Photographer: Jeremy Wilburn/Flickr

College Presidents Worry Their Schools Won’t Survive

Just 39 percent report confidence in their school’s financial sustainability over the next decade

Facing shrinking budgets and, in some cases, flagging enrollment, a growing number of college presidents are concerned about the future of their institutions, according to a new Inside Higher Ed report based on Gallup data.

Only 39 percent of college presidents surveyed for the report felt confident their institution’s financial model would be sustainable for the next decade, down from 50 percent a year earlier. They were more positive about shorter-term survival: Fifty-six percent predicted they’d be OK for five years. That’s still well below the 62 percent who felt that way in 2014. To gauge the officials’ sentiment, Gallup polled presidents of 338 public institutions and 262 private nonprofits in the U.S. in January and February.

“We’ve really reached a turning point,” says Ronald Ehrenberg, a professor of industrial and labor relations and economics at Cornell and head of the Cornell Higher Education Research Institute. “The growing debt crisis and decline in family incomes after the recession has made people very cost-conscious, and institutions aren’t going to be able to increase tuition as rapidly in the future.”

22263-20150313170020000000000

Hoping to counteract budgetary woes, colleges have raised tuition faster than the rate of inflation for four decades. Still, that hasn’t always been enough to damp costs. The typical private college gives back more than 40 percent of its tuition dollars in the form of financial aid for undergraduates, according to Ehrenberg, which means even record-high tuition rates aren’t leaving fat margins for spending.

“When you’re limited on your ability to raise tuition, and you’re using a substantial amount of tuition to pay to help students attend, you don’t really have a lot of money left to run the institution,” Ehrenberg says.

The decline in confidence was particularly pronounced at public universities, many of which have seen their budgets slashed by state legislatures in recent years. Among presidents of public schools granting bachelor’s degrees, 45 percent said they were optimistic about their school’s financial sustainability over the next five years, a 16 percentage-point drop from last year.

The numbers reflect a stark reality for the country’s publicly funded higher education institutions: State support hasn’t increased proportionally with rising costs, forcing many schools to lay off staff, rely more on adjunct faculty, or cut programs. All but two states are still spending less per college student than they did in fiscal year 2008, according to a report (PDF) from the Center on Budget and Policy Priorities.

Presidents of private colleges rated their sustainability somewhat more positively. This year, 58 percent were optimistic about the next five years, the same as in 2014.

Their peers, however, predict a less rosy outcome for these schools. Researchers also asked presidents for their opinions on the educational landscape at large, and they were the least bullish on small, private four-year schools (ones with an endowment of less than $500 million, if they were liberal arts schools), rating for-profit universities as more likely to have sustainable business models.

Excluding the wealthiest among them, many private colleges lack robust endowments and must rely more on tuition dollars for revenue. A growing number, fighting what some analysts have dubbed the private college death spiral, have been forced to close in the past few years, including, most recently, Sweet Briar College in Sweet Briar, Va.

“There may be more closures in the future,” Ehrenberg says, “but hopefully the institutions will be able to survive by sharing resources.”

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE