Why More And More Colleges Are Closing Down Across America

picture this you are an 18 year old College freshman out navigating the world for the first time your weeks are filled with classes studying dorm food annoying roommates and your weekends well it's College it first steps into adulthood Independence the whole world is ahead of you and it's all over one day someone walks into class and tells you we're so sorry but your school is closing you know like it was was honestly the perfect fit for I wanted to learn more wanted to be outside more wanted to do more just to myself wanted to create more I say college this was kind of a family away from family but I definitely had to be knowledgeable you know and and then that was honestly the fun part because I think if I would have went to a big university I don't think I would have lasted I'll be honest I think the small settings and all that kind of was a good fit for me in 2022 Lincoln College a predominantly black private college in Central Illinois shut its doors for good graduating its last class following a post covert drop in enrollment and a ransomware attack the small school just couldn't bounce back from we thought Lincoln had the money I'm gonna be truthful we thought Lincoln was a well-funded school I'm very emotional it was very emotional I just lost a lot of fan I was very lost I was very lost after after Lincoln close this is happening more and more Across America the pace of college closures has picked up since the covid-19 pandemic and could get even worse here's why [Music] Lincoln College is one of 91 U.S private non-profit colleges that have shut down or merged with another school since 2016 affecting more than 60 000 students just like desergeon this is part of a larger Trend that's been picking up since the mid-20 teens with private schools leading public schools on annual closures That's not including private for-profit schools which made up more than 80 percent of college closures from 2004 to 2020. that's an entirely different issue for now let's focus on non-profit colleges and universities of those 91 schools half of them closed during or after 2020 and a whopping 68 percent of them closed because of financial reasons with one consistent issue popping up enrollment there are two significant issues that are affecting higher education right right now specifically through the admission and enrollment offices number one it is the admission cliff and that is the impending decline we'll be graduating our lowest high school classes by population in 2025 and most enrollment professionals have been wringing their hands about this date of 2025 but many schools have seen those enrollment declines already with the downturn in the economy that happened in 2007-2008 there were simply less people born but they were born and they were less people born specifically in different regions of the country the Northeast the Middle Atlantic states and the Midwestern states right now there the majority of brick and mortar colleges and universities are in those places but students are no longer there so admission teams have to think about enrollment by strategy and 95 of the majority of four-year colleges in the country particularly private schools but many public schools as well are 95 tuition driven so the idea of enrollment driving finances and Financial Health of those schools uh is a is a given for most colleges and universities so take one of those away then you know take away the idea of enrollment being a given then finances at that particular School are called into question and then the end result of that is we see some some schools closing particularly private schools 2023 added a new layer of financial stress for already struggling schools the removal of federal stimulus money in the original wave of pandemic stimulus bills Congress passed 14 billion dollars in relief funds for colleges and universities in what was called the higher education emergency relief fund those grants must be spent by mid-220 three things are getting more and more challenging as the year progresses in terms of enrollment in terms of operating performance including you know the inflationary environment labor market you name it it's a reflection of I think an unsustainable operating platform meaning a heavy Reliance on tuition which can't always keep up with inflation it can't always keep up with you know erosion and enrollment can't keep hiking tuition sticker price in in in the hopes that the net residual once you account for scholarship and discounting and and the like is is going to be enough to sort of offset your your growing expense base and so I think it's that's the internal piece that in in many cases is unsustainable yeah when I initially looked at it the appeal of a small Christian liberal arts college in New York City was really high for me I got a chance to visit New York City and Kings the summer before my junior year of high school and I fell in love with both the city and the school and had it be my top School of Choice getting the quintessential New York college experience has also been incredibly fulfilling in the past two years as well whether it's going to Central Park on the weekends or finding that one really good local coffee shop to be my go-to study spot remember those numbers we showed you earlier more than three dozen schools have shut their doors merged or announced plans to close since the pandemic 20 of those schools were religious institutions since 2016 44 of college closures have been religious schools while many were already struggling before 2020 kovid was the final push for Many religious schools in financial trouble I had a little bit of a unconventional way of realizing because I was on the editorial team of our independent student newspaper a couple of stories started breaking where for lack of a better idiom I smelled blood in the water the King's College a private Christian College in the heart of New York City is yet another private school plagued with financial issues enrollment declines and bad business dealings that left it on the brink of closure last fall the school started what it called right sizing laying off staff closing down the Student Union and selling off office spaces and it was stories like our singular on-campus property being put up for sale it was a on-campus housing location in the financial district that I was slated to live in that next school year then in the spring of 2023 the school announced it would need 2.6 million dollars to make it to the end of the semester and then it gave a solemn warning to students start looking for somewhere else to go to school it was approaching Spring Break by that point and we already knew that the school was in trouble so the next question was what do we do in case it closes and those program meetings which were for the individual Majors was when faculty members and our academic advisors came in and gave the list of possible transfer schools my response was definitely disappointment in how the leadership and administration of the school failed us as students as staff as faculty we as students all know our staff and faculty on a very personal level so conversations in the classroom were fraught with emotion on all sides especially as the semester continued on and it definitely marked that experience of that semester in a pretty significant way across the board students who are experiencing their closure tend to have poorer outcomes in re-enrolling and also completing their clinics studies on the impact of college closures on students found that only 47 percent of students re-enroll in another post-secondary program After experiencing a college closure of those who are re-enrolled they were more likely to be white women between the ages of 18 and 24. and only about one-third of re-enrolled students actually end up finishing their degree the students who re-enrolled one to four months after closure were the most likely to get a degree with 47 percent of that group finishing their new program students who waited longer than a year to re-enroll only had an 18 chance of completing their degrees on