<p>I thought the article was a bit sloppy and unfocused. It didn’t really offer much depth of analysis. But it did point to some warning signs. Colleges that are heavily tuition-driven—typically small liberal arts colleges with small endowments—are in deep trouble; they have no cushion to boost financial aid, and in difficult economic times students will be demanding a lot more financial aid (=tuition discounts), cutting deeply into their revenue. Fail to meet that demand and they lose enrollment, cutting deeply into their revenue. Either way, big problems.</p>
<p>Colleges that depend on tuition + endowments are in somewhat better shape, especially if they have room to tweak their endowment payout rates—despite the fact that endowment assets are down sharply. The exception here would be schools that invested heavily in big capital projects, banking on a rising (or at least steady) endowment. With a rising debt load, shrinking tuition revenues (net of FA), and smaller endowments, some may be in serious difficulty.</p>
<p>Public universities are a mixed bag. Those most heavily dependent on legislative appropriations in states facing large budget shortfalls are in big trouble. Others are in better shape, either because their state government don’t face such large deficits, or because the universities are less dependent on legislative appropriations. Some may actually benefit from an economy in which there’s a lot more demand for value-priced education, allowing them to be more selective and possibly to raise tuition, so long as they keep their substantially lower than their private competitors.</p>
<p>And then there are a small handful of super-wealthy privates that seem to prosper whichever way the economy is headed.</p>
<p>Within each of these broad categories, however, the financials will vary tremendously from school to school, so the categorical labels may misinform as much as they inform. Perhaps it’s time for a “stress test” of the financial condition of institutions of higher education?</p>