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Radical Survival Strategies for Struggling Colleges

Radical Survival Strategies for Struggling Colleges

October 20, 2019

Mergers, acquisitions, shorter degree programs and major shifts in course offerings are just some of the tactics being employed to lure more students.

As published by Jon Marcus, The New York Times

When Steve Thorsett crunched the numbers, things looked grim.

Business was flagging. His flow of customers had fallen to a 10-year low, down nearly 20 percent since 2015. By the year after that, annual expenses were outpacing operating revenues by $14 million.

In an increasingly unforgiving market, Mr. Thorsett needed to do more than chip away at the margins of this problem. He could make cuts, but that was complicated in his industry, and would likely only speed the downward spiral. To differentiate himself from his competitors, this chief executive determined that his operation needed to grow bigger, not smaller.

So Mr. Thorsett took a classic shortcut to expansion. He found a partner that was on even shakier ground. The resulting acquisition will bring with it several hundred new consumers, allowing efficiencies of scale that can lower costs.

Now Mr. Thorsett radiates optimism about the future — something rare these days among his counterparts, many of whom face challenges as bad as or worse than he did.

Mr. Thorsett is the president of Willamette University, part of a higher education sector grappling with a sharp decline in enrollment and financial challenges that cry out not for incremental change, but for radical solutions. Colleges and universities that fail to adapt risk joining the average of 11 per year that the bond-rating firm Moody’s says have shut down in the last three years.

Thanks, among other reasons, to a decline in the number of 18-year-olds and low unemployment luring potential students straight into the work force, enrollment is down by more than 2.9 million since the last peak, in the fall of 2011, according to the National Student Clearinghouse Research Center. More than 400 colleges and universities still had seats available for freshmen and transfer students after the traditional May 1 deadline to enroll for this fall, the National Association for College Admission Counseling reports.

More are likely to go under; Moody’s projects that the pace of closings will soon reach 15 per year. Yet when asked what steps they are taking to avoid this fate, some campus leaders responded like the president of one small private liberal arts college in Pennsylvania. It would, he said, “continue to graduate students who will make a tangible and constructive difference in the world.”

The crisis has advanced beyond the point where those sorts of good intentions are enough, Mr. Thorsett said. He and others in higher education have been actively searching for concrete new ways to rebuild enrollment and produce much-needed revenue.

“This is a business,” Mr. Thorsett said. “It’s not for profit, but we have to keep the lights on. We have to build a model that’s sustainable.”

One way is through acquisitions like the one his university has made of the Claremont School of Theology in California, or C.S.T., which is being moved to the Salem, Ore., campus of Willamette, just as private companies might do to increase their size and cost-effectiveness.

The pace of mergers and acquisitions is predicted to pick up so quickly that the self-described first full-service university and college merger consulting firm, Higher Ed Consolidation Solutions, hung out its shingle in August. “Will there be more? Yeah, we’re betting on it,” said Brian Weinblatt, the firm’s founder.

Colleges are also working to reduce the number of dropouts, on the principle that it’s cheaper to provide the support required to keep tuition-paying students than to recruit more. A few are pushing job and on-time graduation guarantees as selling points. Several are getting into the business of corporate training, which is lucrative because employers foot the bill for workers who don’t need financial aid or fitness centers.

Many institutions are adding programs tied to real-time workplace demand, including online courses that appeal to people who are balancing their educations with families and work. Some are even squeezing small amounts of money from such things as renting out their dorm rooms in the summers on Airbnb, catering weddings and licensing their logos for products including (in the case of 48 universities and colleges) caskets and urns.

“You have to be thinking beyond the current business model, whoever you are,” said Stephen Spinelli Jr., president of Babson College, whose Academy for the Advancement of Global Entrepreneurial Learning makes money for the business university by training educators worldwide how to teach entrepreneurship. “That’s what higher education is going to have to do if it’s going to survive.”

Distinguishing itself is also part of Willamette’s even more aggressive strategy in acquiring the 134-year-old C.S.T., which was suffering multimillion-dollar annual shortfalls that, unlike Willamette, it could not make up from its endowment.

Among the institutions Willamette considers its competitors are small liberal-arts colleges such as Reed and Whitman. But it has something they don’t: several graduate divisions (Reed offers one master’s degree in liberal studies) and a goal of increasing its enrollment from the current 2,700 to 4,000 over the next 10 years, starting with about 400 from the theology school.

