What LACs would you avoid, given the recent Sweet Briar closing announcement?

Parents Forum
1

I was tempted to post this as a question in the Sweet Briar thread, but I’m afraid it will be lost at this point…

We spent the last two years looking at LACs for my child, who definitely wants a small, liberal arts experience in college. Results are in with 7/8 acceptances and one decision still pending (due at the end of this month)… After ruling out four, we will be revisiting the remaining three (or four) before my child decides where to enroll. But given the Sweet Briar annoucement, I’m second guessing the stability of some of these schools. For example, College of Wooster just announced that their president is leaving to become the president at Rollins College. Sign of trouble at CoW, or just standard change of leadership? What about Ohio Wesleyan, which appears to be in great shape (based on the amount of new construction) but which failed to meet enrollment numbers last year? Others mentioned Antioch (in the Sweet Briar thread)…although that’s not one of the ones under consideration. And someone mentioned Haverford’s president leaving in the other thread (although I agree that’s more likely due to the prestige associated with leading the Met rather than abandoning a sinking ship…but the change in financial aid policy a few years ago suggests worry about financial stability, no?)… What LACs would you avoid at this point in time? Or, how would you go about figuring out if a school is really teetering on the edge (given that the sustainability ratings were clearly so far off-base about Sweet Briar)?

2

This is a great question, since when my D is a senior we will be considering small LAC’s, and possibly women’s colleges. Currently at the top of her list is Bryn Mawr. I noticed on BM’s website that they are inviting Sweet Briar girls who want to transfer to apply. While that is very nice, it does make me wonder why they have so much room available to take on another school’s students. Did they not meet enrollment quotas in past years?

3

TheGFG, for many schools, transfer deadlines have not passed, and most haven’t admitted their freshman class yet. So I don’t think you can read anything into that.

Freshman retention rates and graduation rates are available for all accredited schools. Women’s colleges do tend to underperform in this statistic relative to the strength of their admitted class. That is, they have academically and financially successful students transferring out. Bryn Mawr’s retention rate of 91% is very strong from a national point of view, but not great compared to Haverford’s 97%.

4

Declining enrollment while becoming less selective in admissions and scholarships may be a warning sign (not just with LACs).

5

Haverford is definitely NOT having financial problems nor is Weiss’ departure for the Met in any way an indication of him leaving a sinking ship. The salary/benefits of the Met job is worth in excess of $1B based on Weiss’ predecessors and the job oversees more than 1,500 employees. For someone with an art history background, the Met job is most likely the pinnacle of Weiss’ career goals. That is why he left Haverford to take the job. No other reason should be read into it.

I would think Bryn Mawr is in good standing. I’m sure they are only going to take Sweet Briar transfers who meet their standard. As far as I know, other women’s colleges are making the same offer. It makes sense that a women’s college would use this event as an opportunity to get some potentially good transfer students while offering a hand to those who need it and who are drawn to women’s colleges.

I’m not familiar with the other schools mentioned but wanted to provide my 2 cents on Haverford and Bryn Mawr and correct misconceptions.

6

In general I would look at the discount rate. It’s not fair to say that all schools that have a 50%+ discount rate are in trouble, but there aren’t really that many schools that have enough revenues to support that as a long-term strategy.

When reading articles about Sweet Briar I found [a report from Bain & Company](The financially sustainable university | Bain & Company) on financial sustainability from 2012, with some key questions to consider. It’s written from an insider POV (it would take some digging to get your hands on bond ratings and I don’t know how easy they make it to compare things like fixed asset ratios over time) but I think it has some things that people might consider:

Sweet Briar definitely had endowment issues using these criteria, and yield was never superb. Some sources also claim that their bond ratings went down in recent years which suggested that lenders weren’t enthusiastic about their future prospects.

I do think it’s hard to really predict when a school will go down and when. Sweet Briar probably could have limped on for a few more years yet – possibly enough time for your daughter to enroll and graduate – if they really went all out. There are undoubtedly some schools out there who are just nervous about the future as SB is/was but have decided to grit their teeth and push through for as long as they can rather than quit early before they are completely out of money. Apart from schools like Antioch that have been in disaster-recovery mode for years, it’s hard to really say for sure whether a school is in danger, a school is about to collapse, or a school is just going through some routine downturns that don’t mean their viability is at risk.

7

Menlo College is not a LAC, but a small business school. It is little known and not that selective, and used to be a private junior college (once but no longer affiliated with the adjacent Menlo School, a private high school). Seems like a difficult niche to survive in.

