Diminutive Sweet Briar College in Virginia has not received as much attention as it has since administrators announced earlier this month that the all-women college will shut its doors at the end of this academic year. Indeed, that announcement stunned students, families and faculty members, and initiated a fundraising drive to keep this 114-year-old institution operational.
As surprised that many people were following the news, some financial and educational experts saw it coming and are expecting other small colleges to follow suit. For high school students weighing their educational options and for students currently enrolled in at-risk institutions, understanding the warning signs can help them make wise choices. With this in mind, we have assembled some of the salient traits of colleges that may close.
1. Missed enrollment projections. Simply because a college is small does not mean that it will fail. A problem becomes evident if the institution misses its enrollment projections. That information is not always projected front and center, but can usually be uncovered by carefully following news related to that school. When enrollment numbers fall short, the school will have fewer dollars to invest in facility upgrades, faculty and in crucial programs.
2. A matter of debt. Students and their families should examine the college’s financial records, That information is posted on the college’s website is required per OMB Circular A-133. Learn how much debt the college has at present. Examine trends to see if the school has taken on additional debt over the past several years. If debt is on the upswing it could reflect deeper financial problems.
3. Endowment that is restricted or too small. Sweet Briar College has an endowment of $84 million, but two-thirds of the funds are for restricted use. The college says that it needs $250 million to stay open, money it simply does not have. There may not be a magic endowment number, but you should know that if the number is both small as well as restricted, then the institution has very little room to maneuver.
4. College administration stability. Who is the college president? Does he or she have a strong record with the school? Has the school gone through administrators and other officials in recent years? Turmoil at the top can suggest wider problems throughout the institution. Take special note of any administrator who was previously at the helm of a college that later closed — this person may have been retained with the expressed purpose to shut down yet another school.
5. Faculty and staff numbers. One thing that raised eyebrows about Sweet Briar was the number of faculty and staff employees in relation to the school’s size. Some 300 employees served about 720 students, an unsustainable number that may have hastened this school’s demise. Colleges with declining enrollments need to downsize, by cutting the number of employees, selling assets and reducing debt.
6. Tuition assistance is on the rise. Understandably, tuition costs are making it more difficult for students to afford college. To attract and retain students, colleges must provide financial aid. If the amount of aid is on the rise and the number of students receiving assistance has also been increasing, then the college has fewer dollars to spend elsewhere. Tuition and related expenses help colleges stay in business. If those dollars are on the decline, the school may not survive.
It is easy to get lulled by various college ranking reports that look at these schools without considering the various problems that may exist. Those reports often skew what is really happening if they bother to include that information at all.