<p>In a fit of nostalgia googling, I ran across the "Sheldon Jackson College Watch" blog today, which is an extremely well-written (IMO) look into the demise of a small college from its closure amost two years ago to present. SJC was a very small college (enrollment of about 300, IIRC) that was orginally a church-run school for Native Alaskans and was the only LAC in the state of Alaska. It shut down last fall due to financial issues (something like $11 million in debt), scattering students, forcing the faculty and staff out of their jobs, and impacting the small Alaskan city of Sitka. On a personal note, SJC was a college I considered briefly during my own search (2005-2006), and honestly, reading about the closure last year made me <em>very</em> glad I decided not to attend. The whole mess gives a very real picture of the possible effects--both direct and indirect--of the hypothetical closings of colleges due to the economy.</p>
<p>My son received a call from a small LAC in NH tonight. They wanted to know if he had finalized his college plans…</p>
<p>TrixieAnn:</p>
<p>Was it Franklin Pierce? I believe they were just bought out by a for-profit enterprise.</p>
<p>I did a Google images search to take a look at the Sheldon Jackson College campus – what a beautiful setting and such attractive buildings!</p>
<p>Well, some colleges will close due to the economy, mismanagement, or because their particular political or ultra-religious viewpoint has become unmarketable. Years ago I was in Alaska and attending U of Alaska (Fairbanks) and loved it, but decided to leave shortly after my car broke down a mile from home at 64 degrees below zero. Alaska is wonderful but will always be unmarketable to the vast majority of students.</p>
<p>Daniel Webster College in Nashua, NH was just bought out by ITT, I believe.</p>
<p>There are a lot of small colleges in NH. DWC is in the process of being bought out though they are well on their way. I haven’t heard anything about Franklin Pierce.</p>
<p>I can well remember the massive die-off smaller colleges that took place in the late '60s and early '70s. One that wasn’t far from my home town in the midwest had survived the Viet Nam War era in part by accepting students who had repeatedly flunked out of other places and who needed a student deferment from the draft. The end of that war spelled the end of that college. This was also a time period that saw the nearly universal conversion of male-only institutions into co-ed institutions (a conversion that automatically doubled their admissions pools), and the beginnings of nationwide marketing through the College Board Student Search program of colleges and universities (another tactic to increase admissions pools).</p>
<p>Some institutions are going to collapse under the weight of the current economic crisis. Others will survive, only to collapse in the next five to ten years as the number of conventional age students drops from the current high level. Still others will adapt and survive. None of us can safely predict which institutions will make it and which won’t - after all, how many of us could have predicted four or five years ago that we would see the current massive die-off of the US automobile industry?</p>
<p>Looking at the longer-term stability of a college or university is a reasonable thing to do, but I don’t think it is healthy to obsess over it. Change is the natural order of all things.</p>
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<p>I had the expectation that GM would be in serious trouble five years ago but I watch debt, consumer spending and other market trends. Colleges usually hold their finances close to the vest so we don’t have visibility into how they are doing directly.</p>
<p>I most probably confused Franklin Pierce with Daniel Webster.</p>
<p>Sorry!!</p>
<p>Many private colleges with small endowments will not survive the next few years. Those colleges often live on the edge of fiscal viability, and the current downturn will be enough to push a number of them over the edge.</p>
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<p>So how are we, the parent-consumer, to know which colleges are stable and which are on the brink of insolvency?</p>
<p>good question, DougBetsy. My D is looking into some small colleges, and the ones I consider safeties look particularly vulnerable.</p>
<p>The College of Santa Fe (in New Mexico) is fighting for its survival via acquisition.
[url=<a href=“http://www.csf.edu/news?id=991]News[/url”>http://www.csf.edu/news?id=991]News[/url</a>]</p>
<p>Many small colleges are being quietly acquired. I know of a group that has recently acquired or are in the process of acquiring four in the past year.</p>
<p>Out of curiosity, how small of an endowment should we be nervous about? How about endowment per student?</p>
<p>Probably LACs with endowments of under $25 million or so that have less then 1000 students and are nearly 100% tuition dependent for revenue are the ones in trouble.</p>
<p>Whew, thanks for alleviating my fears.</p>
<p>Lantzk:</p>
<p>Good question. The simple answer to your question is that having no students is what puts colleges out of business. As long as there are students, there is money. However, rapidly declining enrollment can close a school very quickly. In general, the colleges at risk will be those with enrollments under 1000, especially those that have struggled to maintain enrollment. </p>
<p>I’m not concerned about survival at any LAC talked about on College Confidential with two exceptions. Bennington almost went belly-up in 1995. It’s recovered since and they’ve gotten enrollment back up to 600. But, Moody’s just downgraded their bond rating to “speculative” and the College has no cushion. I have one larger LAC that I’m watching, due to a personality driven management style that jumps from big spending initiative to big spending initiative. I personally suspect the college’s finances are a house of cards, although they publish zero financial information so it’s difficult to offer anything but a hunch.</p>
<p>For the most part, the issues you should be focussed on is the degree to which each college will be curtailing programs over the next four years. It’s not just fat. Every college and university will be trimming bone and muscle for the next half decade, some more than others.</p>
<p>For financials, consider the following to get a picture of a college’s health:</p>
<p>a) the year end financial statements (usually on-line if the college is solid)</p>
<p>b) per student endowment</p>
<p>c) endowment spending percentages</p>
<p>d) debt in relation to size of endowment</p>
<p>e) cash flow issues (especially those caused by massive cash call commitments to private equity investments). For example, Amherst with one of the largest endowments, just borrowed $100 million to cover payroll and operating expenses because they are on the hook for $500 million in cash calls. Amherst is clearly not going out of business, but their disasterous cash flow investment management means they will have to make more severe cuts than their peer competitors (Pomona, Swarthmore, Williams). This will leave a mark.</p>
<p>f) Read the budget and planning statements as each college plans to scale back spending to deal with the recession. Search the college newspapers for additional information.</p>
<p>g) Search for the Moody’s bond ratings.</p>