“‘Midsize university’ is a sweet spot,” said Mr. Thorsett, who is working to position his school as small enough to promise personal attention but big enough to offer lots of choice, while not coincidentally lowering per-unit costs by serving a larger study body. “The university nature of our institution lets us do things our competitors can’t do.”

These include ramping up money-saving accelerated programs through which students can get both undergraduate and graduate degrees more quickly than it would take them elsewhere, such as a five-year combined B.A. and M.B.A. It now may add a joint B.A. and master’s of divinity degree with C.S.T., some of whose faculty have already arrived on campus.

“Those kinds of synergies are really distinctive,” Mr. Thorsett said. “And they’re something that is really hard for the competition to match.”
Other institutions also are trying to cash in on the growing impatience among students and their parents about how long it takes to earn degrees. Only 41 percent of undergraduates now finish in four years, federal figures show, costing them even more than they’d planned.

Speeding this up has become a promotional tool. Howard University, for instance — which suffered a nearly 28 percent drop in enrollment last year — is guaranteeing rebates equal to half the cost of their final semesters to students who graduate on time or early.

“We sell that to the parents and students when we’re recruiting,” said Wayne A.I. Frederick, president of the university, which reports an uptick in enrollment this fall. “The goal here is for your parents to come back in four years and pick you up.”

Or maybe even three years. That’s how quickly Dr. Frederick thinks as many as 10 percent of his students can finish, by increasing the number of credits they take at one time, including during a three-credit “mini-mester” planned for the otherwise unproductive winter break.

“As students and their parents become more sophisticated as consumers, these are the kinds of things they’re looking at,” Dr. Frederick said.

A few universities and colleges are offering employment guarantees as an inducement to prospective students. DePauw University last year started promising job placement or a free additional semester to graduates who meet certain guidelines but don’t have jobs within six months. Some Davenport University graduates who can’t find jobs in their fields of study within six months get up to 48 additional credit hours free.

Even colleges that don’t have job guarantees are scrambling to add subjects that connect with real-world demand.

Higher education institutions nationwide added 55,416 new programs in the five years ending in 2017, the last period for which the federal government has figures. The number that offer credentials in cybersecurity, for example — for which the labor market analytics firm Burning Glass says demand is growing three times faster than for other IT jobs — is up by a third since 2013.

“Employability and a school’s ability to provide students with access to successful employment is now the key factor in our programming,” said John LaBrie, dean of professional studies at Clark University, which, among other subjects, just began offering a graduate certificate in the timely area of regulating legalized marijuana.

Lehigh University in Pennsylvania has started hiring faculty for a new college of health policy, part of a plan to add 1,800 students. Other universities are forming partnerships with private, for-profit coding boot camps to which they worried they were losing customers.

The University of Tennessee at Chattanooga in August became the latest to team up with the coding school Thinkful. Rice in September added a financial technology program to the data analytics and cybersecurity boot camps it launched last year with Trilogy Education Services.

If it seems odd for colleges and universities to try to attract more customers by promising results that people might have been expecting anyway — degrees within four years, with jobs at the end — some of their other strategies also have distinctive shortcomings, underscoring the magnitude of the challenges they face.

Not all of those tens of thousands of new offerings, for instance, are likely to attract enough students to pay off. Fifteen programs nationwide that were added in casino management turned out an average of two graduates apiece, the consulting firm Eduventures found. “That’s a philosophy of let’s throw something at the wall and see if it sticks,” Miles K. Davis, the president of Linfield College, in McMinnville, Ore., said with a laugh.

Those job guarantees, come with lots of fine print; at Davenport, for instance, they apply to only to majors in the highest-demand fields.

And for all of the work it has done to reduce the number of dropouts, the higher education industry has so far barely moved the needle. Twenty-six percent of freshmen each year fail to return as sophomores, just 2 percentage points better than in 2009, with almost no improvement in the last few years, the National Student Clearinghouse Research Center found.

A very few colleges have taken yet another lesson from the business world and responded to decreased demand in the most dramatic way of all: by sharply lowering their prices. Central College in Iowa announced in September that it would cut its tuition by $20,000 starting next fall, to $18,600, after years of enrollment declines. St. John’s College, which has 800 students on campuses in New Mexico and Maryland, reduced its tuition by $17,000 this fall, to $35,000. Applications went up, and the size of the entering class rose slightly.

But some colleges that cut prices saw their numbers go down, not up. A few enjoyed a bump in applications in response to the attention, which quickly faded. That speaks to Americans’ conviction that things that cost more must be worth more, said Mark Roosevelt, president of St. John’s Santa Fe campus.

