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Can you give me examples of colleges that decreased enrollment to fix their equilibrium? This seems a convoluted way to fix an endowment spending problem. A far more straightforward to simply SPEND LESS. Some school may also decide to enroll fewer students, so as to keep their 'expenditure per student' steady, but the fact remains that simply spending less of the endowment is the first step. Frankly I thought the more common "strategic" plan was to cut back on tuition discounting (instead of decreasing enrollment), as a way to accommodate this lower spending.
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<p>Reducing spending (which almost has to mean cutting faculty slots) and increasing revenues by reducing the tuition discount rate (targeting more full-fare customers) are the components of equilibrium plan. </p>
<p>Both steps suggest cutting enrollment. If you have to cut faculty, your perceived quality will decline unless you also reduce enrollment. If your school isn't "selective" enough to attract more full-fare students at the current size, one good way to become more competitive is to reduce the number of acceptance letters. Remember the multiplier. Many schools are mailing 4 acceptances to generate 1 enrolled student.</p>
<p>Here's an example of a strategic plan built around reducing enrollment. See page 14 for the financial plan:</p>
<p><a href="http://www.oberlin.edu/strategicplan/pdfs/strategicplan.pdf%5B/url%5D">http://www.oberlin.edu/strategicplan/pdfs/strategicplan.pdf</a></p>
<p>Here's the catch. If you simply "reduce spending" by whacking some faculty positions, your student/faculty ratio will decline (as will the real quality of your product). This, in turn, will make your product less attractive to consumers, fewer rich kids will apply, and you tuition discount rate will increase, thus undermining the purpose of the cost-cutting in the first place. The key is that it costs more to educate 100 incremental students than you get from them in tuition revenues. Thus, whacking 100 students (and the professors who teach them) can improve the financial balance of a private college with added advantage of making the college harder to get into which makes it more attractive to wealthy customers.</p>
<p>I find it hard to believe that in many circumstances the marginal cost of educating a small number of addidtional students will exceed the marginal revenue from full pay students. So many costs are fixed over a narrow band that the only additional cost is faculty. 50 students at full pay means about $1.75 million in tuition. At $125K/head for faculty you could hire 14 faculty which is a ratio of 3.6 to 1. To maintain a 10 ratio you only need to hire 5 and pocket the rest to pay overhead.</p>
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50 students at full pay means about $1.75 million in tuition.
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<p>If a college could get full-pay students that easily, they probably wouldn't need to address issues of financial equilibrium.</p>
<p>The schools that are most successful in attracting full-pay students (the USNEWS creme de la creme) are only averaging 70 cents on the tuition sticker price dollar. The vast majority of private schools are seeing tuition discount rates of 40% to 50%, or even higher, so cut your incremental revenue gains from increasing enrollment in half.</p>
<p>That's not even looking at room and board, which is a loss leader. If it were profitable, more schools would build dorms to house their students.</p>
<p>In addition to professors, you need additional capactiy in dean's services, career counseling, registrar's office, study abroad office, psych services, health center, athletic coaches, science labs, financial aid office, music ensembles, and so on and so forth. Incremental students are only profitable to the extent that you do not increases services to maintain the same quality level.</p>
<p>I seriously doubt you would need an additional person in any student services for just 50 more students out of 2000 or so. Most of those folks are not suffering from overwork. I left out dorms because I assumed that either some seniors would move off campus or the school had some vacancies. Most schools in financial trouble are there because they LOST students and have excess capacity. Very few are in the get smaller to get richer mode.</p>
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Most schools in financial trouble are there because they LOST students and have excess capacity. Very few are in the get smaller to get richer mode.
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<p>I guess we need to be very specific. The vast majority of the country's private colleges and universities have essentially no endowments and live exclusively on tuition revenue.</p>
<p>The ones I have been discussing are the schools that do have endowments and are on the first pages of the various USNEWS rankings. Actually, the two LACs that have published plans to address financial equilibrium issues in the past couple of years are both at record high enrollments.</p>
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I seriously doubt you would need an additional person in any student services for just 50 more students out of 2000 or so.
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<p>No. You could just let quality slide. How long does it take to get an appointment to talk to financial aid at Berkeley?</p>
<p>But, if you increase the number of students without adding a single support person in any department, you will have reduced the availability of support services incrementally. I am not aware of any college health care or psych services that are currently overstaffed. Heck, many very well endowed colleges have been cutting back health services from 24/7 to M-F 9-5 -- a significant reduction in student services.</p>
<p>BTW, failing to provide housing for your students is a rather significant "quality" decision.</p>
<p>Many students are tired of the campus life after three years and would love a chance to move into less regulated housing and act like a grownup. Most times the requirement to live on campus is to prevent students from moving off in order to keep the dorms full and payoff the debt on them.
I doubt any decline in quality would be noticed by anyone. We are not going from 2000 to 30000--just 2000 to 2050.</p>
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Many students are tired of the campus life after three years and would love a chance to move into less regulated housing and act like a grownup.
