Besides sentimental reasons for wanting your alma mater to “be around for many years to come”, there are practical reasons for hoping your college is able to withstand the intense financial pressures bearing down on higher education today.
Do not ignore financial fitness when making a list of potential colleges to attend.
Lucie Lapovsky, former V.P. of finance at Baltimore’s Goucher College, a higher-ed financial consultant and a FORBES contributor, cautions against ignoring the financial health of the colleges you choose: “Visible signs of financial stress can include fewer classes offered less frequently, more classes taught by adjunct professors, less money for clubs and cutbacks in the upkeep of campus facilities.”
Financial woes are also the leading cause of accreditation suspensions. Indeed, more than a dozen schools among our C- and D-rated colleges are already facing some kind of accreditation inquiry. The last thing you want is for Junior’s college to lose its accreditation. When that happens the feds pull financial aid, enrollment plummets and the lights get turned out.
To help determine the financial health of a college on your list, you can use the FORBES College Financial Grades. Over 900 private colleges are graded based on several components:
Balance Sheet Health (40%)
Operational Soundness (35%)
Admissions Yield (10%)
Freshmen Receiving Institutional Grants (7.5%)
Instructional Expenses per Full-Time Student (7.5%)
Higher education is facing a tough situation.
The prognosis is ominous in part because institutions of higher education operate in an extremely difficult business environment today. Imagine, if you will, running a company that sells a commodity product, where pricing is opaque and you have hundreds of competitors all clamoring after the same shrinking customer base–which, by the way, happens itself to be in financial distress.
Then consider that one of your other chief revenue drivers, subsidies and grants from federal and state governments, has either been cut back or eliminated. Add to this an evaporating competitive moat being stormed by newly minted for-profit businesses and cheap online alternatives.
Management may be the biggest problem.
… By far the biggest problem at most colleges is that they are governed in a way that flies in the face of sound business practices. The vast majority of colleges in the U.S. are bloated with personnel and programs that make little economic sense.
It’s no surprise that the highest scoring schools on the Forbes list include the Ivy League and other elite institutions. I was a little surprised to see two local schools, Pace University and Concordia College, at the bottom of the list with D grades. This financial information would certainly be a factor if I were considering these schools for my child.