Colleges in Dire Financial Straits

[Minervabird]

The woes of the University of Dundee
https://www.bbc.co.uk/news/articles/cjel3ng04q4o

Looks like financial mismanagement.

[apl68]

The woes of the University of Dundee
https://www.bbc.co.uk/news/articles/cjel3ng04q4o

Looks like financial mismanagement.

They mention large amounts of "ringfenced" funds that ended up being misspent.  Wonder what the details were on that?  I also wonder how their enrollment of international students, whom they were treating as a cash cow, collapsed so suddenly. 

[Minervabird]

The woes of the University of Dundee
https://www.bbc.co.uk/news/articles/cjel3ng04q4o

Looks like financial mismanagement.

They mention large amounts of "ringfenced" funds that ended up being misspent.  Wonder what the details were on that?  I also wonder how their enrollment of international students, whom they were treating as a cash cow, collapsed so suddenly. 

The UK government changed the visa rules, so international students can no longer bring families with them.  Enrolments dropped a lot as a result across all universities.  A lot of universities here invested in vanity projects...buildings, other campuses abroad, and the interest rates went up. Tuition is also regulated here to a maximum amount by the government, and it really is not enough...a bit over £9000 a year for UK students, and a lot more for international students who were subsidising the universities.

[apl68]

The woes of the University of Dundee
https://www.bbc.co.uk/news/articles/cjel3ng04q4o

Looks like financial mismanagement.

They mention large amounts of "ringfenced" funds that ended up being misspent.  Wonder what the details were on that?  I also wonder how their enrollment of international students, whom they were treating as a cash cow, collapsed so suddenly. 

The UK government changed the visa rules, so international students can no longer bring families with them.  Enrolments dropped a lot as a result across all universities.  A lot of universities here invested in vanity projects...buildings, other campuses abroad, and the interest rates went up. Tuition is also regulated here to a maximum amount by the government, and it really is not enough...a bit over £9000 a year for UK students, and a lot more for international students who were subsidising the universities.

Oh yes, I remember now reading in the news about those visa changes.  The limitations to tuition for UK students, and the failure of public funding to keep pace with inflation, had led to a financial dependence on high-paying international students.  Higher education in the UK and in North America seems to be struggling with a lot of the same issues.

Actually, higher ed seems to be struggling all over the world.  I understand that in Japan, where they've already begun toppling over the demographic cliff, many colleges are looking at closing for lack of students.

[Hibush]

Hartwick College in Oneonta NY is laying off staff and interim president predicts deficits.

This is a small, private college with a modest endowment located in a small town in upstate New York. It is in the same town as a SUNY campus that many say offer a better education for much less money.

The rumors of closure seem credible given how many boxes it checks.

[spork]

Hartwick College in Oneonta NY is laying off staff and interim president predicts deficits.

This is a small, private college with a modest endowment located in a small town in upstate New York. It is in the same town as a SUNY campus that many say offer a better education for much less money.

The rumors of closure seem credible given how many boxes it checks.

I look up Hartwick's financials. It has run a deficit every fiscal year since 2014, even with federal aid during the pandemic and asset sales.

The college is not financially viable.

[apl68]

Hartwick College in Oneonta NY is laying off staff and interim president predicts deficits.

This is a small, private college with a modest endowment located in a small town in upstate New York. It is in the same town as a SUNY campus that many say offer a better education for much less money.

The rumors of closure seem credible given how many boxes it checks.

I look up Hartwick's financials. It has run a deficit every fiscal year since 2014, even with federal aid during the pandemic and asset sales.

The college is not financially viable.

With a record like that, it sure doesn't look like it.  Wonder if they've already quietly cut a number of faculty and programs?

Their Wikipedia entry says that the foundation dates from the late 1700s, and has been a four-year college for nearly a century.  But it's a very small school, with only a little over 1,100 undergrads.  They're on their second new President since 2022, which doesn't look good.

Looks like they've tried to stay innovative.  Since 2009 they've offered a three-year bachelor's program, which is something I've heard advocated here before.  I guess what they offer still hasn't been attracting enough students.  An already-small college can't afford to lose too many, but such are the times.

[Ruralguy]

1100 students might not be so bad if they're enrollment hasn't been decreasing (doubtful, considering their revenue issues), especially if their infrastructure is more or less built for 1000-1500 students.

Their main issue is that their endowment is really far too small (factor of of a few, probably) to be useful in budgeting. I wouldn't be surprised if their budget is close to 100 million (or was), and with their endowment, they can't be pulling much more than 3 million per year. Probably not getting more than a million in grants either. If they are lucky, gifts might be 5 million per year. So, my point is, they are extremely tuition driven. More so than my school, which is of similar size, but older with a bigger endowment (and fairly generous alums, at least once they've been out in the world for a bit). So, if 90% tuition driven with decreasing enrollment, and nearby competition, then, uh oh.

[apl68]

1100 students might not be so bad if they're enrollment hasn't been decreasing (doubtful, considering their revenue issues), especially if their infrastructure is more or less built for 1000-1500 students.

Their main issue is that their endowment is really far too small (factor of of a few, probably) to be useful in budgeting. I wouldn't be surprised if their budget is close to 100 million (or was), and with their endowment, they can't be pulling much more than 3 million per year. Probably not getting more than a million in grants either. If they are lucky, gifts might be 5 million per year. So, my point is, they are extremely tuition driven. More so than my school, which is of similar size, but older with a bigger endowment (and fairly generous alums, at least once they've been out in the world for a bit). So, if 90% tuition driven with decreasing enrollment, and nearby competition, then, uh oh.

