Many private colleges this year kept their enrollments on target -- even amid the severe economic downturn -- by increasing student aid (need-based and merit) and watching their discount rates (the percentage off sticker price that students and their families get) rise. Sweet Briar College, a women's liberal arts college in Virginia, also worked hard to help families, but held its discount rate steady at 42 percent.
The result: an enrollment drop, a budget deficit of nearly $1 million, and a new plan to save money. Among the steps being taken:
- All retirement contributions on behalf of employees will be suspended for five months. (Normally, the college pays 8 percent of salaries into TIAA-CREF accounts.)
- The president will work for two weeks without pay and the vice presidents and deans will work for one week without pay.
- A small number (up to five) of administrative and support staff positions will be eliminated through layoffs.
Jo Ellen Parker, president of the college, said that the cuts were designed to show the commitment to going back to full spending on retirement accounts, salaries and so forth. Had the college simply reduced its pay levels, she said, a signal would have been sent that perhaps the college was scaling back -- which she said is not the intent. And the top administrators are working without pay rather than taking furloughs because the college needs to save money and they need to do their jobs.
For Parker, who started as president in July, the financial cuts follow a disappointing fall season in enrollment. The college had hoped to to enroll 650 students this fall (new and continuing), but ended up with only 605. Most of the lost students were (potential) freshmen, but the college also saw some continuing students fail to return, typically citing the economy as the reason.
The enrollment drop means lost revenue of more than $900,000 out of a total annual budget of $43 million -- and that's a significant enough shortfall, Parker said, that cuts were needed. The college has been on a long-term plan to lower its endowment payout rate (now down to 6.5 percent from a high of 10 percent) and trustees did not want to increase payouts at a time that the endowment -- while recovering from last year's Wall Street losses -- is not back to where it once was. (From a high of $95 million, the endowment dropped a year ago to the low $60 millions and is now back to $83 million.)
The college has been analyzing the reasons for its enrollment decline, and Parker said that she believes the issue was that "our financial aid packages were not competitive." She said that "we held our discount rate very closely to 42 percent, " and that now "we're reviewing our aid matrix" and "having a discussion" on whether to allow the discount rate to rise.
Many experts have expressed fears that private colleges were putting themselves at risk by letting their discount rates go up too quickly, but Sweet Briar may illustrate why many colleges have elected to do so -- at least during the current economic mess.
Parker said that she did not view the enrollment difficulties as related to the college's being a women's institution. Randolph College, until recently a fellow women's college in Virginia, recently started admitting men, and changed its name from Randolph-Macon Woman's College. Randolph cited the relatively low demand from female high school students for women's colleges (although the colleges note that, once enrolled, their students value the experience of single-sex education).
Prior to her hire, Parker said, the college conducted a major strategic review, and believes that its mission and future are best served as a women's college. "This is part of our distinctiveness," she said. "We view it as an asset."
Stephen G. Bragaw, a professor of American politics at the college who sometimes blogs about campus and higher education finance, said that -- speaking for himself -- he thinks that "Sweet Briar's response to our budget shortfall has been both proactive and transparent. President Parker has been very open and forthcoming with us." He noted that "times are tough all over in higher education."
Parker said that she feels the college is responding well to the tougher times. She noted that there are no furloughs, given what needs to be done, and that she never considered furloughs over the idea of suspending her own salary and those of top administrators. She said she is joking with colleagues that the only way they will be able to tell when she's on her furlough is through her attire. She said that when she's not getting paid, she plans to skip the heels.