreign languages, for example.

are one of the more common ones. Liberal arts studies are one of more common ones. So yeah, every college is cutting back because they have to be able to preserve their cash. So if they're paying you as an adjunct faculty member to teach a Spanish class and there's only two students enrolled, they're losing money. And so yeah, almost every college out there is cutting back in some form or fashion just to be able to make sure the cash they have is positive.

Mary McGrath (01:44)
And to look at it from a perspective of a student who just recently graduated from a school that has unfortunately closed, would this have a negative effect on them, whether it be in an area such as finding a job? Is that a negative thing on their resume?

Gary (01:56)
Yeah, yeah. There's no really practical impact. They've earned the degree. They've fulfilled the requirements, both for the general education and the major, and they've earned that diploma, which is what you're working on right now that says, hey, I graduated with my bachelor's degree in whatever. The other part of that, though, is there is some logic and some argument that there's a traumatic impact, maybe not a practical impact, because like I said, they've earned the diploma.

But now all of a sudden they have no alma mater. And if you spent four years or even more going to a college, it's been a big part of your life, especially if you're 22 years old. And even if you're 42, to look back and realize that the college that you spent all those years at no longer is in existence, there is some trauma, not for everybody by any stretch, but there is some trauma to recognize that that name is no longer in existence, even though the academics you earn

are 100 % valid.

Mary McGrath (02:59)
So with different college closures, obviously sometimes it can come as surprise to different students and their families, whether they be prospective students or current students. In these situations, would you say that the faculty and staff are actually more informed about the state of the college financials or are they kind of in the same boat as those students?

Gary (03:17)
If only that were so. To answer your question, absolutely not. The faculty and students are essentially in the same boat. They only know the information that their college leadership shares with them. It's a sad commentary really for both parties. I'm hard -pressed to say which one is hurt more, the student or the faculty. The faculty of course, it's their livelihood that's at risk.

And the students, their ultimate livelihood is at risk, but they have some options, even though it's traumatic, to move on from a closed college for lots of reasons. And we can talk about that another time. I can't say that college leaders have evil intention. I don't believe that they do.

but they have this fiduciary responsibility, which is to look out above and beyond for the value, the safety of the organization, the continuing ongoing operations of the organization. And if they said to anybody in a public setting, hey, we're running out of money or anything like that, Mary, it's gonna become a self -fulfilling prophecy. Word will get out, don't go to Mary University because their president said they're in financial distress.

So what we're seeing, especially in 2024, and this is a sad development, is we're seeing about one private college, nonprofit private college close per week. And more than half of those are with relatively short notice, like weeks. And when there was one last week in Chicago, it was a Northwestern college in a suburb of Chicago. Announced their closure, Mary, on Monday, but they locked the doors the prior Saturday.

and University of the Arts in Philadelphia and Wells College in New York and others, they're just not doing right by their students. And sadly, Mary, I worry that that pattern will continue. But on the other hand, here in St. Louis, there are some that do it well. Sad though it may be, Fontbonne University here in St. Louis announced their closure this past spring, but they won't be closing until about this time next year. Now, it's still traumatic for lots of reasons.

But God bless them, they're doing the right thing by getting out in front of this and saying, guys, find a new job, students, find a new college, and they're helping them find those colleges. So there are some that are doing it right. But I worry in the coming months, as we see more closures, in particular because of the FASTA debacle, that we'll see way, way, way too many colleges.

announced their closure on something like Friday and turn out the lights on Monday or something similar to that. And that's not good for so many reasons.

I wish that faculty would use the version of the app that we've created for them, the college and faculty version. And we have one, as you know, for both the public and private colleges. And I'll make sure to put a link in that in the show notes. To spend a couple bucks to be able to look at not just their college, Mary, but to compare their college to their competitors. Regionally, nationally, statewide, it doesn't really matter what it is. Because otherwise, they're depending on

on college leaders and boards who have, if not an offensible argument, at least a logical argument saying we can't tell you faculty how bad it is because of that self -fulfilling prophecy. And so faculty need to take it of their own to find something like the College Viability app and the ones specially designed for faculty and staff. Take a look at those nine or 10 reports we've created for them and then have an informed conversation with their bosses. Hey boss, our enrollment has been down for eight consecutive years.

