The Emerging Financial Crisis in American Higher Education: Possible Strategies and Solutions
The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.
By Stephen R. Rolandi
March 29, 2024
“The Chinese use two brush quotes to write the word crisis. One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger – but recognize the opportunity.” – John F. Kennedy (1917-63)
A few years ago, Professor William Clements, Ph.D., former Associate Vice President for Academic Affairs and Dean, College of Graduate and Continuing Studies at Norwich University (Vermont) wrote an article that appeared in the October 8, 2018 issue of PA Times. In it, Dr. Clements called for an analysis of rising tuition levels, institutional costs and the importance of higher education to the American public.
Given my background in finance and administration (part of my career was spent as a college administrator), I decided to devote this month’s column to what many observers and experts see as a serious financial crisis effecting higher education in the United States.
Prior to the COVID-19 pandemic, dozens of colleges and universities around the nation started the 2019-2020 academic year under some level of financial stress. These institutions had already spent the prior decade struggling with declining enrollments and weakening support from state governments. The COVID-19 pandemic brought economic challenges to nearly every industry and sector, including higher education.
According to one report, at least 48 public or private colleges have closed, merged or announced closures since March of 2020. Many are privately-funded institutions. It should be noted that this trend started in the mid-2010s and accelerated during the pandemic.
This is just a partial listing of colleges that have either closed their doors or merged with another institution as of January 2024:
- College of New Rochelle (absorbed into Mercy College, New York);
- Salus University (PA.);
- Lincoln Christian University (Illinois);
- Woodbury University (California);
- Johnson University Florida (Florida);
- College of Saint Rose (New York);
- Magdalen College (New Hampshire);
- Hodges University (Florida);
- Augustine College (Illinois);
- Pennsylvania College of Health Sciences (PA.; merged with Saint Joseph’s University);
- Alliance University (NY-formerly Nyack College);
- Cazenovia College (NY);
- Medaille University (NY);
- Mount Ida College (MA., absorbed by the U. Mass system)
- Holy Family College (Wisconsin);
- Wesley College (Delaware; acquired by Delaware State University);
- Wheelock College (MA., merged with Boston University);
- Marlboro College (VT., acquired by Emerson College);
- Notre Dame College (Ohio)
The cost cutting has not been limited to small colleges, as recent events have shown at West Virginia University, where the WVU administration closed a $45 million budget shortfall by discontinuing 28 academic programs and eliminating 143 faculty positions.
This crisis is not expected to disappear anytime soon. According to the highly regarded credit rating organization, Fitch Ratings, Inc. (one of the “big three” credit analysis companies along with Mody’s and Standard & Poor’s), more U.S college closures, mergers or restructurings are expected over the next several years.
In addition, this crisis is beginning to extend to publicly-funded colleges and universities as well, according to a report recently issued by New York State Comptroller Thomas P. DiNapoli (the report can be found at: https://www.osc.ny.gov/). Comptroller DiNapoli’s report also examined options to facilitate growth and innovation in the higher education sector.
Some schools experienced fiscal mismanagement issues leading to a closure or merger. However, there are two major reasons for this crisis. According to Robert Franek, Editor-in-Chief of The Princeton Review, the causes can be attributed to declining enrollments (due to anticipated drops in college-age enrollment, as seen by lower numbers of secondary school graduations starting in 2025), and an over-reliance (95 per cent in many instances) on tuition in college revenue operating budgets.
The implications of dwindling enrollments include less funding, fewer student program/course offerings, more structural budget deficits, reduced credit standings (Fitch, Moody’s, S & P) and eventual closings and or mergers.
As with most challenges, there are also opportunities which call for “out-of-the-box” thinking. One approach may be to consider that the traditional four-year undergraduate college curriculum is not for every prospective student; the current labor market remains a solid high-wage alternative to pursuing a traditional degree. Many employers have relaxed bachelor’s degree requirements for entry level positions. A two-year or technical degree may be an ideal substitute.
Another idea worth considering may be to make an undergraduate degree program consist of 6 semesters (three years plus a summer term). The four year model in the United States dates back to over 100 years ago; it may be time to consider a different model which may result in lower tuition costs. I should note that many law schools, such as Northwestern University and SUNY Buffalo Law School, now offer an accelerated two year J.D. degree program (two academic years + summer terms).
Some other options might include less over-reliance on tuition, more rigorous setting and management of strategic goals, addressing total costs and financial aid gaps and establishing more partnerships to keep pace with innovation.
Higher education has proven to be beneficial to the development of democracy in the United States, and is a model known throughout the world today. This crisis needs to be resolved over the next several years. A presidential blue-ribbon type commission to study this problem and make recommendations may be the ideal way to draw the needed buy-in from the many constituencies that make up colleges— government, private industry, the not-for-profit sectors, citizen groups, etc.