average for-profit students who experienced a closure had significantly worse outcomes than non-profit closures but again that's an entirely different issue and it's worth mentioning that this isn't an issue that is impacting all private schools equally a number of record applications applied for spots this year Yale and brown also got record numbers of apps and marked record low acceptance rates and it's not just Ivy League schools many colleges and universities across the country inundated with applications we've spoken a lot about this is the bifurcation of the sector the week getting weaker the strong getting stronger to put it plainly the top schools like the ivy league and big state schools are bringing in more money more applicants and larger endowments than ever before pulling those dwindling student numbers away from smaller schools that struggle to compete there's going to be a real challenge for institutions who are not Elite and probably don't have large market share or for football or basketball teams that they can rely on to help boost recruiting the question is who will Who will survive through the through the bottom and and as as usual a smaller enrollment base a operationally challenged sort of platform uh heavy Reliance on one Revenue one or two Revenue sources tuition and you know maybe room and board and student fees all of those things make weathering that more challenging and so the burden has tended and continues to fall more heavily on those institutions there's also something else that's happened in the past few years something that may explain why top-tier private schools are seeing record application numbers test scores or rather a lack of test scores three thousand plus four-year colleges across the states Alone um became test optional simply meaning that that students needed to submit the SAT or the act for academic admission it doesn't prohibit them from from submitting them and many students will still submit the satact AP exams and so on because so many schools are test optional and some of the most competitive schools in the land are continued to be test optional at least temporarily then we see surges in their application pools over the last three years of time that has made this phenomenon has made those schools many of the perceptual best schools in the country at least by way of reputation and brand have seen ballooning application numbers College told students they would have an answer for them by May 31st the week before it had been announced that school's accreditation was revoked my initial reaction was not again because this is what's been happening the entire semester we were first told all we'll know by the beginning of March then we were told oh we'll know by spring break then we were told all will know by the end of March then we were told oh we'll know before graduation challenging environment out there for higher ed and it's not going to get we think any easier as the year goes on although there have been some near-term signs that inflation is easing the question is will that be enough to sort of hold universities um whole as they progress into a very uncertain fall semester but what I would look for is philanthropy over time and that's usually something that is well advertised and a good indication of alumni engagement alumni success but also just enrollment look at look at the enrollment Trend particularly if you're waffling between a few schools that's that's a good indicator of what just what the trajectory is and as we know now as graduates the student experience is definitely a key part of and and I think a primary reason why people pick one school over another is how you feel on campus look at those enrollment Trends over time and a significant amount of time over the last 10 plus years of time are those students getting jobs substance upon graduation if you can't if a student prospective student cannot answer those questions definitively and clearly during the search process undergrad or graduate school then I would give me pause it's very difficult to predict what's in which institutions are going to close because some institutions may look like you're on the brink but did they survive because they're actually very efficient at what they do and they can survive by cutting costs here or getting some donations from a wealthy donor and they survive and even thrive in some instances and others who appear relatively fine that one year might be able to a rough patch where they all of a sudden just like decline at poor leadership and all of a sudden their the decisions that they were making are no longer mission 500 and strategic many of these schools give students enough time to make a plan offering teachout plans partnering with neighboring schools to transfer students to similar programs or in some cases moving whole departments to other universities but according to the State Higher Education executive Officers Association the best tool a closing College can give a student is time I think the longer Runway institutions can provide and this kind of comes back to institutions making sure that they're making the best decision for the institution but also for the students that are enrolling and the longer they can give notice about a closure if it does come to that they're better and the more they can do to help students with the teachout and transfer is going to improve student outcomes as much as possible given the complete disruption that's going to happen during students educational careers so that makes the question if you could go back and do it all over again would you choose differently I wouldn't give up what I received here for the world the friendships that I've built the faculty and professors that I've gotten to know the education that I received here and the opportunities that have been opened by me coming to New York City and even with all of the uncertainty of this semester or not knowing if I'll be able to finish next year or not what I benefited from and what I was blessed by through the two years that I have spent in New York and that I have spent at Kings is something that I wouldn't give up or change for anything we have the tricks to um just go see Lincoln and see what it is now it's the desert I'm gonna be honest there's nothing there except the buildings I think honestly like just a family that I have made there um we will make time for for each other we will make time to to see each other Six Flags trip to Summer things of that sort like we the feeling that I have made I will say that we will we are sticking together yeah I would never change that I would never change that it's been really cool to see the community come together in a way that it hadn't previously specifically praying for the college's future whether it remains open or not just that everybody who's in the college and is involved in IT staff faculty students parents to just receive the wisdom and Direction needed for whatever comes next and seeing all of the efforts in coming together as a community is something that's been incredibly heartening and encouraging even in the midst of all of the uncertainty thank you [Music]

Channel: CNBC

Views: 746,846

Keywords: CNBC, CNBC original, business, business news, finance, financial news, news, news station, money, stocks, colleges, college closures, education, U.S. education, education system, college, higher education, private colleges, public colleges

Id: rBENl0GVxzA

Length: 16min 35sec (995 seconds)

Published: Fri Jun 16 2023

Reddit Comments

[u/splagen13]

Money. They’ve been using a bad business model. Tuition and charity… only in a flush economy. Skyrocketing expenditures… just foolish.

[u/Treebeard-42]

When noone can afford your product....

[u/No_Joke_9079]

Mine closed in 2015.

[u/Aware_Huckleberry_10]

Trade schools

[u/IETheDeadlyNinja]

Lol the amount of degrees that don’t get you a paying job. But a ton of debt Uncle Sam gets the collect. And the. People really think they’re gonna forgive the scam they wanted us in in the first place.

[u/Secure-Maintenance51]

People don't want to send their kids to get an indoctrination.