Private Colleges on Life Support

Holy Family College in Manitowoc will shut its door for good at the end of August. It will not be the last Wisconsin college to close since the COVID-19 pandemic struck, only the first. Other Wisconsin colleges are in critical condition. Some will make it out of intensive care alive. Others will not.

What is happening in Wisconsin is not an isolated incident. It is taking place all over the country as private colleges struggle to survive, but Wisconsin is very close to the center of the private college collapse.

“By 2030 over 50% of colleges will collapse,” was the headline in a 2013 article for Business Trends by futurist Thomas Frey.

So far, Frey’s prediction has not come true. Until the COVID-19 outbreak, few experts in higher education agreed with Frey’s prediction. But most believed that Frey was only overstating the percentage, not the general, dire direction. Since the virus outbreak, more experts are increasing their college demise numbers. The heaviest toll may be in the Midwest, including Wisconsin.

“Wisconsin is on the edge of a Great Lakes and Northeast phenomenon,” Nathan Grawe told Wisconsin Examiner. His 2018 book, Demographics and the Demand for High Education, is highly regarded and often cited by those examining the future of colleges in America.

A lower birthrate after the Great Recession has resulted in a smaller future student population.

Colleges must prepare for that decline, says Grawe. “The stories we saw about Wisconsin, both public and private, found that they were reorganizing their programs, rethinking the things that they are going to do as they grapple with these changes.” And that was before COVID-19.

In addition, states like Wisconsin are an importer of college students from Illinois and the East Coast. Wisconsin colleges cannot survive simply on resident state students. Grawe says prospective students are likely to choose to go to college closer to home during the pandemic, meaning colleges that depend on out-of-state students are likely to find a much smaller pool to draw upon.

Grawe points out what colleges may discover, as they are forced to move classes online: “The student is not getting the experience at the college that we sell. How will that affect the students and the perspective students who may have even made a deposit? If this goes on into the fall, will students say, the education you are currently offering is not the education you are selling?”

The colleges that are likely to survive are also those colleges which adapt the best to the online experience.

Enrollment and endowment are no guarantee

Experts like Grawe believe colleges with an enrollment of under 1,000 students, a small endowment and low cash flow, are the most vulnerable.

Grawe says that his own college, Carleton in Northfield, Minnesota, is much like Wisconsin’s Lawrence and Beloit — small colleges with high entrance requirements and healthy endowments which may help them weather the storm. But colleges that meet those standards are not necessarily in a safe position. He notes the warning signs at Beloit College.

“Dawn of the Dead” was the title of a November 2019 article in Forbes Magazine that outlined the ominous prospects of many private colleges in this country through a rating system the magazine created. Several other publications have done the same.

Forbes gave Lawrence University in Appleton a financial score of “B+”, their highest rating for a Wisconsin private college. The next in line was Beloit at “B-.” But Beloit has been going through some rough times in the last few years.

Last year Beloit faced a $7 million deficit after a significant drop in enrollment. That was preceded by several years of increasing deficits that Beloit officials could no longer manage by dipping into cash reserves. Budgets and salaries were cut.

Eric Boynton became provost and dean at the college one year ago. He agrees with Grawe. “I do believe the situation gets tougher and tougher especially four years from now when we begin to see the demographic cliff on the horizon.”

What got Beloit into trouble was a concerted effort to increase enrollment for several years. The incoming freshman classes increased to around 390 students, then the bottom fell out two years ago, and the class dropped to 300.

Boynton attributes the drop in enrollment to overly aggressive recruitment, which brought in students who were not a good fit for Beloit. The college is no longer casting such a wide net. However, it is hard to accept that a college would deliberately make a drastic change in its admission policies in such a way as to force major budget cuts and salary decreases.

Beloit faces a new challenge — 16% of its students are international, with half coming from China. Right now Boynton says about 150 international students are on campus because they have nowhere else to go. He expects 100 students will be with them over the summer. No one is sure what the chances are of new international students coming to Beloit next fall.

Boynton agrees that colleges that handle online learning the best and are flexible in their approach are the colleges that will survive. Next fall Beloit is dividing each of its two semesters into two blocks where students will take only two classes at a time. This “maximizes flexibility and minimizes disruption,” says Boynton. It is difficult to juggle more than two online classes at a time, says Boynton. If the college has to go back to online classes or have classes back on campus, it is easier to pivot in the middle of a semester.

Partnering with a larger institution

The lowest Wisconsin college on the Forbes financial list is Milwaukee Institute of Arts and Design (MIAD) which earned a score of “D”.

Jeff Modrin, president of MIAD, contests the Forbes ranking. Such rankings don’t always take into consideration all the variables and often the data used is several years old, he points out.

Modrin admits that his institute does not have much of an endowment; it is a tuition-driven college. However, MIAD’s enrollment has grown 40% in the last four years. This year its enrollment is 860, and “we are on track to be somewhere above that,” he says.

MIAD benefited from the 2015 closing of the for-profit Art Institute of Wisconsin, just blocks away. MIAD gained some students. More importantly, it no longer has a competitor in the neighborhood.