8

I would look at acceptance rate and discount rate. If the acceptance rate is low, likely the discount rate would be as well as the school is capable of accepting enough students who are of good quality and can pay.

I don’t see Haverford cutting their fin aid from what can only be described as “extremely generous” (unsustainably generous for a LAC, IMHO) to merely “very generous” as a cause for concern.

9

Count me among the apocalypse skeptics. Even with respect to Sweet Briar, there’s been a lot of Monday morning quarterbacking about the fact that Forbes in 2010 put the college on a list of institutions that are facing financial problems. Yet in 2013, Forbes also gave Sweet Briar an A grade for financial health.

In 2014 Moody’s recently downgraded Earlham college, one of Pope’s ‘Colleges that Change Lives’. Yet in 2013 Forbes gave Earlham an A grade for financial health.

In fact, if you look at Moody’s report, enrollment fell at 2/3 of the colleges its rates, for 2 years in a row.

In 2005, Oglethorpe, a small LAC in Atlanta, was operating at a 4 million dollar loss, had only a 20 million dollar endowment and was placed on warning by its accreditation agency. To this day, it doesn’t have a very high yield rate–11%. Yet the college managed to weather the recession, turn itself around under the leadership of its president, and by 2011 was operating with a surplus and removed from warning status.

In 2010, Birmingham Southern, another CTCL, found that as a result of a mistake in awarding financial aid, it had to cut 10 million dollars from its 49 million dollar operating budget. The endowment at the time was 56 million. It laid off many employees, cut faculty salaries, closed departments and eliminated some majors. It’s bond rating fell. Enrollment dipped. Yet again, though, under the strong leadership of a new president, it was able to turn itself around.

Of course, it both cases, it could have gone the other way. But I bet if you dig hard enough, you will see many, many LACs that have had to respond to financial issues in the recent past. And you need to be careful of ‘reading the tea leaves’ and interpreting some random fact about the college that doesn’t seem right as some ‘hint’ that things are going south.

In the Sweet Briar thread, periwinkle (I think) posted a link to a blog ‘Higher Ed Data Stories’. The relevant post of the blog starts as follows

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The chart given at the bottom gives a very interesting look at such things as draw rate, endowment, tuition reliance, net revenue per FTE. It might be a good place to start if you are curious about the financial health of the institution you are looking at. But as the author says

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10

Both Ohio Wesleyan University and the College of Wooster will be open for business ten years from now. I confess I have no idea if your child will be able to attend their 50th college reunion if he/she decides to attend one of those schools. I’d say the odds are better that OWU and CoW will still be around than about 20 other Ohio colleges I could name, however.

11

A change in leadership at the top is par for the course, unless there are significant, dramatic other indicators, such as announcements of dramatic budget cuts, flood of faculty leaving for other positions, dramatic change in acceptance rates (taking anyone in order to preserve tuition flow), etc.

The change at Haverford or Wooster is hardly cause for concern. As a member of the BiCo community (H’ford/BMC), is it frustrating that Pres Weiss was there a short time? Yes, but the Met is a dream job for him, and the community understands why he took it.

If a family is researching specific schools, look beyond the glossy folders and read the student newspaper, the alumni magazine. At the same time, with student newspapers, realize that they can be harsh about administration at many schools and often think “the sky is falling” because a beloved faculty member did not get tenure, or there are changes in the way certain programs are being funded.

12

I’m not too sure the HBCUs are all on good financial footing.

13

I agree with skrlvr about Birmingham Southern. D and I recently toured Birmingham-Southern, and I had the opportunity to have a personal conversation with their excellent president, General Krulak. I had concerns about the financial health of the college going in, but my conversation with General Krulak allayed any concerns I had. Enrollment has been steadily increasing and will be at pre-financial crisis levels with this incoming freshman class. Fund raising has raised significant amounts of money for the college. Much of the financial betterment has been attributed to the General. While he is stepping down as president of BSC in June, he has purchased a house close to the college and is remaining involved as “president emeritus”. BSC has an excellent reputation in the South, a beautiful campus, and is located in the vibrant city of Birmingham. The future looks good for BSC.

