Small Private Colleges: Can they Survive?

According to a CIC report, colleges with fewer than 1000 students are most likely to have financial problems.

According to a CIC report, colleges with fewer than 1000 students are most likely to have financial problems.

Grace University, a private Christian college in Nebraska has announced that it will be closing its doors permanently in 2018.

Other schools that have closed recently are the Memphis College of Art and St. Gregory’s University in Oklahoma. Several others have chosen to merge or sell off land or assets to help survive a bit longer.

Does this spell trouble for other small, private schools? What are some warning signs of a university in trouble and what should you look for in a school to avoid closure. What happens if you find out your school will be closing?

Follow the Money

Colleges are expensive to keep running. There are a myriad of costs that go into running an institution of any size including land and building fees, technology and staffing. Although many colleges receive donations from alumni and funds from their state, many institutions earn most of their revenue from the students who attend.

This doesn’t mean the largest schools will be the richest, but according to a report by the Council of Independent Colleges (CIC) entitled “The Financial Resilience of Independent Colleges and Universities”, colleges with fewer than 1000 students are amongst those most likely to have financial issues. What’s especially interesting is that the apparent sweet spot for healthy organizations is in the 2000-3000 student range.

We may be able to explain this apparent conundrum by examining the idea of economies of scale. For example, it may cost you $100,000 to build a single bedroom home from the ground up, but for you to have it built with two bedrooms, it may only add another $15,000 to the total bill. Adding a third bedroom likewise may only add another small chunk to the bottom line. But for you to add say 20 bedrooms, it’ll be more expensive because you’ll have to improve other aspects of the house. This simple analogy can explain the financial “sweet spot” in the CIC report.

Common Factors to Watch For

Although every school is different and even small colleges can be extremely successful, there are a few criteria outlined in the CIC report that could be potential indicators of financial stability.

Besides looking at the total number of enrolled students, also be sure to take a look at the enrollment figures over the last four to five years. If enrollment is drastically shrinking year after year, the school is going to struggle to maintain their programs and will need to cut funding somewhere.

Another item to watch for is the school’s endowment size. An endowment is donated money given to the school in order to grow the school and help pay for improvements and student financing. If a school has a shrinking endowment – or doesn’t have one at all, it could mean the school will be less equipped to handle a sudden downturn in student enrollments. You can get some information on endowments from the National Association of College and University Business Officers (NACUBO).

Lastly, keep an eye out for massive property and asset sales of any prospective schools. Schools selling off large portions of their assets may be in need of money and could indicate financial issues.

What If Your School Closes?

Unfortunately, school closures and mergers are more common than you may think. On average five colleges close their doors per year, but according to Moody’s, this number may triple over the next several years. So what should you do if your school closes up before you graduate?

The first thing to do is to get an official copy of your transcript – your transcript is your college history – if the school closes down and stops offering archival of student transcripts, all of that time and money could go down the drain. Don’t just print off an unofficial transcript – be sure to request an official transcript.

Talk to school counselors or mentors. You’ll need to transfer your credits to a new school so talk to your current school counselors to see how this process works and if they have any recommendations for you.

Small colleges are an important part of the higher education institution as they can offer things large schools can’t such as close-knit communities with personalized instruction. Don’t be afraid to enroll in a small college – just be sure to do your research ahead of time. 

Have you found the right college-fit for you?