<p>Interesting article about how Oberlin decided last spring to reduce its size and move towards more need awareness in order to boost its financial stability. There is a link in there to the actual strategic plan, which makes for interesting reading.
<a href="http://insidehighered.com/news/2005/03/17/oberlin3_17%5B/url%5D">http://insidehighered.com/news/2005/03/17/oberlin3_17</a></p>
<p>Interesting reading, Carolyn.</p>
<p>The two key financial indicators for a college are:</p>
<p>a) per student endowment
b) tuition discount rate (financial aid/gross tuition & fees)</p>
<p>Oberlin intends to increase a) by lopping off 100 more students (Enrollment has already declined by 100) and reduce spending accordingly with a faculty downsizing.</p>
<p>They intend to reduce b) by trying to lop off 100 financial aid students and I guarantee it won't be 100 higher stat merit-aid kids.</p>
<p>There are many colleges in the same situation and I predict that we haven't seen the tip of the iceburg yet. The culprit is the tuition discount rate. Financial aid spending has gone through the roof in recent years as schools have effectively lowered their prices through increased discounting. The other alternative would be to reduce the "other price" -- selectivity or median SAT scores. However, that makes it harder to attract full-fare customers as prestige is tied to selectivity.</p>
<p>What we are really seeing is the impact of competitive merit-aid bidding wars (both explicit and hidden merit aid).</p>
<p>Per student endowment is the key. It provides cash money to offer the luxury touches that attract full-fare customers and/or to cover the cost of tuition discounting (and you better have a lot of tuition discounting because diversity is a key selling feature to luxury full-fare customers).</p>
<p>As a sidenote, I'm starting to have a real distaste for the "private college counselors" quoted in these articles lately. Their stock in trade seems to be an implied snootiness. From everything I can tell, Oberlin is a wonderful college. The entire college application game would be a lot more rational if some east coast college apps got mailed to the midwest, instead!</p>
<p>Yawn.</p>
<p>IMHO, the only news here is that Oberlin admits to the problem. As I've said in other posts here, they can fix the situation o so subtly. Just give more weight to community service, for example, and you can probably lop off half your low income admits. What working class kid has time for community service???</p>
<p>I think Oberlin's problem is that their perceived liberality implies to many folks that they must meet a higher standard that, say, Yale. Just walk around Yale and tell me you cannot feel the wealth oozing out of the students. Check out the shops...Yale does not have this problem because we EXPECT them to cater to the wealthy. We don't expect the same out of liberal, quirky Oberlin.</p>
<p>NewMassDad:</p>
<p>I don't think the issue has anything to do with Oberlin being liberal. It's a probably that is going to cut a wide swath through all colleges and universities with exception of about a dozen colleges and universities with astronomical per student endowments.</p>
<p>Yale doesn't have the problem because they are one of those twelve and have been for a very long time. They have offered the luxury perks for 200 years and solidified a well-heeled clientele. Without looking up the exact numbers, figure Yale is selling a $75,000 product for $40,000 (actually probably more like $27,000 after discount). That's an easy recipe for a long line of customers as long as you have the per student endowment to pay for it.</p>
<p>Oberlin is not exactly an endowment poor college. It is in the top 30 in per student endowments in the country - immediately behind Brown and ahead of UPenn. Just a tick behind Columbia and Northwestern. Larger than Wesleyan. Much larger than Tufts and Georgetown.</p>
<p>Fundamentally, the rapid rise in financial aid spending (both need-based and merit-based) is nothing but a good old-fashioned price decrease. Wait 'til the echo boom demographic glut leaves the marketplace and you'll see firesale price cutting and a lot of colleges getting smaller.</p>
<p>That's not necessarily a bad thing. I certainly didn't shed any tears when the Honda shortage came to an end and dealers could no longer get $1000 over sticker for an Accord. I think the elite college market is way overheated right now and some cooling off in demand would be a good thing. But, it is going to be difficult adjustment. Why do think everyone is so gung-ho to attract more international students? It's not all the "global village vision thing".</p>
<p>
[quote]
As a sidenote, I'm starting to have a real distaste for the "private college counselors" quoted in these articles lately. Their stock in trade seems to be an implied snootiness.
