“… The financial health of colleges and universities is much in the news these days. An enrollment cliff – a drop-off in traditionally aged college students – will hit in the next decade and may threaten more small, regional and marginally resourced public and private colleges and universities. A recent article in Forbes offered some sound advice recently: “If you are worried or even curious about the financial health of a college, ask them. It’s a good, reasonable question for any student, parent or community leader to ask.” But what are the right questions to ask? As long-time university administrators with experience in both the public and private college sectors, we suggest beginning with these five questions:” …
https://www.ourmidland.com/news/article/5-ways-to-check-a-college-s-financial-health-14883746.php
The article begins by opining the possible closure or merging of “marginally resourced” colleges and universities then does a deep dive on the 106 institutions with billion dollar endowments or endowments large enough to throw off significant amounts of income to support the college’s operations. Um, those colleges are not in danger of closing any time soon. And, even if there were legitimate concerns about their financial stability, the information is not so opaque as the author’s make it out to be. Any college with capital needs large enough to require floating a bond can have its bond rating searched online via Moodys or S&P.
Speaking of Moodys, I ran into this news the other day about Northwestern University:
https://www.chicagobusiness.com/education/northwestern-loses-top-moodys-rating
Of course, a prestigious college like NU is not in danger of closing down anytime soon, but its financial health status does have some degrees of impact in its ability to compete with other elite colleges, its ability to recruit and keep world-class faculty, maintain competitively generous financial aids to attract top students, protect its admissions yield, etc.
As for endowments, I don’t really care for the overall size. From a “shopper’s” perspective, I like to look at the institution’s endowment per student. Who cares how large the overall endowment is if the institution’s programs are too large and spread out all over the place?
As for more “small, regional and marginally resourced public and private colleges and universities,” other telling signs of financial health are athletic and academic closures or downsizing, staff and faculty layoffs and other belt tightening. A friend of mine who’s a faculty in one such regional college told me recently that the funds for conferences and other travels have been reduced in the past few years and ongoing.
Endowment per student gets a lot of play on these boards, but it doesn’t always mean what people think it does. For some colleges, it means that a huge chunk of their operating budgets depend on the interest and capital gains generated by these billion dollar plus piggy banks. For an extended period of prosperity like the one we are experiencing, that’s fine. But, a lot of these places had to make jarring budget cuts and even had to borrow money in order to meet their payroll back in `09.
It also puts them at greater risk of being taxed by the federal gov’t.:
https://econofact.org/the-university-endowment-tax-who-will-pay-it-and-why-was-it-implemented
I don’t know what kind of “play” endowment per student gets on CC, and I don’t know what you mean by “it doesn’t always mean what people think it does,” but endowment per student, as opposed to total endowment figure, is a good indicator that colleges with large endowment per student can dedicate more funds to those attending, most significantly their financial aid. It’s of course one indicator among many others worth looking into for any shoppers concerned about the financial health of any colleges they’re interested in.
It’s sexy; it’s a prestige item. But, as you say, these days, endowment per student is largely a surrogate marker for how generous a college can be with financial aid. The higher the ratio, the higher the discount rate for tuition which is the other half of the financial aid equation.
However, if generous financial aid is of importance to you, your best bet is probably to research colleges that actually meet 100% need. Places as varied as Cornell, Tufts, Vassar, Harvey Mudd and Middlebury seem to do just fine with less than a million dollar per student endowments.
More important than endowment per student is the actual money spent per student and where it goes. Even then, you woud want to peel away all the wasteful spending that goes toward administration and collateral enterprises like athletics and just look at the instructional budget. Wesleyan has one of the lowest endowments per student in NESCAC but if you stopped your research there, you’d miss the fact that it has one of the highest R&D expenditure rates in that conference.
“Meet 100% need” is one of the most overestimated-in-significance phrases on these forums. The colleges that make this claim define “need” however they want, so their net prices for the same student can vary all over the place (and some may be more expensive than some colleges that do not make this claim).
Better to use the net price calculator at each college rather than rely on “meet 100% need” claims. (Of course, if your situation makes it difficult to use the net price calculator accurately, you are back in the old days when students had to apply without much idea of whether there is any chance of affordability.)
But then this thread may be more trying to point toward assessing the risk of college closure, or cutting underenrolled majors or departments to make the budget balance.