Colleges in Dire Financial Straits

[Vkw10]

IOW, these restrictive endowment lines cannot be altered even if the school would go belly-up without recourse to the funds?

If this is true, and that, say $50m of the 77 is earmarked specifically for scholarships and endowed professsorships, since it cannot be diverted to other uses in order to save the school, then when the school does indeed go belly-up, what happens to funds like that?

It's typically up to state to transfer it to institution with similar mission, but here's more on the topic:

https://www.fa-mag.com/news/orphan-endowments-of-dead-schools-bedevil-u-s--states-31757.html?section=75&page=3

[kaysixteen]

It's good that the state in question gets to do this.  Innumerable potential conflicts of interest and avenues for self-dealing if the trustees got to do it.   I am still wondering what has or will become of the small denominational college I worked for six years ago, whose denominational parent chloriformed it last summer.  Its endowment was miniscule, but the value of its physical plant, esp given its location, is certainly in the tens of millions.

And it is still true that whenever more or less any institution of higher learning croaketh, this death causes real pain to the local environs, all across the board.  Which is probably why states usually find it nigh onto impossible to shutter state colleges,and is probably also why they should, in their own interests, do all they can reasonably do to keep private ones afloat, including passing laws that might allow, in certain exigent circumstances, the state to intervene to override restrictive endownment covenants to allow liquidation of some of these funds in order to help sustain the school's existence.

I had not considered the cases where school X merges with dying school Y... in roughly what percentage of cases is this even likely a possible outcome? 

[pgher]

Modern gift agreements have escape clauses of various kinds to handle changes in the institution's structure or policies. Unfortunately, that practice dates back just a few decades. We have lots of scholarship endowments with plainly illegal restrictions. We can't change them, but have to find ways to work around them. If the donor has passed away without giving proper authority to a descendent, the college is just screwed.

[apl68]

Modern gift agreements have escape clauses of various kinds to handle changes in the institution's structure or policies. Unfortunately, that practice dates back just a few decades. We have lots of scholarship endowments with plainly illegal restrictions. We can't change them, but have to find ways to work around them. If the donor has passed away without giving proper authority to a descendent, the college is just screwed.

I guess by "illegal restrictions" you mean that they are limited to certain types of people or specifically exclude certain types of people.

I recall Alma Mater having a number of ludicrously small memorial scholarship grant opportunities that amounted to only a few hundred dollars' worth of aid each.  Even in the 1980s some of these would barely pay for a student's textbooks.  Somebody with a bit of money set up a tiny "scholarship" to make a nice gesture, without realizing that they weren't really helping much.  I don't envy whoever has to go to the trouble of managing those tiny pots of money.

[apl68]

IOW, these restrictive endowment lines cannot be altered even if the school would go belly-up without recourse to the funds?

If this is true, and that, say $50m of the 77 is earmarked specifically for scholarships and endowed professsorships, since it cannot be diverted to other uses in order to save the school, then when the school does indeed go belly-up, what happens to funds like that?

It's typically up to state to transfer it to institution with similar mission, but here's more on the topic:

https://www.fa-mag.com/news/orphan-endowments-of-dead-schools-bedevil-u-s--states-31757.html?section=75&page=3

That link mentioned Sweet Briar College, which got a lot of discussion a decade ago when its trustees voted to shut it down, and the alumnae rallied and wouldn't let them.  And, after ten years, Sweetbriar is still going!  A last-minute campaign to raise funds to save a failing school actually worked.  Talk about beating the odds. 

IHE recently had an article about Sweet Briar's unlikely survival:


https://www.insidehighered.com/news/governance/executive-leadership/2025/03/27/how-sweet-briar-college-defied-odds-closure


What kept them going?  Fiercely loyal alumnae, who also had serious money--about $160 million worth over the past decade, and counting.  A substantial remaining endowment for a school its size.  A lot of valuable land that they could use.  And a unique niche (all-women's school in a rural setting, with lots of potential for equestrian and agricultural programs) that they were finally able to figure out how to use.