[/quote]
Amen. Both of the quoted remarks sound like car salesmen pushing their own models against the competition.</p>
<p>Apart from the issues raised in the informative discussion above, I would call attention to those reported "win rates." That Oberlin loses more often than it wins when students are admitted to both Oberlin and Grinnell ought to bother Oberlin. Not that Grinnell isn't a very good school, but this is a competition that my guess is Oberlin used to win more often than not. The same is true of the competition with Carleton. Again, a fine fine school, but not one that Oberlin lost to a generation ago (my guess). </p>
<p>What both of those win rates also show is the myopia of the college counselors quoted in that article: Grinnell and Carleton are hardly urban or eastern schools; yet they, too, win in the competition for dual-admits with Oberlin.</p>
<p>Oberlin could borrow a page from Mt Holyoke. Actually, they could hire the dozen of consultants Mt Holyoke hired to establish their "position" among peers. MHC has to rebate 45% of its tuition and has been learning how to market (downplay) its lower selectivity and how to focus on a different category of students that has no overlap with the Ivies and little with community colleges. It's all about carving a profitable niche.</p>
<p>I haven't read the report, but my understanding is that, except for a few token NMS awards, Oberlin doesn't do merit aid. If it "loses" head to head to Grinnell, wouldn't that be at least partly because they do?</p>
<p>
[quote]
If it "loses" head to head to Grinnell, wouldn't that be at least partly because they do?
[/quote]
</p>
<p>Absolutely. A lot of people don't know it, but Grinnell has the largest endowment and largest per student endowment of ALL liberal arts colleges. Larger than the next four -- Pomona, Swarthmore, Williams, and Amherst. They spend less per student and use their endowment to compete on price through lower tuition and heavy discounting. Grinnell's per student endowment is three times the size of Oberlin's, so they can afford to be aggressive with their pricing and still be fiscally conservative in their use of endowment income.</p>
<p>So, yes, that is exactly why Oberlin in losing the head-to-head matchup. That's the merit-aid bidding war. BTW, Oberlin spends 11% of its aid budget on merit-aid -- a not inconsequential percentage.</p>
<p>Xiggi:</p>
<p>I don't know about Holyoke, but I have read that Smith's rapidly increasing tuition discount rate has reached the point where they no longer feel it is tenable and needs to be addressed through financial aid policy changes. Haverford's discount rate is at the point where it will trigger by-law mandated caps that require policy changes.</p>
<p>IMO, there won't be more more than a dozen "need-blind" schools left in a few years. To be perfectly honest, the market would probably work better with a more explicitly stated pricing structure with list prices established in inverse relation to median SAT scores. That is the reality now, but it's hidden in the discount rates because nobody wants to lower their list price and "devalue" their product.</p>
<p>Short-term, it makes sense to market to the white and wealthy customer base. However, with the changing demographics of the country, colleges that aren't building a brand among Latino and Asian-American consumers now may be hurtin' down the road. Being "lily-white" is already a competitive disadvantage, even among the wealthy and white consumers in the prime Northeast and West Coast markets.</p>
<p>ID, I saw on their page that they offered a limited amount. interesting, when my D was looking into them years ago, I am positive they did not offer it then. Though maybe i'm just remembering wrong.</p>
<p>Since ID mentioned endowment, I thought you'd all be interested in a look at Grinnell's strategic plan. First here's the Inside Higher Ed piece on it: <a href="http://insidehighered.com/news/2005/05/02/grinnellGrinnell%5B/url%5D">http://insidehighered.com/news/2005/05/02/grinnellGrinnell</a> And the direct link to the plan itself: <a href="http://www.grinnell.edu/offices/institutionalplanning/strategicplanning/%5B/url%5D">http://www.grinnell.edu/offices/institutionalplanning/strategicplanning/</a></p>
<p>I didn't post Oberlin's strategic plan to bash Oberlin. I posted it because I agree with ID that this is the tip of the iceberg of what is going on at many schools. I can name several others (Macalester and Earlham for sure, but I also bet Dickinson) that are discussing these sames types of issues.</p>
