Private colleges adapt or wither in face of declining enrollment, financial challenges

Enrollment has slipped in Iowa

Coe College junior Nicole Johnson talks about science during an ice cream social and
Coe College junior Nicole Johnson talks about science during an ice cream social and "minute of science" gathering in the physics lounge in Peterson Hall of Science at the college Friday, April 11, 2014, in northeast Cedar Rapids, Iowa. (Jim Slosiarek/The Gazette-KCRG)

Sticker shock didn’t scare off Spencer Stout, 19, a college sophomore from Westminster, Colo., from looking at Coe College in Cedar Rapids.

He wanted the small-school experience, a quality liberal arts education and a reasonable cost, which Stout said he found despite a $45,550 a year price tag for tuition, fees, room and board.

“They lay everything out before you come,” the biology and environmental sciences major said. “You look at the price tag, and think, ‘I could go to a public school for four years for that price,’ but they let you know right away how much financial aid you get.”

Coe touts small classes, close access to tenured faculty, that 60 percent of entering students graduate within four years — which rates high nationally — and huge discounts. The average financial aid package was $32,000 this past fall, which puts the actual cost on par with prices at Iowa’s state schools.

But that perception of sky-high prices is one of many obstacles the private college system is battling right now.

Private residential colleges in Iowa and around the nation face fierce competition for students, shrinking high school graduating classes and cost-conscious parents thinking thrifty as the economy recovers.

Meanwhile, the high cost of educating students, paying salaries and maintaining an attractive campus is testing the small private college model as more people turn to the convenience of online programs or elsewhere.

Private college enrollment at Iowa’s 33 private not-for-profit four-year colleges slipped about 4 percent from 2009 to 2013, according to a report prepared for the Iowa Coordinating Council on Post-High School Education. That includes a quarter of the schools that had declines of 9 percent or more.

That trend has some tuition-dependent colleges fighting for survival.

Small private colleges can run smoothly when flush with students. But when the market sours, the applicant pool dries up and many tuition-driven colleges across the country have struggled, said Andrew Gillen, senior researcher at American Institutes for Research in Washington, D.C.

Moody’s Investors Services has given a negative outlook for the entire not-for-profit college sector, which includes public and private colleges alike, and in 2013 downgraded the credit rating of 36 private colleges, compared to nine upgrades. That’s twice as many downgrades as two years earlier.

Schools that supplement budgets with interest from strong endowments can absorb a volatile market. But those without that cushion face difficult choices.

“An institution that is living hand-to-mouth doesn’t have a cushion,” Gillen said. “When they don’t have the tuition coming in, they have to make immediate cuts to balance budget.”

Leaner and stronger?

About 75 miles south of Cedar Rapids on Interstate 380, financial woes forced one of the oldest private colleges west of the Mississippi River to take drastic measures to stay afloat.

Enrollment at Iowa Wesleyan College in Mount Pleasant has declined 30 percent from 858 full-time students in 2009 to 599 students this year, and the school reported a $2.5 million deficit in its most recent tax year filing.

Only 29.7 percent of students graduate within six years, which is considered very low, and 18.4 percent of loan borrowers default within three years of entering repayment, which is well above the national average, according to the College Scorecard, a service of the U.S. Department of Education.

The hardships forced the school to abandon half its 32 majors and lay off 22 of 52 faculty and another 23 staff members. Some fear the restructure will only further hurt the campus. But School President Steven Titus said the painful decisions will make the school leaner and ultimately stronger in years to come.

In a guest column published in The Gazette in February, Titus wrote, “This reorganization will improve the quality of our programs and the efficiency of our operations. It is the first step leading to long-term stability and growth for the college.”

Titus declined interview requests and refused a visit to campus by The Gazette. Faculty haven’t returned phone messages or said they could lose their jobs if they spoke to a reporter.

Industry analysts have pointed to 1,000 students as a key threshold for private colleges because running a broad liberal arts curriculum with fewer than that number is not cost-effective.

“He’s implementing what the corporate world criticizes higher education for, not taking drastic measures soon enough,” said Ray Brown, director of Institutional Research & Assessment at Westminster College in Fulton, Mo. “It will be interesting to see Iowa Wesleyan a few years down the road. Did they do what they need to do and at a level they can grow in healthy way for years to come?’”

But Iowa Wesleyan is hardly alone in Iowa or the nation.

Credit rating agencies have downgraded Central College in Pella due to declining enrollment and Upper Iowa University in Fayette due to high debt. Others have sold out to for-profit companies, such as Waldorf College in Forest City and Clinton’s Ashford University, which was once known as Mount St. Clare College.

Central College still has a solid reputation bolstered by strong graduation rates, an 80 percent freshman retention rate and a broad array of courses.

Central College President Mark Putnam said the school is committed to staying the course with conservative budgeting but no drastic changes, such as cutting programs, layoffs or diving into an online curriculum or graduate programs.

The school will scale down slightly through attrition, and seek savings in places such as renting property for a location in London rather than owning and restructured debt to fixed interest rates rather than variable.

“We are keeping attention on the long term,” Putnam said. “We are being anything but reactive”

Still in demand

Other colleges seem to be thriving.

Grinnell College, which is the class of private colleges in Iowa, remains one of the top-ranked private colleges in the nation. The student body of 1,721 has held steady and actually is up about 30 students from five years earlier.

One measure of Grinnell’s strength is its endowment, which is the biggest in Iowa and ranks No. 51 in the nation. The endowment grew 12.3 percent from 2012 to 2013, up to $1.6 billion, according to the National Association of College and University Business Officers and Commonfund Institute.

Gary Steinke, president of the Iowa Association of Independent Colleges and Universities, said colleges such as Grinnell at the top end and struggling schools at the bottom are the outliers. The ebb and flow of the market historically has left scars from time to time.

Now is no different, he said.

“We are not facing financial difficulties, by and large,” Steinke said.

The private college experience is still in demand, student success and debt metrics are strong compared to public schools, and under the radar the private colleges are enrolling low income students at nearly twice the rate as public universities, he said.

“Private colleges in the state of Iowa are extremely enrollment-dependent,” Steinke said. “They are all competing with each other both inside and outside, and that’s what makes these places so strong. They have to maintain quality.”

Back at Coe, the school boasts growing enrollment, a higher caliber entering class and an expanding campus.

The school has grown a modest but respectable $89 million endowment, up from $37 million in 1995.

A conservative approach to spending, a focus on the core mission — providing a residential liberal arts education — and adapting to new approaches for recruiting students, has allowed Coe to weather challenging times, college leaders and faculty said.

“They knew me by name, and got to know me on a personal basis,” Spencer Stout said of his campus visit. “The admission counselor would text me or call me whenever I wanted a question answered.”

On a recent Friday, physics, chemistry and biology students gathered for an ice cream social in Peterson Hall. The weekly social gives students and faculty a chance to touch base, and is an example of the personal touch small colleges, such as Coe, can offer.

Peterson Hall recently underwent a $14 million renovation. It beefed up technology in the labs, which gives undergraduates the chance for research typically associated with graduate programs.

“At my high school, we didn’t have labs like this,” said Maddy Jensen, a freshman chemistry major from Columbia Heights, Minn. “I thought, I could really see myself learning here.”

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