<p>I happened across this article today about the financial troubles Birmingham-Southern has been having over the last year (Help</a> Wanted: Leader to Restore Students, Finances, and Trust - Administration - The Chronicle of Higher Education). </p>
<p>My son was contacted by the XC coach from BSC last year and we only considered them for about 2 minutes due to a couple of factors (size, greek culture, didn't offer his intended major, etc.) -- but this article shocked me because it made me realize that I know nothing about determining the financial health (or lack thereof) of a school. it didn't help that I had also just finished Mark Taylor's, Crisis on Campus... so now I'm becoming slightly paranoid.</p>
<p>Please excuse my ignorance, but short of looking at the endowment growth/decline over a period of time what else could or should we be examining?</p>
<p>To look at financial strength, most people look at endowment. However there actually are colleges that have a debt that is larger than their endowment.</p>
<p>For many colleges, you can find a Moody’s bond rating and report on google. Moody’s and some other services look at financial controls, endowment, debt, spending, admission rates, yield rates, and other factors.</p>
<p>Some colleges post an annual financial report on their website, although it is often hidden in a finance dept. section.</p>
<p>
</p>
<p>Just looking at the size of the endowment can be very misleading. Typically endowments pay out at 3.5% to 5% per year, based on a 3-year, 5-year, or 7-year moving average of endowment value. That means an endowment of $5 billion—which only about 10 or so schools have—would produce annual income of about $250 million tops. That’s a nice sum of money, you might think, until you compare it to other sources of revenue. Many schools haul in more than that in tuition revenue (net of financial aid). Quite a few major research universities haul in literally hundreds of millions of dollars a year in research grants, the most successful of them in the vicinity of $1 billion annually. And state flagships might bring in $300 million to $500 million or more annually in legislative appropriations—a $500 million haul being roughly the equivalent of the payout from a $10 billion endowment. Countering that there’s debt, which as charlieschm suggested (^ post #2) may offset a sizable fraction of the endowment.</p>
<p>Bottom line, looking only at endowment is foolish. The bond rating agencies track all of this closely. They’re not infallible; they were dead wrong on many financial institutions and other corporate players before the recent recession. But for those not trained in financial analysis they’re probably as good a source as any to rate the financial soundness of academic institutions.</p>
<p>Good question.</p>
<p>Although my daughter is only a high school sophomore, she’s been looking closely at schools and continues to narrow and refine her list of possibilities. As she “settles” on possibilities, I begin my research, focusing on such things as the school’s financial aid offerings, scholarships, COA, etc. For colleges outside Alaska I’m particularly interested in the schools which participate in the reciprocal Western Undergraduate Exchange (WUE) program, which offers out-of-state students tuition at 1 1/2 times the in-state rate. </p>
<p>I set up Google email “alerts” on each of the schools she’s selected. I may receive 5-10 messages a day on each school, directing me to news articles and the like (and sometimes directing me right back here to CC!) about that school. Right now, for example, I’m reading about on-going discussions in the Oregon legislature, re: college funding. I’m reading about the Univ. of Nevada/Las Vegas considering bankruptcy. I’m reading about my home state Univ. of Alaska system putting together a new merit-based scholarship system.</p>
<p>These “alerts” lead me to a better understanding and knowledge, including knowledge of the school’s financial health, on each of the schools that interest my daughter (and, by extension, me). Such knowledge will help us see what schools are financially sound and those which are not.</p>
<p>It takes a bit of time to go through all the email alerts–my list is up to about 25 colleges–but I’m retired, so hey, I’ve got time!</p>
<p>"But for those not trained in financial analysis "</p>
<p>Thanks everyone for your input – ^^^— because that definitely describes me:)</p>