As reported in today's Daily Briefing, a new deal will allow Sweet Briar College to remain open for one year after months of uncertainty and legal battles. The Daily Briefing's Kristin Tyndall sat down with EAB's David Attis to ask about the implications of Sweet Briar's situation for other schools.
Q: What do you see as the biggest challenge facing Sweet Briar College right now?
David Attis: It's important to separate out the short-term legal and PR battle from the longer-term strategic issues that Sweet Briar faces. Clearly, this cannot be a case of simply going back to business-as-usual. The sudden burst of philanthropy that helped saved the college is probably not sustainable long term.
Q: So after the immediate crisis, what kinds of long-term issues are they looking at?
Attis: There will be two related challenges to address—recruiting quality students and stabilizing their revenue stream.
EAB's analysis of other regional private colleges and universities shows that most have seen a decline in the average test scores of entering students. The best students are increasingly going to public universities with strong and growing national reputations but an affordable price, even for out of state students.
More fundamentally, a significant percentage of regional private institutions have seen declines in net tuition revenue. They are increasing financial aid faster than they are increasing price in order to keep attracting students. This is clearly unsustainable.
The question for Sweet Briar and other regional private institutions is—can they attract enough students willing to pay a price high enough to maintain their current educational model. If not—as is the case in many institutions—what other models will enable them to maintain (or even enhance) their mission while being financially sustainable?
Q: You mentioned that other schools like Sweet Briar are being forced into a similar balancing act between recruitment and mission. Where is this pressure coming from?
Attis: The recession marked a real turning point for higher education finances in the United States. Since then, demographic declines and state budget cuts have had a major impact on revenues.
Overall revenue for colleges and universities grew 5% annually for the five years leading up to 2007—but less than 2% annually in the five years since.
A third of all colleges and universities have seen declining net tuition revenue per student since the recession. Many have responded by growing total enrollment, increasing out-of-state enrollment, and adding new programs for working adults. All of this has added up to a challenge for smaller colleges.
Q: Are other types of institutions also feeling the effects of these market forces?
Attis: We're seeing a real bifurcation in the market. Research universities (both public and private) with strong national and international reputations are doing very well. They can attract top students from around the world and have been able to increase net tuition revenue per capita while raising average test scores.
But many regional institutions are really struggling. The average test scores of incoming students are falling as top students are recruited away. And as I mentioned, many have been forced to increase financial aid faster than prices, leading to declining revenues.
View our on-demand web conference: Understanding the enrollment downturn
Q: Why are research universities somewhat protected?
Attis: While larger universities can face many of the same enrollment and financial pressures, smaller colleges are particularly at risk because a decline of just a dozen students can have a significant impact on their budget. Also smaller colleges are more dependent on a few academic programs. A major decline in, say, an education program, can have a larger impact than a university with a more diversified program portfolio.
This is why many small schools feel pressure to grow enrollment and add new programs. But at the same time, many worry that this threatens the sense of academic community on campus.
Q: What are you hearing from provosts and presidents about these issues?
Attis: Surveys show that only about half of presidents are confident in the long-term viability of their financial model. We hear from many college and university leaders that current cost and revenue trends are simply unsustainable.
But on the positive side, very few are facing insolvency. There is a growing sense of urgency about the need to find new revenue sources and contain the growth of costs, but most leaders are cautiously optimistic that their institutions will be able to evolve a sustainable model despite a difficult political and economic environment. Our upcoming meeting series will look at these revenue challenges, as well as the opportunities for universities.
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