<p>The other trend in strategic planning seems to be not getting smaller but taking advantage of the bump in the numbers of college age students that's occurring and will peak in a few years. Goucher is one school trying to take advantage of this --- they're boosting their enrollment to 1500, building new dorms, etc. Haverford is considering growing from just over 1000 to 1600 in the next few years. One wonders what will happen when the "bump" goes flat. For an alternative view on growth, see the recent article in the Chronicle of Higher Ed about Earlham's decision to stay at 1200 - It's featured on the opening page of Earlham's site.</p>
<p>I think this sort of information is useful on both a theoretical and practical front. Theoretically, it is interesting to see how so-called "non profit" organizations try to manage business issues. Practically, however, knowing that schools like Oberlin and Earlham are aiming for smaller growth, or that Goucher and Haverford are planning to grow, is important to know as you're planning a list of schools to apply to. (Not to mention, it's always nice to know what a school you may be attending is planning for the time you may be a student)</p>
<p>Funny, huh? Oberlin is getting killed by Grinnell's merit-aid discounting, but Grinnell feels like they can't fiscally justify their discounting.</p>
<p>This is precisely what Williams Prez, Morty S*c*hapiro predicted for the merit-aid arms race several years ago in a white paper.</p>
<p>I think back to the first time I picked up a USNEWS listing of median SATs when my daughter was beginning her search. Using what I thought I knew about traditional admissions difficulty, my immediate reaction was "what the h#ll, how did all these schools get median SATs like Williams, Dartmouth, etc.?" </p>
<p>The answer is merit aid discounting. They got such high median SATs the old-fashioned way; they bought them. Otherwise, the scores would be distributed over broader range with less compression at the top and more meaningful differentiation in the REAL difficulty of admission. It is the lack of identifiable resolution in selectivity that makes us all think the admissions game is so happenstance. Because the median stats are manipulated by merit aid, true differences in selectivity are shrouded in fog.</p>
<p>ID, are you aware of any study of the actual mean/median sales price for colleges after discounting? </p>
<p>I agree with your comment about Grinnell vs. Oberlin, that the win-rate reflects the price as well as other factors. Is the same true of Carleton v. Oberlin?</p>
<p>One big question in my mind after reading Carolyn's links on Grinnell. </p>
<p>Grinnell was a college that was barely on my radar screen of awareness decades ago, but it seems to have risen hugely in endowment---the article mentions their endowment growing from $40 million to $1.3 Billion in just 25 years.</p>
<p>That's pretty amazing---however did they manage THAT!</p>
<p>(Note: actually the Inside HIgher Ed link Carolyn posted didn't exactly work for me but I found this on the site after searching:
<a href="http://insidehighered.com/news/2005/05/02/grinnell%5B/url%5D">http://insidehighered.com/news/2005/05/02/grinnell</a> )</p>
<p>That kind of endowment growth can only come from a huge donation of stock that goes through the roof, much in the way Coca-Cola stock donated to Emory back in the 30s became the mother lode.</p>
<p>I'm not absolutely positive who the sugar-daddy at Grinnell is, but Warren Buffet is a "Lifetime Trustee of Grinnell College", so that would be a pretty good guess.</p>
<p>Grinnell was fortunate enough to have an alum who was a founder of Intel. He generously endowed the school.</p>
<p>there is also another part of the demographic cycle that could negatively affect the schools listed on this thread...the boomlet notwithstanding, the population shift has been primarily in the south and west, causing schools like Berkeley & UCLA to become only slightly less selective than the biggies; conversely, Michigan has become a relative safety for any high stat OOS applicant.</p>
<p>Since the vast majority of students go to a school within 250 miles of home, I would opine that schools like Oberlin, Grinnell et al, will have to continue to "buy" students to get them to even apply.</p>
<p>A lot of schools did very well during the dot.com boom/bust of the nineties, Grinnell among them. Studies have shown that once a college endowment reaches the billion dollar level, it takes either a real economic earthquake or a conscious decision to spend down the endowment to reverse its performance. </p>
<p>But, I disagree with ID to the extent that he said, endowment per student is one of the two most important things to look for in terms of a college's finances. Endowment per student actually tells you very little about a college's finances; it doesn't tell you what it spends its money on, how much or how little. To be economically viable an educational institution needs two things: 1) a predictable income stream and, 2) controllable expenditures. Every college is different, but, in general, most of the "prestige" colleges have a combination of things going for them, including large endowments, generous alumni and some hook that annually draws the sons and daughters of the fabulously wealthy.</p>
