New Realities

Presidents of liberal arts colleges share views on how the economic downturn has changed their financial decisions and all-important admissions strategies.
January 7, 2010

MARCO ISLAND, FLORIDA -- "Is there an economist in the house?" Paul Hennigan, president of Point Park University, jokingly asked the question of a group of college presidents gathered here at a meeting of the Council of Independent Colleges. While there was one economist among the presidents, he seemed as worried as everyone else about the impact the economy was having on their institutions.

Hennigan moderated an open discussion that revealed some of the frustrations (and points of pride) of the presidents, who agreed to let reporters sit in on the discussion provided that no names or institutions were disclosed.

The council's members include some of the few liberal arts colleges that have been fortunate enough to have billion-dollar endowments and attract eight-figure gifts. But the presidents in this discussion were not members of that rare group -- these were the presidents of more typical small and medium-sized colleges, places with endowments of $100 million (if that), and colleges where tuition revenue, not endowment income, is the key factor in producing a budget each year.

Generally, these presidents pointed to successes in the last year, but a lot of concerns looking ahead. Most said that they had met their enrollment targets for the year. But a large majority raised their hands when asked if their discount rates (the average discount on the listed price of tuition and fees actually paid by students and their parents) had gone up this year. Some presidents said that they thought their rate had gone up too much, and a number said after that they believed both that their discount rate had gone up too much and that they didn't have much of a choice this year.

One president said he was uncomfortable with his discount rate going up but felt "pressure from admissions" to do so. He said that the percentage of students at his college who receive no discount dropped to 8 percent this year, from 12 percent the year before.

Similarly, several colleges described continued spending increases this year -- on budget categories like admissions and residence life that directly relate to enrollment.

Beyond discount rates, they noted other potentially worrisome signs. While smaller private colleges with the numbers to back it up have been boasting to anyone who will listen that their enrollments didn't collapse with the economy, some talked about concerns over which students were enrolling. In several cases, presidents said that their total numbers were up because of adult students or those enrolled in branch campuses -- while enrollments actually fell at the main, residential campus that may have historically defined the institution.

In another illustration of how tenuous some of the enrollment figures are, a lot of hands went up when the presidents were asked whether their applications were up so far this year. But the bubble was burst when one of the presidents said that, given the demographic trends that are decreasing the population of 18-year-olds that many of these institutions depend on, there is no way that these increased applications will translate into increased enrollments.

Colleges are also facing pressure with certain kinds of programs and students. One president said that her college's enrollments and applications were very strong in a few niche programs. But outside of those programs, it's a different picture, she said.

"The parents are reluctant to invest in a kid who doesn’t know where she wants to be," this president said. As a result, her college is losing such students to community colleges. Several others said that they either viewed community colleges as competition -- or they were investing more recruiting dollars on going after community college transfers.

Another president described this as a "paradigm shift," and said that her recruiters had specifically been instructed to move beyond the 18-year-old market and to focus on two-year college graduates. This president said that her college's coaches had been urged to recruit community college athletes.

Friendly (Community) Banks, Depressed Trustees

In terms of managing finances, the presidents had a range of frustrations. Big national banks took a beating at the meeting, with one president calling them "extortionists." Several of the presidents described situations in which larger national banks with which they had done business for years suddenly made it difficult to renew lines of credit, demanding higher interest rates, or were unwilling to provide loans that they needed.

Just about all of those stories ended with a contrasting statement of praise for a community bank that "came through" for the college.

Many of the presidents reported changes in trustee relationships during the economic crisis of the last year. One president asked if others were experiencing more instances of one or more trustees "arguing forcefully" for a particular investment choice. Others said that they were -- and they didn't seem happy about the specificity of the suggestions.

Another president mentioned how difficult this period has been for trustees, especially those on the committees that set endowment investment policies.

“I found myself noting that the chair of the investment committee was seriously emotionally afflicted by coming to three board meetings in a row [to talk about endowment losses] as he’d never seen losses in his life,” this president said. "The trustees have been battered in this economy."

While the presidents in the room take pride in managing their budgets without depending on endowment earnings, many suggested that they were strongly committed to regaining whatever their endowments had lost. Several described recent decisions not to take any money from the endowment this year, or to use endowment earnings only after all other dollars were spent.

For now, the presidents said that they were spending more time communicating with various campus constituencies than they had in the past and were trying to come up with low-cost morale boosters.

One president mentioned creating a new "faculty member of the year" award and a "staff member of the year" award. Several spoke of the importance of campus meetings where anyone can ask any question. One new president talked about the importance of being visible -- and how when she is asked whether she's unhappy to have become a president right now, she is quick to say that she's very happy to be president.


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