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<p>That's not what we are talking about. Many colleges and universities provide on campus housing for less than half of their students. There's no "choice" involved.</p>
<p>interesteddad, I don't dispute that if you start cutting student services and other student-oriented things, students (and others) will start to perceive the college as less friendly, less service-oriented and possibly of lower quality. Maybe what we'd dispute is how much you can let these things slide before the perception takes hold. </p>
<p>But that's not really my point, here. </p>
<p>What I am challenging is your assertion that "let's cut enrollment" is the manner in which higher education finance folk commonly go about improving a college's financial position, or that this is part of a strategic plan to reduce enrollment spending while maintaining endowment spending per student.</p>
<p>I can't help but notice that Oberlin states, "Currently its most critical
financial priority must be to realize more net tuition revenue per student..." They state that in addition to cutting some students (and faculty), they are planning to reduce discounting, and retain the same number of full-pay students. That sounds both sensible and familiar to me. I didn't see a place where Oberlin said (or even implied) "we will reduce the number students so that we can raise/maintain endowment spending per student." Unless I missed it.</p>
<p>I think you've come up with a concept that sounds good, but does not in fact reflect how colleges think about endowment per student or endowment spending per student. I think it's an interesting and even useful metric, but in my experience I don't find it to the the first thing people look at. </p>
<p>I guess this sounds like nitpicking, but you've made statements that do not jibe with my understanding of higher ed finance, and it sounds to me like it doesn't ring true to barrons' ears either (although I can't speak for him). I'm trying to understand the source of your assertions.</p>
<p>Sorry, I was focusing on the Oberlin or typical smaller LAC example. They generally house most students in dorms and require them to live in them to keep them full--I mean add to the experience. For a large school to reduce by a handful of students would have little impact on endowment per student or overall finances.</p>
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I can't help but notice that Oberlin states, "Currently its most critical financial priority must be to realize more net tuition revenue per student..."
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<p>Right. But, then flip the page where they outline six specific strategies. The very first strategy is:</p>
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1. Reduce the undergraduate enrollment from a
baseline enrollment of 2,883 in 2003-04 to a
total undergraduate enrollment of 2,720 by the
year 2010.
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<p>Why? Because increasing the proportion of full-pay to discount customers while maintaining current enrollment would mean attracting MORE full pay students (in absolute numbers). They must surely have come to the conclusion that it is not possible to attract more full-pay students.</p>
<p>Furthermore, I believe they see a need to reduce spending, and that requires a reduction in faculty. The only way to reduce the faculty without further eroding their published student/faculty ratio and their "prestige" (i.e. the ability to attract full-pay students) is to reduce enrollment a comparable amount.</p>
<p>I agree with you. You can't look at any of these items in a vaccuum. Tuition discount rate, per student spending, per student endowment, and so forth are all inextricably linked, especially because schools with the highest per student endowments have the ability to attract full-pay customers, which in turn reduces the tuition discount rate.</p>
<p>As for visibility to college finance guys: Have you ever seen a strategic plan that doesn't call for a campaign to increase alumni contributions to the endowment? They may not be explicitly stating it as per student endowment (although many do), but it's the same issue. You say tomAto, I say tomAHto.</p>
<p>hoedown:</p>
<p>I'm also trying to provide a relatively available number that represents a private school's financial fundations. Comparing each schools net tuition revenues to operating expense is a good way to approach that. However, most college applicants are not going to dig deep enough to find those numbers.</p>
<p>Endowment is a simple number. The bigger the number, the more resources a college can add to the pot (on top of tuition revenue) and/or the more conservative a college can be and maintain reserves to continue programs, add diversity, etc.</p>
<p>You have to go the "per student" route if you want to compare the three or four similar colleges on your list. There's no other way to equalize the metric for different enrollment sizes.</p>
<p>Per student endowment is a number that any potential applicant can quickly access....and a number that can quickly clarify the differences between two seemingly similar colleges. If one school is spending twice as much per student per year than a comparable school, that money is buying something, whether it's more paid internships, less defered maintenance, flat-screen TVs in the dorm lounges, more diversity, an Arabic program, 24/7 health center, enough dorm rooms for all who want to live on campus, no lab course fees. It's buying something. Maybe it's something you want; maybe it's not.</p>
<p>I also wonder how accurate the "endowment" numbers are. The official number for Wisconsin only represents less than half of the actual total because they have at least six separate entitities that provide that resource for the university.</p>
<p>Reported endowment is a pretty solid number. These are charitable institutions that have to accurately report their endowments. You can get the "official" list each year at:</p>
<p><a href="http://www.nacubo.org/documents/research/2006NES_Listing.pdf%5B/url%5D">http://www.nacubo.org/documents/research/2006NES_Listing.pdf</a></p>