14

This is an interesting discussion to me because if one looks at endowment rate per student, Earlham’s is actually very high (in the $309,000 range - at least in comparison to my son’s more selective school, Wesleyan - about 200,000 - , and two other schools to which my daughter was admitted) and Wittenberg’s is very low (1/10 of Earlham’s at maybe $40,000). So I am actually worried more about Wittenberg than Earlham. Does anyone know - am I understanding these endowment numbers correctly? Should I push a wealthier LAC over one rated lower by Forbes? I don’t want the school to cut programs or, of course, close down while my daughter is attending but what if my daughter loves it when she visits?

15

^ I think that’s a valid way of looking at endowments.

16

I agree that the apocalypse calling is getting kind of…over the top. Yes, in the next 50 years a lot of small, tuition-dependent colleges will probably close, but people are naming some big-name, financially healthy, prestigious colleges in this round-up. Haverford has a 23% acceptance rate; they have to turn away many students who would be perfectly qualified for their freshman class. If they found their yield falling, they could simply admit more students without changing the academic qualifications of their freshman class very much. And they have a $495 million endowment.

I don’t think colleges like College of Wooster ($271 million endowment, national draw) or Bryn Mawr (ditto) are in danger of closing in the next 4 years, when a current senior would attend the college. A place like Ohio Wesleyan might close soon-ish (74% acceptance rate, but $214 million endowment), but probably also not in the next four years.

People have also been singling out HBCUs, but every HBCU is different - and HBCUs are not any different from any other college in this regard. If they are tuition dependent with falling yield, high acceptance rates and a high discount rate, then they are in trouble, but not all HBCUs are like this. My own alma mater - Spelman College - has a 41% acceptance rate, a yield that is about on par with other top women’s colleges like Scripps, Mount Holyoke, Smith, and Bryn Mawr, and a $309 million endowment (about the same as Scripps, larger than Pitzer’s, Kenyon’s, and Wooster’s, and not that much smaller than Occidental’s or Reed’s). Hampton University has a 37% acceptance rate and a $288 million endowment.

But there are schools like Paine College (69% acceptance rate, endowment has a net worth of $4 million), Allen University (just 700 students, and a $312,000 endowment - no, not a typo - they’ve been placed on financial warning status), and Edward Waters College (1.8 million endowment, just 700 students). Several HBCUs have also had problems maintaining their accreditation, primarily because of financial problems, and a few have lost it (like Morris Brown and Barber-Scotia Colleges). But it’s not because they are HBCUs; it’s because they are small, tuition-dependent colleges with most regional applicant pools that already had high admissions rates before the financial crisis; they can’t dig deeper into their applicant pool, and their potential student body isn’t filled with scions of wealthy families. Predominantly white colleges with similar features are facing similar problems.

17

Note that some historically black schools have managed to attract non-black students, indicating that being historically black does not necessarily mean that the school’s potential market is limited to black students.
http://time.com/2907332/historically-black-colleges-increasingly-serve-white-students/

18

Here’s a list of 2014 college endowments per student:
http://www.reachhighscholars.org/college_endowments.html

Note that 15 of the 25 richest schools (by EPS) are LACs.
These 15 LACs all have bigger endowments per student than 4 of the 8 Ivy League universities.
An additional 12 LACS have bigger endowments per student than at least one Ivy (Cornell being the Ivy with the lowest EPS, at $281K/student).

I count 46 LACs with higher endowments per student than at least one of the USNWR top 25 National Universities
(i.e., higher than Georgetown, with its EPS of $82K). The LACs in the top 50 by EPS generally also are among the USNWR top 50 national LACs, and have admit rates below 50%.

Also consider the following list of 61 schools that claim to meet 100% of demonstrated need:
http://www.usnews.com/education/best-colleges/paying-for-college/articles/2014/09/15/colleges-and-universities-that-claim-to-meet-full-financial-need
More than half of them (34/61) are LACs.

19

I can’t ever see Haverford going under; it’s a prestigious, very well-regarded school.

I could just see LACs outside the top 100- and perhaps higher up the chain- being subject to severe pressures.

If a state has a decent-to-good state university, I’d think that LACs that are ranked at or below the same level would be in danger, since it is difficult to justify paying higher tuition for a school that’s not as good. Unfortunately, that’s a lot of states and a lot of LACs.

For example, UNC has plenty of good campuses, and Clemson University in South Carolina is fine- its SAT scores are by some measures higher than those of any LAC in the state. With that kind of competition, how could a low-endowment LAC thrive?

20

Those endowment/student figures may not be complete.

For example, Trinity University–not Trinity College, which is listed–has $1.18B for 2500 students, and is not listed at all. That works out to $472K per student.