Most of its students come from Wisconsin and northern Illinois. If students wish to stay closer to home during this pandemic, MIAD might be in a good position.

Its biggest advantage may be its relationship with Marquette University, less than two miles away. Students can dual enroll in both colleges, majoring at one institution and minoring at the other. MIAD also contracts with Marquette for other services such as its health clinic.

As colleges struggle, experts believe that many colleges will either fold or merge with larger institutions. MIAD’s cooperative arrangement with Marquette could be its lifeline.

Finding a niche

Just a mile south of Lake Superior in the community of Ashland is Northland College.

Because most college offices are closed as staff work from home, it is sometimes difficult to make direct contact with anyone on campus at many colleges. But if one calls the admissions office at Northland, chances are Kevin Haas will pick up the phone.

Although this college has only 600 students, Haas points to several factors in Northland’s favor. The college carries little debt and most of its students are from the Midwest with only a handful of international students. Forbes gave Northland a financial health grade of “C”.

“Our saving grace is our niche with the environment,” says Haas. Another selling point is its Native American studies program.

The college is in a remote part of the state with a small population not hit hard by COVID-19. “Our plan is to be up and running in the fall,” says Haas.

But remoteness could also have a negative impact on the college. A significant percentage of its students come from Illinois. That distance might be just great enough to give parents and students second thoughts. Just how unique Northland’s programs are is another question. Both the University of Minnesota – Duluth and UW Superior are only 65 miles away, both with recognized programs in environmental and Native American studies. The real niche Northland may have is offering these programs at a much smaller college, something some students may be looking for. Is this enough?

What is your plan?

In September 2019, Silver Lake College of the Holy Family in Manitowoc changed its name to Holy Family College. At the time the president of the college, Robert Callahan was quoted in the local paper, explaining, “To go from a surviving mode to a thriving mode, we really have to put our stake in the ground and say, ‘This is who we are, and this is who we serve,’”

The fact that Callahan even had to mention the words “surviving mode” was not a good sign.

Several phone calls to the president’s office and other possible contacts were left unanswered. Even today, over six months after the name change, the switchboard answering message announces this institution as “Silver Lake College of the Holy Family.”

Last week, the only contact that could be made was to the vice-chair of the board of trustees, John Russo, at his office at an investment company. It was explained to him how important it was that Holy Family explain  how it was going to move forward. He stated he understood, and he would have someone get back to the Examiner. We were still waiting when on Monday, May 4th, the college announced it was closing for good at the end of August.

There were plenty of warning signs. At last count, the college’s enrollment was about 500 students. Its incoming freshmen ACT composite score was only 17, far below the state high school student average. Forbes gave no ranking for Holy Family. The niche Holy Family was trying to stake out was to put its Catholic faith front and center. Its analysis concluded that faith-based colleges seem to be thriving better than secular private colleges and those that have softened their religious roots.

A simple name change and going back to its roots was not enough. Holy Family needed a major reorganization to survive.

Into the unknown

“Small colleges were already on the brink. Now coronavirus threatens their existence,” reads the headline in Detroit Free Press.

Michelle Streeter of the Institute for College Access and Success says, when a student is trying to decide which college to attend, if a college “can’t tell you for several months what your experience is going to be, it wouldn’t be foolish to look at the situation and decide not to go.

“We’re going to see closures as a result of that… there are a lot of schools for which this is an existential crisis.”

Wisconsin State Treasurer, Sarah Godlewski, strikes a more positive note: “I think we will come out of this with regards to higher education, stronger. We’re building our capabilities to learn remotely and online more strongly than before.” Of course, Godlewski is not saying that every college is going to make it, only that access will be better.

Wisconsin public colleges and universities have a variety of different dynamics. Their survival is dependent upon political will. Public colleges may actually benefit from the private college crisis. For private colleges, it comes down to money.

Every private college that was contacted for this article said that there were challenges but their incoming enrollment looked good, and they would weather the storm. Holy Family was the one college that did not respond to requests for comment. That silence was deafening. But the reassurances from other colleges may not reflect reality.

Robert Zemsky, Susan Shaman, and Susan Campbell Baldridge have just published a 2020 book on just how dire the situation is for many colleges. They build upon Grawe’s research, creating new metrics to judge the viability of colleges in The College Stress Test. The book was published before the virus outbreak,

“Potential students and donors are not likely to open their checkbooks to an institution whose future appears shaky,” the authors write. “So, struggling institutions’ leaders may wait to publicly acknowledge that reality until the very last hope for recovery has faded.”

In other words, expect every college to say they have a bright future until the day they decide to close.

It’s not clear which Wisconsin private colleges will make it, which ones will close. But there will likely be fewer colleges before the decade is out.

So, what are parents and students to do in picking a college in these final weeks? Look past the beautiful campus videos, the overseas exchange programs, the ethnic and cultural diversity, and a host of other pluses a college puts forth in their sales pitch. Those things might ultimately come, but probably not now.

The colleges that are likely to survive and flourish are those colleges that have best handled the pivot to online learning, that have a plan in place no matter what is thrown at them. Education is likely to dramatically change; we are not going back to the old normal, and colleges must respond.

Reprinted with permission of Wisconsin Examiner.