Postscript:
Readers interested in this topic and wishing to further explore the financial issues currently facing American colleges and universities may wish to consider:
- “Financing American Higher Education in the Era of Globalization,” by William Zumeta, David W. Breneman, Patrick M. Callan and Joni Finney, Harvard University Press (2021)
- “Wealth, Cost and Price in American Higher Education: A Brief History,” by Bruce A. Kimball and Sarah M. Iler,” Johns Hopkins University Press (2023)
- “Colleges on the Brink: The Case for Financial Exigency,” by Charles M. Ambrose and Michael T. Nietzel, Rowman and Littlefield (2023)
Author: Stephen R. Rolandi retired in 2015 after serving with the State and City of New York. He holds BA and MPA degrees from New York University, and studied law at Brooklyn Law School. He teaches public finance and management as an Adjunct Professor of Public Administration at John Jay College of Criminal Justice (CUNY) and Pace University. Professor Rolandi is a Trustee of NECoPA; President-emeritus of ASPA’s New York Metropolitan Chapter and past Senior National Council Representative. He has served on many association boards, and is a frequent commentator on public affairs and political issues affecting the nation and New York State. You can reach him at: [email protected] or [email protected] or 914.441.3399 or 212.237.8000.
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The Emerging Financial Crisis in American Higher Education: Possible Strategies and Solutions
The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.
By Stephen R. Rolandi
March 29, 2024
“The Chinese use two brush quotes to write the word crisis. One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger – but recognize the opportunity.” – John F. Kennedy (1917-63)
A few years ago, Professor William Clements, Ph.D., former Associate Vice President for Academic Affairs and Dean, College of Graduate and Continuing Studies at Norwich University (Vermont) wrote an article that appeared in the October 8, 2018 issue of PA Times. In it, Dr. Clements called for an analysis of rising tuition levels, institutional costs and the importance of higher education to the American public.
Given my background in finance and administration (part of my career was spent as a college administrator), I decided to devote this month’s column to what many observers and experts see as a serious financial crisis effecting higher education in the United States.
Prior to the COVID-19 pandemic, dozens of colleges and universities around the nation started the 2019-2020 academic year under some level of financial stress. These institutions had already spent the prior decade struggling with declining enrollments and weakening support from state governments. The COVID-19 pandemic brought economic challenges to nearly every industry and sector, including higher education.
According to one report, at least 48 public or private colleges have closed, merged or announced closures since March of 2020. Many are privately-funded institutions. It should be noted that this trend started in the mid-2010s and accelerated during the pandemic.
This is just a partial listing of colleges that have either closed their doors or merged with another institution as of January 2024:
The cost cutting has not been limited to small colleges, as recent events have shown at West Virginia University, where the WVU administration closed a $45 million budget shortfall by discontinuing 28 academic programs and eliminating 143 faculty positions.
This crisis is not expected to disappear anytime soon. According to the highly regarded credit rating organization, Fitch Ratings, Inc. (one of the “big three” credit analysis companies along with Mody’s and Standard & Poor’s), more U.S college closures, mergers or restructurings are expected over the next several years.
In addition, this crisis is beginning to extend to publicly-funded colleges and universities as well, according to a report recently issued by New York State Comptroller Thomas P. DiNapoli (the report can be found at: https://www.osc.ny.gov/). Comptroller DiNapoli’s report also examined options to facilitate growth and innovation in the higher education sector.
Some schools experienced fiscal mismanagement issues leading to a closure or merger. However, there are two major reasons for this crisis. According to Robert Franek, Editor-in-Chief of The Princeton Review, the causes can be attributed to declining enrollments (due to anticipated drops in college-age enrollment, as seen by lower numbers of secondary school graduations starting in 2025), and an over-reliance (95 per cent in many instances) on tuition in college revenue operating budgets.
The implications of dwindling enrollments include less funding, fewer student program/course offerings, more structural budget deficits, reduced credit standings (Fitch, Moody’s, S & P) and eventual closings and or mergers.
As with most challenges, there are also opportunities which call for “out-of-the-box” thinking. One approach may be to consider that the traditional four-year undergraduate college curriculum is not for every prospective student; the current labor market remains a solid high-wage alternative to pursuing a traditional degree. Many employers have relaxed bachelor’s degree requirements for entry level positions. A two-year or technical degree may be an ideal substitute.
Another idea worth considering may be to make an undergraduate degree program consist of 6 semesters (three years plus a summer term). The four year model in the United States dates back to over 100 years ago; it may be time to consider a different model which may result in lower tuition costs. I should note that many law schools, such as Northwestern University and SUNY Buffalo Law School, now offer an accelerated two year J.D. degree program (two academic years + summer terms).
Some other options might include less over-reliance on tuition, more rigorous setting and management of strategic goals, addressing total costs and financial aid gaps and establishing more partnerships to keep pace with innovation.
Higher education has proven to be beneficial to the development of democracy in the United States, and is a model known throughout the world today. This crisis needs to be resolved over the next several years. A presidential blue-ribbon type commission to study this problem and make recommendations may be the ideal way to draw the needed buy-in from the many constituencies that make up colleges— government, private industry, the not-for-profit sectors, citizen groups, etc.
Postscript:
Readers interested in this topic and wishing to further explore the financial issues currently facing American colleges and universities may wish to consider:
Author: Stephen R. Rolandi retired in 2015 after serving with the State and City of New York. He holds BA and MPA degrees from New York University, and studied law at Brooklyn Law School. He teaches public finance and management as an Adjunct Professor of Public Administration at John Jay College of Criminal Justice (CUNY) and Pace University. Professor Rolandi is a Trustee of NECoPA; President-emeritus of ASPA’s New York Metropolitan Chapter and past Senior National Council Representative. He has served on many association boards, and is a frequent commentator on public affairs and political issues affecting the nation and New York State. You can reach him at: [email protected] or [email protected] or 914.441.3399 or 212.237.8000.
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