“Most of the gains were pretty short-lived if they existed at all,” said Alex Bloom, a pricing expert at the enrollment management-consulting firm EAB, who has studied what happened to colleges that cut tuition in the last two decades.

Colleges and universities are also pushing more students into graduate school, since this is typically a revenue producer for them, and graduate enrollment is a bright spot; it has kept rising, even as undergraduate enrollment is falling. On the down side, there are signs that graduate numbers are beginning to flatten out, too. That includes international graduate enrollment, long an important source of revenue for universities in the United States.

There are other moves that colleges can make. One is to broaden their outreach. While the supply of 18-year-olds overall is falling, for example, the number of Hispanics 18 and under will nearly double nationwide by 2060, the Census Bureau projects.

For institutions struggling for students, that means looking in new places and in different ways. Linfield, which suffered five years of declining enrollment and resulting budget deficits that forced a buyout of 13 faculty and staff members, now has full-time admissions officers who are bilingual, four Spanish-speaking “student ambassadors” and new scholarships for students who are the first in their families to go to college.

“It seems like a simple thing” to make a sales pitch to customers who haven’t gotten one before, Mr. Davis said. “But now we can have that conversation with parents who may or may not speak English.”

Linfield, which had 1,240 students last year, says it has seen a 38 percent jump in the size of its entering class this fall, and more than 40 percent of freshmen are first-generation.

“The world that existed 35 or 40 years ago, where there was an unlimited number of people applying to school, is diminishing,” Mr. Davis said. “And the smaller you are, the more difficult that battle is.”

If it takes more work to find traditional-age freshmen, there’s one very big supply of prospective students available to colleges: older adults who never went, started but didn’t finish, or want to get advanced degrees. Just by itself, the number who have some credits but never graduated is more than 35 million, according to the Census Bureau.

Many institutions are attempting for the first time to recruit these students, but that can be a hard sell; often these adults were left with debt but not degrees and are understandably skeptical about risking that again, or now are juggling careers and children. “If you are not already serving adults in some capacity, trying to make that pivot can be difficult,” said Marie Cini, president of the Council for Adult and Experiential Learning.

A faster way in is by selling corporate training to their employers, who cover the costs and pay full price without requiring the colleges to give discounts or financial aid. Pace University, for example, has a deal with AT&T, Verizon and a coalition of other companies to train network technicians in the telecommunications industry.

“The corporation makes it easy,” said Patrick O’Keefe, a business reorganization and turnaround expert. “That’s a good reach out by the universities, no question. You’re dealing with a deep-pocketed customer. Why wouldn’t you tap into that?”

Now smaller institutions are getting into the estimated $88 billion-a-year corporate training business. For example, starting this fall, Husson University is providing an M.B.A. program to employees of the outdoors retailer L.L. Bean, which hired it to offer the degrees at the company’s headquarters in Freeport, Maine.

“This broadens our product range from an 18- to 21-year-old market to a multiple-age range,” said Husson’s president, Robert A. Clark. “You couldn’t have a better model as part of a portfolio. And being associated with a brand like that doesn’t hurt.”
If Mr. Clark talks like a certified financial analyst with an M.B.A., it’s because he is one. Many of the campus leaders who are trying innovative strategies to stay afloat have taken unconventional paths to their jobs.

“What a president does these days has very little to do with academic programs. It has a lot to do with business, finance, labor law, marketing fund-raising,” said Mr. Davis, who took over in July at Linfield and before that was a business-school dean and a managing consultant and principal for EDS, now part of Hewlett-Packard. “You need people who can think entrepreneurially.”

Mr. Spinelli, who also started in July at Babson, co-founded Jiffy Lube before becoming president of Philadelphia University and overseeing its merger with Thomas Jefferson University in 2017. Dr. Frederick is a medical doctor who also has an M.B.A. An astronomer, Mr. Thorsett managed $125 million spacecraft missions.

It’s not easy, in an academic setting, to talk about such things as mergers and markets, strategy and synergies, Mr. Davis said.

“But what’s more difficult than having this conversation,” he said, “is having the conversation that they’re having in places where institutions are shutting down.”

Jon Marcus is the higher education editor at The Hechinger Report, a nonprofit, independent news organization that covers education.

A version of this article appears in print on Oct. 13, 2019, Section F, Page 4 of the New York edition with the headline : Survival Mode.