<p>Observers have been predicting Oberlin's demise for many decades now, and it always seem to bounce back. This is what a full page Newsweek article celebrating the 150th anniversary of its founding (that's the sort of pull that it had in 1983):</p>
<p>"The financial outlook is particularly troublesome for Oberlin's commitment to black education [sound familiar?] ... Since black students tend to have less money than whites, the financial aid restrictions could slow Oberlin's progress toward its 15% nonwhite enrollment goal. Currently blacks make up 8.4% of the student body. Asians and Hispanics, 5%" [Newsweek April 4, 1983;p.79]</p>
<p>Well, here it is, twenty years later and the latest estimates are that Oberlin's non-white enrollment is at the 20% level, including a 7% niche for blacks (that latter figure is not bad considering that affirmative action was still a controversial issue in 1983 and since then, <em>every</em> compeitive college competes for the same small pool of high achieving African-American students.) I predict that twenty years from now Oberlin will still be leading the pack, producing the diverse, quirky, socially aware leaders they always have.</p>
<p>If endowment per student was that important, we'd be having very interesting conversations about Berry and Berea. (But then the yield at Berea pretty much puts it in a class by itself. ;)) You can also artificially increase endowment per student by keeping the size of the student body low, and keep costs down by accepting students who are less demanding in higher cost areas, from football to music to the studio arts to maintaining JYA programs in high-cost geographic areas.</p>
<p>Conservatory instruction, and the one-on-one instruction it requires, is a bit more costly than political science classes.</p>
<p>If per student endowment is not important, I wonder why the references to it are so prevalent in ALL college strategic and finanical planning?</p>
<p>Most of the areas you mention on the spending side are not terribly expensive. Football, even at a powerhouse DIV III school is $1 million a year or so and is almost always covered by special alumni funds. With TV contracts, NCAA payouts, and Nike deals, it's a big money maker for big Div I schools. That's why the football coach always makes more than the president.</p>
<p>The Study-Abroad programs are money-makers in most college budgets. They are happy to charge US tuition and provide that service.</p>
<p>I believe that by far the most costly academic departments on a per student basis are the hard sciences and engineering. Very expensive facilities, lab costs, research spending, etc.</p>
<p>The financial figures don't support the contention that "conservatory music" is a particularly high expense. As I understand it, Oberlin's consevatory is considered to be pretty decent. Yet, including the conservatory students, Oberlin spends $27,000 to $28,000 less per student than either Williams or Swarthmore, neither of which have more than half a dozen music majors.</p>
<p>New England Conservatory does spend about $3,000 more per student than Swarthmore, but that is with a combined undergrad/graduate enrollment of just 355 students, so the overhead allocation per student is astronomical. The per student cost is probably inflated because it is not allocating a penny of spending to the youth programs, the private continuting ed instruction beyond the enrolled conservatory students. That per student figure is just the total operating budget divided by 355.</p>
<p>"I believe that by far the most costly academic departments on a per student basis are the hard sciences and engineering. Very expensive facilities, lab costs, research spending, etc."</p>
<p>Huh?</p>
<p>This is actually a complex topic. Let's take undergrad science education first. Yes, laboratories are more expensive to build and furnish than a social science classroom. Agreed. But, instructional expense is often less. Most schools have large lectures, often the largest on campus, for core science classes. Ever see a small O chem lecture? Intro Bio? Labs are handled mostly by TAs. AND, many colleges charge extra for lab courses.</p>
<p>Now take a look at research spending. Almost all of it is externally funded, often by NIH, NSF etc. On top of direct expenses, the money the lab actually gets to spend, there is a significant indirect cost component, to pay "rent" for the lab space, departmental overhead, the library etc. These are carefully negotiated rates, often 50-60% or more of the direct costs. Some have even argued that colleges make money on research.</p>
<p>I agree that the equation for a LAC is a bit different. They usually need a wealthy donor to pay for new science buildings.</p>