If they've been running deficits for over a decade, then they've likely spent down much of whatever endowment they had.  And it was probably not large enough to contribute a very large share of the budget to start with.  I remember some discussion here a few years ago where somebody--maybe you?--had some observations regarding just how large an endowment has to be before it can meet much of even a small college's budget.  There must not be very many small schools with that sort of endowment.  It looks like some of these dire straights colleges accumulated just enough endowment in their (relatively) fat years to starve a little more slowly now.

[Hibush]

fairly generous alums, at least once they've been out in the world for a bit)

A bit of a tangent, but relevant to the role of endowments in avoiding dire financial straits.

Alumni giving is a big factor for private schools, and one that works for long-estabished schools.

I learned that at my school the peak time for giving is right after retirement. That is when people leave the accumulation phase of life. Some find that they have accumulated a lot more than they actually need and realize that it is rewarding to fund things they value back at old alma mater. In this scenario, having a few alumni with account balances in the nine and ten figures makes a big difference.

But the payoff comes half a century after graduation. That is an enormous lag. And a lag with significant investments to keep alumni engaged that whole time--even the ones who end up having no excess at retirement.

[dismalist]

fairly generous alums, at least once they've been out in the world for a bit)

A bit of a tangent, but relevant to the role of endowments in avoiding dire financial straits.

Alumni giving is a big factor for private schools, and one that works for long-estabished schools.

I learned that at my school the peak time for giving is right after retirement. That is when people leave the accumulation phase of life. Some find that they have accumulated a lot more than they actually need and realize that it is rewarding to fund things they value back at old alma mater. In this scenario, having a few alumni with account balances in the nine and ten figures makes a big difference.

But the payoff comes half a century after graduation. That is an enormous lag. And a lag with significant investments to keep alumni engaged that whole time--even the ones who end up having no excess at retirement.

That's certainly true.

A sure fire method to collect for the endowment earlier is to generously offer legacy admissions! :-)

[apl68]

fairly generous alums, at least once they've been out in the world for a bit)

A bit of a tangent, but relevant to the role of endowments in avoiding dire financial straits.

Alumni giving is a big factor for private schools, and one that works for long-estabished schools.

I learned that at my school the peak time for giving is right after retirement. That is when people leave the accumulation phase of life. Some find that they have accumulated a lot more than they actually need and realize that it is rewarding to fund things they value back at old alma mater. In this scenario, having a few alumni with account balances in the nine and ten figures makes a big difference.

But the payoff comes half a century after graduation. That is an enormous lag. And a lag with significant investments to keep alumni engaged that whole time--even the ones who end up having no excess at retirement.

Which is why I get alumni office junk mail all the time from my undergrad and grad institutions--even though I'll never have much money to give the former, and have no intention of giving the latter a red cent, after they used me as cheap graduate labor for six years.

One reason the little regional schools and church-affiliated schools struggle so much is that they've produced little, if anything, in the way of rich alumni.  The rich folks nearly always are graduates of the Ivies and the R1s, which is why they get multi-million-dollar, even occasionally billion-dollar-range donations, while the other schools scrape for tiny contributions from their overwhelmingly middle-class alumni.  It's also a reason why the hugely rich schools find themselves receiving so little support from large segments of the public when they become subject to attacks by demagogues.  Conspicuously rich people and institutions don't usually have a lot of foul-weather friends.

[selecter]

Hartwick isn't quite Super Dinky, but it's been on that sort of 'circling-the-drain' watch list for a handful of years. It looks like things are beginning to accelerate, downward.

[Ruralguy]

As a very general rule of thumb, if the ratio of endowment $ to number of students is much less than 100,000, Its not going to be able to contribute much to the budget. I say "every general" because, for instance, you can think of the aberrant example of a school shrinking to a student body of 10 with a million dollar endowment. They are Not going to be in good shape. 

Another way of thinking about essentially the same thing is that the endowment must be much larger than the annual budget in order to effectively contribute anything to said budget. It looks like Hartwick's endowment numbers are probably a bit *less* than its annual budget. This forces almost total tuition dependence. Again, I'm not in a position to throw stones. But, why my school will probably survive at least several more decades (I'll report back here if the *don't*) is that there is significant endowment relief even though we are still more than just moderately tuition dependent.

It sounds horrible to say, but, yes, a small private school probably can not survive if none of its alumni are wealthy. A bigger one might have big numbers on its side, but still needs megadonors to compete and be on the cutting edge.

[Hibush]

Hartwick isn't quite Super Dinky, but it's been on that sort of 'circling-the-drain' watch list for a handful of years.

This note describes the circle plainly. Their financial strategy adds to the risk. I wouldn't want to be the administrator who got that evaluation.

December 16, 2021 -- Moody's Investors Service has downgraded Hartwick College's (NY) issuer and debt  ratings to B1 from Ba3.

The outlook remains negative.

Hartwick has total outstanding debt of about $37 million.

RATINGS RATIONALE  The downgrade of Hartwick College's issuer rating to B1 from Ba3 reflects an escalation of student market difficulties, resulting in deepening operating deficits and declining liquidity.

Weak regional demographics, a social consideration under Moody's ESG framework, along with heightened competition from an array of public and private colleges in the northeast, contribute to the college's deteriorating strategic position and are a driver of this rating action.

The college's financial strategy, a key governance consideration under Moody's ESG framework, adds to risk through elevated endowment draws and is also a key driver of the action.