Our tuition fee revenue has been down six of the last eight years. What's going

Mary McGrath (07:09)
Yeah, so I know you mentioned that when a school is in financial distress, sometimes that demand or almost the want to go to that school obviously goes down. Because like you said, word gets around with that kind of thing. So does a school's acceptance rate or even their scholarships and grants that they offer also become less competitive since the demand is down to go to that school?

Gary (07:19)
Yeah,

And there's a few ways to look at that. And really the competitive piece is a term not commonly used, it's selective, right? And there are maybe 50 really selective colleges in the country. The IVs, Ohio States, the Illinois, the Michigan, the USC, the Texas, and the rest are comparatively non -selective. And so what happens when a college is in financial trouble is they become even less selective.

So let me give you an example. This is for the listeners to be able to understand what percent admitted means. And if 100 students apply to Mary University and Mary accepts five of them, that's a really, really selective university. There are very few of those. But if Mary University accepts 75 % of those, they aren't, know, the university is not very selective.

And I can make a logical argument that they are as much accepting those students for the tuition and fee revenue as they are for their academic preparation. When that percent admitted gets above, let's say 90%, I'll be nice. So they admit nine out of every 10 students. There's no way in the world that anything close to selective, they're admitting students so they can pay the bills. That's harsh. It's logical. It's fair.

because what we're seeing is that's reflected then in the graduation rates. And you and I have talked about four -year graduation rates before, and they're abysmal, abysmal. I posted something on LinkedIn this week on my regular top bottom report, where I reported on the four -year graduation rates, the 2022 four -year graduation rates for almost 1 ,300 private colleges in the country. More than half, Mary, and you've heard me say this before, more than half don't even graduate. 50 % of their students

in four years, what a tragedy that is. And we've talked before about buyers and sellers, I think, and Jeff Salingo is the guy that coined this term. the sellers are those top 50, the Yale's, Harvard's, and the other colleges that are referenced. Every other college is a buyer of some sort, and they're buying your enrollment. And they mostly do that through tuition discounts.

It's mostly called merit aid. Most of them are called scholarships, but it's really just discounts, just like you and I get when we go to a grocery store or clothing store or buy a car, something like that. And so they become less selective just to get the tuition dollars and the consequences are not good. And I've coined a phrase for those that accept more than 90%, more than 90 out of every 100. And fair or not, I call them heartbeat admissions colleges, because essentially have a heartbeat, they're going to admit

Mary McGrath (10:24)
Yeah, so I've never heard that phrase actually. That's pretty clever. I like that one. I'll start using that. So are these college closures usually more common in a certain region of the country or is it just that's not really a factor in this?

Gary (10:39)
No, it's a factor. And the most at risk regions are in the Northeast and in the Midwest. And there's a logical reason for that because that's where the most private colleges, most colleges really, per capita per thousand, 10 ,000, 100 ,000 citizens, however you want look at that, that's where the biggest concentration is. So I've got a list of four high at risk states.

and I'm being nice, should be a much larger number, but the four states at the greatest risk for private college closures are Pennsylvania, the state of New York, Wisconsin, and Minnesota. I should probably add Michigan. I should probably add Ohio, but I haven't done that yet in part because I haven't had the time, but those are high risk states.

Missouri and Illinois should be on that list in some form down the road as well because they have a lot of private colleges in those states. So yeah, it's geographical. are college closures everywhere. This year they've been in Florida, they've been in California, they've been in the Northeast and Midwest, they've been in the South, but it's typically in the Midwest and Northeast.

Mary McGrath (11:51)
Yes, so obviously when we're looking at or when students and families, I should say, are looking at different colleges, obviously the tuition and different financial aid offerings is one of the most important things they look at, especially from the parents point of view. So how often does this get revised by a college?