That said, Sweet Briar has had a tough time of it.  They had to cut nearly two-thirds of their majors.  That means a number of long-time faculty must have been let go.  And they don't have much margin of error as they try to survive from year to year.  Still, it's pretty incredible that their Hail Mary play actually worked in this case.  Very few people would have figured that the school would still be around a decade later.

[kaysixteen]

Presumably a state school could not now have a scholarship endowment fund whose donors stated in the contract that the funds could only be awarded to a white kid, even though this was probably acceptable 100 years ago when mamy of these things might have been set up.   But if this fund still exists and no donor heir has authorized this language to be removed, wouldn't it therefore be the case that more or less any non-white student enrolled today could sue the school saying he should have been at least allowed to apply for this grant?  How the hell does a school, esp but not only a state one, that still has such restrictive covenants in existence with various endowment bequests that no living heir is able or willing to change, 'just work around this'?

[Ruralguy]

There's no way a school today would disburse the funds in the manner specified by the original donor in the case you mention. They would almost certainly just make it available to anyone now, and if anyone were to fight it in court, they'd just say their hands were tied by the law, tried to contact heirs to change the language of the gift, but there were none.

[Vkw10]

Our foundation went through all our endowment funds a couple of years ago, checking for discriminatory restrictions. They contacted donors who were still living and talked most of them into amending their deeds of gift, returning a few small gifts where donor wouldn't amend. For the deceased donors, they got a ruling from state court to amend their deeds of gift. They did it as one big court case, presenting the problem language and proposed amendment.

My department now gets to award a $135 scholarship to a student taking a course in personal finance or economics instead of to a "young lady studying domestic economy, with preference for active members of Congregationalist Church."

[Hibush]

Siena Heights will close after the next academic year.

This school has a lot of the hallmarks leading to dire financial straits: 1000 on-campus undergrads, small town in the midwest (halfway between Toledo and Battle Creek), a Catholic legacy but no longer having the financial support. Pretty low rankings in many fields. Tried adding a lot of online students. Also added a few grad degrees (master in business and nursing) to claim to be a university.

[spork]

Siena Heights University will close in 2026:

https://www.sienaheights.edu/siena-heights-university-announces-closure/.

Undergraduate FTE enrollment peaked in 2016 at 1,920 and was at 1,381 in 2023, a 28% drop. Its endowment is, or was, only about $8 million.

[Puget]

Tried adding a lot of online students.

It is very mysterious to me why failing institutions think this will work. Why would students pick a small no-name institution for an online degree when they could do one probably for less money and certainly with more course offerings at one of the big ones?

[spork]

Warren Wilson College.

Undergraduate FTE enrollment peaked in 2012 at 960 and was at 719 in 2023, a 25% drop. Deficits every year since FY 2016, except for FY 2022 (pandemic aid) and FY 2024 (only 270K in net revenue). Its endowment is or was only about $55 million, and it appears to be selling portions of it annually.

[Hegemony]

Looking at Sweet Briar's departments, I see that the History Department has only two faculty and the English Department only three (two of whom have PhDs from the University of Utah, curiously enough). That's bare-bones staffing. But I see that as of 2022 the college had only 460 students. Yikes. They're certainly skating on thin ice.

[ciao_yall]

Tried adding a lot of online students.

It is very mysterious to me why failing institutions think this will work. Why would students pick a small no-name institution for an online degree when they could do one probably for less money and certainly with more course offerings at one of the big ones?

My previous institution, the community college of a famous city, though putting up online classes would flood us with enrollment! Because... wow!! People from all.over.the.world would be thrilled to have an online certificate or degree from us!!!

Never mind the global marketing expense to let the world know it was an option, the tuition costs for non-state residents per unit...

1995 called. They want their dot com boom back.

[kaysixteen]

Presumably Col. Culpepper IX could assert, as his ancestor's sole direct heir, that if the progenitor's will can no longer be allowed because of the intransigence of the Damnyankees, that the bequest be cancelled and refunded to the estate?

WRT Sweet Briar, would it likely end up evolving into something like a specialized trade/professional school, with these sorts of equestrian programs end up more or less being all there was, and students no longer offered a bachelor's degree in liberal arts, the sort that would continue to require core classes in things like English or history?