About 40 percent of American colleges enroll 1,000 or fewer students. Another 40 percent enroll 1,000 to 5,000 students. These campuses, clustered mostly in the Northeast and upper Midwest, are employment and cultural anchors in their communities, where other industries have fallen on hard times in recent decades.
But now these schools are in trouble, too. Rarely does a week pass without one of the major bond-rating agencies issuing a warning about the finances of a small college. What’s significant about the guidance of these firms is that they tend to rate only schools with strong balance sheets to begin with.
Just this week, Moody’s Investors Service revised the outlook on Mount St. Mary’s University in Maryland to “negative” from “stable.” The rural Catholic college with 2,300 students near the Pennsylvania border made national news last year after its president compared struggling freshmen to bunnies that should be drowned or shot.
The president later quit, but the firestorm he created seems to have impacted the university’s ability to recruit students. Freshman enrollment fell 17 percent last fall, Moody’s said, and that means “heightened financial risks” for the tuition-dependent university on $38 million in rated debt. At the same time, Moody’s affirmed Mount St. Mary’s Ba2 rating, which still places the debt in junk territory, because the university has made “progress in stabilizing leadership and rebuilding its board.”
Like many small colleges, Mount St. Mary’s is competing for a shrinking number of students in its primary recruitment market. After decades of a fairly steady upward expansion in the number of high-school graduates across the United States, the nation is heading into a lengthy period of stagnation, according to projections released in December by the Western Interstate Commission for Higher Education.
The organization, which tracks graduates for the entire country, found that the South and to some extent the West will account for nearly all the growth in the number of high-school graduates over the next decade, while the Northeast and Midwest will show a continued and steady decline. Everywhere, the nation’s high-school graduates will become more diverse than ever before, with the number of Hispanic graduates expected to grow substantially.
Although warnings about the changing demographics of college-age students were first issued earlier this decade by the commission, many small colleges ignored the predictions. And now their lack of a strategy to diversify the enrollment pipeline is putting financial strain on the bottom line, especially in a student market where tuition prices continue to increase year after year as family incomes lag.
The answer for many small colleges has been to discount tuition prices. The average discount for first-year students has reached a staggering 47 percent — that’s nearly half off of the published sticker price of tuition, and up from around 40 percent just seven years ago. But there is evidence that even discounting tuition no longer works in attracting students. More 40 percent of small private colleges missed their goal for enrollment or tuition revenue last year, according to a recent survey by the Chronicle of Higher Education.
Not all small colleges are struggling, however. A handful have deep pockets to maintain their small size and national reputations that generate plenty of qualified applicants. Even a few without a brand-name or a hefty endowment have forged a pathway to prosperity, some even by growing in size.
Take the University of New England, for example. The school in Biddeford, Maine, just south of Portland, has seen its enrollment triple in the last decade to some 12,000 undergraduate, graduate, and professional students. It’s the ninth-fastest-growing private college in the country. What’s more, the university is drawing more of its students from outside Maine. In 1998, half of the university’s incoming class came from Maine. In recent years, 70 percent of new students came from elsewhere, mostly Massachusetts and New Hampshire, but also New York and Connecticut.
“We saw the writing on the wall and knew the demographics weren’t in our favor,” Scott Steinberg, the university’s dean of admissions, told me. So the university started to focus on recruiting at high schools throughout New England “knowing 50 percent of students go to college within 250 miles of their home,” Steinberg said.
Simply racing to where large numbers of students live is not a strategy by itself. “Everyone follows that playbook, so we needed to be unique in other ways,” Steinberg said. For the University of New England that meant emphasizing a broad liberal-arts education combined with health professions programs, which tend to get students jobs. The university also focused on getting students to visit the campus because those who do are more likely to apply and eventually enroll.
Earlier this month, Moody’s, in rating new debt for the University of New England at a level of A3, characterized the school‘s outlook as “stable.” The university, Moody’s noted, has “strong student demand” and its leaders have engaged in “thoughtful planning and careful execution.”
“Student enrollment is like an investment portfolio,” Steinberg told me. “You have to diversify, not only in geography, but academic majors, graduate programs and different ways of reaching students, such as online. No doubt many small colleges face demographic challenges. It will be tough going if you just do what you always did. You have to think differently.”