Numerous schools have been struggling financially in recent years, and I think the current situation is going to be too much for many.
At what level of endowment per student do you think a college is well equipped to weather the current downturn?
Trying to draw a firm line below which we will not consider applying…
No set answer. Better to list the schools under consideration and seek comments with respect to financial stability.
Tough to answer this, and posters’ answers will vary. I’ll start off by saying I would take a closer look at enrollment history/outcomes/financials of any school with an endowment of less than $100M.
And yes, I know there are some very good schools with less than $100M endowments, but that’s my line in the sand. At least today, lol.
University of Vermont also has relatively high student loan debt levels.
https://college-insight.org/explore/step3/?entity_ids=5019999999,5012440411,5011231165,5011231174,5012231095,5012231086,5012231059,5012230995,5012230959,5012230940,5011230931,5012247649,5011230913,5012230898,5012230889,5012231077,5012230852,5011230834,5012230816&years=2017&variables=fa_loans_debt_avg_d,fa_loans_debt_p,fa_loans_nfed_vol_p,coa_tuit_fees_d,coa_on_tcoa_d,en_fall_ug_tot_n,fa_grants_inst_nb_p,fa_sfa_pell_p&is_state=true&state=50
I’d go further and say that my line for having to do a lot of due diligence is <$250M. I wouldn’t let my kids apply to a school with an endowment of <$100M. (And those were my lines even before the crisis! But now it’s not just a nice pair of numbers, now I’ve got concrete reasons.)
Of course, this is for private colleges. Public institutions, there are a whole different set of financial considerations.
Any thoughts/input on the following:
Susquehanna
Manhattan
Quinnipiac
Clarkson
Can you elaborate on what your concrete reasons for those benchmarks are?
@scholarmin, it’s based on the burn rate most colleges have.
Colleges have a pretty stable business model, and even those with effectively no endowment can generally balance the books well enough to get through. However, there’s evidence that fall enrollments are off year-to-year by quite a bit at most places, plus that college endowments are down as the normally safe diversification that colleges practice isn’t enough to shelter their usual cash cushion (because honestly, that’s the core reason for an endowment) from significant downturns.
Therefore, I’d estimate that $100M (less whatever it’s dropped by in the past couple months) gives a college only two to three years to figure things out and recover, largely because the populations served by low-endowment colleges are the ones most likely to have been financially hit in the downturn in ways that make postsecondary education a less- to unaffordable luxury.
$250M, I’ll admit, is just adding a healthy margin for safety.
Now, a better measure would be endowment less outstanding debt, but finding out what most private places actually owe to lenders seems only very slightly more difficult than getting access to Q clearance nuclear designs.
Wouldn’t the size of the college matter?
Isn’t endowment per student more telling?
$250M might be okay for a small LAC with 1000 kids and completely insufficient for a college of 15,000?
@taverngirl - I can only comment on Manhattan- endowment is kinda of low at just north of 100 million, but they have a good student size of 3300 plus and the big * is it is backed by the Roman Catholic Church so if chit hit the fan, I think the RC would bail them out, being so close to NYC helps them.
I have been researching endowments , which was not part of my research for my previous child bc of all that is happening now. As I posted above I feel safer if a college has a endowment of 100 million and a pretty sizable enrollment of at least 2500 kids. Especially if the LAC has the backing of a religious group, yes it is not a failsafe but I think that school w a sizable enrollment will be saved long before one with atone enrollment say under a 1,000.
@CaliMex I think it’s hard to draw a definitive line. Like the other comments, below $100 million is pretty dangerous. Usually, a good part of the endowment is restricted so it can only be used for certain things. I’m sure everyone has seen the Forbes Financial Grades. I would say any school below the B range is sketchy in the current environment.
Forbes has ratings for the “health of each college”…I would check that out. it was posted in a thread a few days ago.
Article from a few years ago indicating that several Catholic colleges were in financial trouble, and did not mention a church bailout being likely for them:
https://www.insidehighered.com/news/2017/11/13/spate-recent-college-closures-has-some-seeing-long-predicted-consolidation-taking
My kids were way too young back in 2008 for us to think about endowments. Anyone able to give a nutshell recollection of that time period?
Any thoughts on Fordham? Endowment was around 728m in 2018 and Forbes gives them a C- grade. (Gulp)
Here’s the Forbes list:
https://www.forbes.com/sites/schifrin/2019/11/27/dawn-of-the-dead-for-hundreds-of-the-nations-private-colleges-its-merge-or-perish/#5aa11644770d
and here’s their methodology:
https://www.forbes.com/sites/cartercoudriet/2019/11/27/how-fit-is-your-school-the-methodology-behind-forbes-2019-college-financial-health-grades/#4a90b78961c4
The Forbes list digs down beyond the endowment. Some schools with small endowments do surprisingly well and the converse is true for some with larger endowments. For instance Bates College’s endowment is about 1/4 that of Middlebury, its slightly larger NESCAC peer, but Forbes gives Bates an A+ and Middlebury a B+. My guess is that it’s largely because Bates is more conservative with its spending (no ski hills or golf courses, etc.) It will be interesting to see if that stands after the hit from COVID or whether schools with larger endowments will be more able to tighten their belts than schools that were already running a fiscally tight operation. I think we’re going to see a lot of closures among the schools scoring below a 1.5 (a D grade) on the Forbes list.
Just adding the link in here (for the health grades of schools) since I was just looking for it, too. (You will have to scroll down a bit in the article…)
Endowment money can be restricted by donor stipulations. So a college may have what appears to be a large endowment, but if very little of it is an unrestricted slush fund, then it may get into financial trouble if the restrictions on the endowment money prevent it from being used to get out of the financial trouble.