Gary (12:07)
Good question. And during the admission year, constantly. And here's why. If you're applying to a college and they accept you and they make you a financial aid offer and these colleges are looking at the number of student butts, sorry to be harsh, student butts they need in their seats at the start of the next school year. It's mid -July, so colleges across the country starting about a month from now.

And this process probably started in April or May. If colleges are scared that they're not going to make that student butts in seats number, they're going to contact students and say, hey, you know that $20 ,000 scholarship we gave you? We'd like to make it $25 ,000. So like I talked before, they're buying your business. They're welcome to do that. There's nothing wrong with that. But at some point, the colleges then, they discount the tuition so much.

that they don't have the funds to make payroll, they don't have the funds to keep the lights on, they don't have the funds to make payments on their debt. And that's one of the leading factors of colleges closing is they don't have cash because students are getting such monstrous discounts just to show up. Great for the students, absolutely fine for the students. And then we should all get that kind of discount with everything that we do, but the colleges need some money.

to make payroll. The faculty and staff still demand to be paid. I I'm being silly, but that's the heart of matter. And so, yeah, they change it all the time because they want, they need, if they need 500 students, 500 new freshmen, and there are 400 in mid -July, they're scared to death that they're not gonna get that number and have to do all sorts of cutbacks when the school year starts in August or September.

Mary McGrath (13:59)
And although it's unfortunate and we have seen it happen in the past, would you say it's common for colleges to attempt to deceive students and families about its financial state in hopes of trying to get that number, reach that student enrollment number?

Gary (14:13)
Yeah, I want to grow up to be a nice guy. And I'm hesitant to use the word deceive, but they certainly are not proactive. They certainly don't offer anything that somebody doesn't ask for. And again, it goes back to that self -fulfilling prophecy that we talked about. It's a tough gig. One of the toughest jobs in the world these days is a college president because they have so many different stakeholders.

faculty and staff and students and students' families and the community and bondholders and the list goes on and on and on. They're in a position where they're hesitant to say, we're in trouble. And that's why College Viability, one of the main reasons why I had the passion behind College Viability is a private entity like College Viability needs to be out there and provide tools like we do with our app to say, hey,

Be careful about going to Mary University. Their enrollment has been down the last eight years. Their tuition has been down. Their graduation rates are awful. There are better options because there are many, many financially strong and academically strong colleges, but you just have to look at the data. And I think I've shared with you before that one of the analogies that I make with the college viability app, we've talked, we all know what the FAFSA is, of course. And I make the argument that the college viability

is the reverse FAFSA. Colleges know about your family's finances from the FAFSA. It's only fair, Mary, that you and your family and all the families in the country can learn about a college's finances. And the only resource without exceptional financial knowledge and looking at financial statements is to use the college viability app. And that's why it's out there.

Mary McGrath (16:03)
So how can students and families trust that the information they are getting directly from that college, that that information is accurate and

Gary (16:12)
The old Latin phrase caveat emptor, of course, means let the buyer beware, right? And that applies in higher education today more than ever before. And again, while colleges should be more forthcoming with their data, it's just not gonna happen.

And that's why, you know, there's a group of folks like me, and I was being interviewed by USA Today earlier today, and I introduced the phrase to them. There is a cadre of higher education data entrepreneurs, like myself at College Viability, who are taking the lead on exposing college, exposing is too harsh, publicizing, noting colleges financial health or lack thereof. And that's the only way it's going to change is with folks using data.

And it's the old moneyball analogy like Oakland Athletics started way back in the 1990s, I think. It is the moneyball era in higher education. And data entrepreneurs like those of us at College of Viability are leading the way to say, hey, look at the data. Don't trust colleges because they have a vested interest. They're probably not evil, but they aren't sharing information that they should.

Mary McGrath (17:27)
And with that, it'll be a wrap for myself and Dr. Gary Stocker. Thank you for joining us on the Beyond the Brochure podcast where we provide guidance on college decisions, financials, and much more. Hope to see you next time.