<p>Are there "asterisks" in a few cases? Yeah. Like the funky gift that a crazy member of the Eli Lily family left Earlham...the Conner Prairie working homestead farm and tourist trap along with a gazillion acres and many millions with the requirement that, as long as they funded the operation of Conner Prairie, they could use the rest for Earlham. What a nightmare for the school. They finally negotiated and got court approval to split off the Conner Prairie property and endowment into a separate entitity.</p>
<p>BTW, I don't know that endowment is necessarily a relevant figure for public universities. I defer to Hoedown for all things public. I don't have the first clue how to decipher the finances and it's probably different for every state.</p>
<p>Although there's little I love more than being deferred to (ask my spouse) that may not be warranted. While working at a public U has given me insights into that sector, my degree focused on all aspects of higher ed. I'd probably be better described as a good generalist rather than an expert in public universities. </p>
<p>I don't know how Wisconsin reports, but Michigan reports endowment for all three campuses rolled into one. In principle, that's confounding, but for practical purposes I don't think it much matters. That is, it's not really a gross misstatement of U-M-AA's resources because Flint and Dearborn are smaller, and I am pretty sure the lion's share of the endowed chairs and scholarships and major gifts have been designated towards the Ann Arbor campus.</p>
<p>hoedown, </p>
<p>The closest I've come to a good number for public university education was a document that one of the top state universities (I wanna say either NC or UVa) had to prepare for the legislature each year. It provided a "hard" number cost per student for undergrads and was used in setting out of state tuition and legislative appropriations to cover the in-state discount. I guess OOS tuition has to cover the operating costs. I'll have to hunt around for it. If I recall, it was pretty respectible number.</p>
<p>It was useful because it made some (presumably good faith) effort to back out the grad school and research dollars and actually pin down what they are spending per undergrad -- something that is just impossible to do from university financials. The costs of the vet school and the nursing school and the med school and the biz school are all so different.</p>
<p>If I could wave a magic wand and add one number to the Common Data Set, it would be a consistent, real number for operating cost per undergrad. But that will never happen. Too many big name, big enrollment private universities wouldn't want that number out for comparison.</p>
<p>I've never even looked at per student endowment for publics. I just don't think you can use the same financial metrics at all.</p>
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it would be a consistent, real number for operating cost per undergrad. But that will never happen. Too many big name, big enrollment private universities wouldn't want that number out for comparison.
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<p>I don't think it's a matter of the big bullies being afraid of how the information would make them look. True, they would "suffer" from the the benefits they enjoy from economies of scale and scope, but I don't think that's the only issue. There is not consensus on how "instructional costs" (whether calculated per student or otherwise) should be measured. </p>
<p>There are a couple of models for this (i.e. the Delaware study) but many folk familiar with higher ed think it's hard to find a model that works for all campuses. Added to that is a problem with standardization of measurement on some things. </p>
<p>I believe instructional costs studies are more useful for intrainstitutional comparisons. I question whether it's a reliable metric for a higher ed "consumer" trying to make a quality or service distinction between schools.</p>
<p>My example of Wisconsin. They only report the UW Foundation amount. In addition there are the UW System Funds 95% of which are UW Madison money. About $500 Million. Then there is the WARF--Wisconsin Alumni Research Foundation. All money goes to benefit Madison and comes from the patent income etc. Currently in the neighbohood of $2 Billion--a good neighborhood. The UW Medical Foundation--around $500 Million, Vilas Trust $175 Million, and some smaller trusts.</p>
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I don't think it's a matter of the big bullies being afraid of how the information would make them look.
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<p>I'm not sure (although I wouldn't use the term "bullies"). For example, somebody has suggested to USNEWS to use a measure of faculty size that includes professors who have a total release from teaching to pursue research endeavors. That's how we end up with some very misleading statistics. </p>
<p>Likewise, I think it would be relatively easy for USNEWS to change class size statistic from number of courses in each size category to something that reflects the sizes of the classes students are actually taking. For example, a 750 student lecture at Harvard only counts as 1 large "class", when the reality is that 1/8th of the entire student body is in that single 750 person lecture class each semester. </p>
<p>That would be very easy to correct by simply reporting the number of students in classes below 10, from 10-20, 20-30, etc. That data could be calculated from exactly the same registrar data used to generate the current numbers but would provide much more transparency into the real world undergrad experience.</p>
<p>To some extent, the current "statistics" have the effect of minimizing differences.</p>
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There is not consensus on how "instructional costs" (whether calculated per student or otherwise) should be measured.
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<p>That's why I wouldn't try to identify "instructional costs", but rather the overall operating costs for the undergrad experience. </p>
<p>For example, I don't believe that a 24/7 walk in health care facility is an "instructional expense", but it is very much a part of the "undergrad experience".</p>
<p>If you approached it from an operating expense standpoint, the only real challenge for universities would be a formula for allocating shared costs (faculty, buildings and grounds, etc.). Most of these could be allocated on a straight per capita basis. There must be some fairly standard measure of teaching loads.</p>