institutionalfinance

Price of a Year in Jail vs. a Year at Harvard

An Associated Press analysis of the costs of prisons in California offers this comparison:

California's budget estimates that the cost of jail for each inmate in the state will reach $75,560. That's about $2,000 more than the price of a year Harvard University, counting tuition, room and board, books, and other expenses.

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North Central Completes Absorption of Shimer

North Central College announced Friday that it has completed the absorption of Shimer College, a small Great Books institution. Both institutions are located in Illinois. North Central will now have a Shimer Great Books School that will operate on the principles of reading original texts closely rather than using textbooks. Classes will use the Socratic method. The two colleges announced last year that they would explore such a combination, which has now been approved by the Higher Learning Commission, the accreditor of both institutions.

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Southeastern Bible College Suspends Operations

Southeastern Bible College, in Alabama, announced Friday that it is suspending operations. "Upon the recent completion of an evaluation of SEBC’s financial resources, projected cash flows, strategic challenges and possible solutions to generate the funds needed to support operations, it was concluded that SEBC will not have sufficient resources to meet its obligations," said a statement from the college. AL.com reported that enrollment has been dropping and is currently 140. About 40 faculty members and other employees have either resigned or lost their jobs recently.

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University of Missouri System tries to turn cuts into a new direction

As cuts pile up, new University of Missouri System president seeks to set the stage for a new direction.

Creighton Will Cut 60 Nonfaculty Jobs

Creighton University has announced that it is cutting 60 nonfaculty jobs, some through eliminating vacant positions, but many through layoffs, The Omaha World-Herald reported. Cuts in higher education at this time of year often follow a disappointing admissions cycle, but Creighton officials said they anticipate a record high number of freshmen in the fall. But officials said Creighton faces more competition from other universities and needs to provide more financial aid to students, creating pressure on the budget.

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For-Profits' Suit Challenges Borrower-Defense Rules

A group of California for-profit colleges filed a lawsuit in federal court this week seeking to block the implementation of borrower-defense rules finalized last fall.

The regulations, which would go into effect July 1, expand on and clarify existing federal statute to spell out how borrowers who were the victims of fraud or misrepresentation by their institution can have their student loans discharged.

Many expected that GOP lawmakers would kill the Obama era rules using the Congressional Review Act. But Congress took no action and the Trump administration has yet to indicate what approach it will take toward implementation. Education Secretary Betsy DeVos told a House appropriations subcommittee Wednesday that the department would have "something further to say" on borrower defense in the next few weeks.

The for-profits' lawsuit, which names DeVos and the department as defendants, argues that the borrower-defense provision in federal statute was never intended to be used to make an affirmative case for debt relief by student borrowers.

The regulations, the suit argues, "turn a defense into a novel affirmative cause of action that will expose schools to massive liability."

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As lawmakers examine improper payments, record of former FSA chief under scrutiny

Republicans in Congress press issue of improper payments by Department of Education and suggest possible subpoena of former student aid chief.

Westminster Backers Propose Splitting From Rider

A group dedicated to keeping Westminster Choir College at its longtime campus in Princeton, N.J., says it has armed itself with a well-known attorney and entered talks to spin the institution off from Rider University.

The Coalition to Save Westminster Choir College in Princeton Inc. announced Wednesday that it has met with Rider University leadership about the idea of turning the choir college into a freestanding institution. The coalition’s representatives were asked to submit a written proposal for consideration by Rider’s Board of Trustees and expects to meet again with the university’s leaders within 30 days, it said.

Facing budget gaps and financial pressure, Rider has considered several options for Westminster. The choir college, which became a part of Rider under an agreement in the early 1990s, is located about seven miles away from the university’s main campus in Lawrenceville. Rider first considered moving Westminster to Lawrenceville. After that idea was met with opposition from students, faculty and alumni who said the Princeton campus was specifically suited to host a choir college and a unique part of its institutional identity, Rider announced it would instead try to sell Westminster.

Rider’s leaders said they preferred to sell Westminster and its land as a package. But they also said they would consider selling them separately, which would likely require Westminster to relocate its operations.

The Coalition to Save Westminster Choir College in Princeton has retained Bruce Afran, a lawyer who recently settled property tax litigation brought by homeowners against Princeton University. Afran questioned in a Wednesday statement whether Rider has the right to sell Westminster’s campus under the agreement that brought the institutions together.

“The 1991 agreement was intended to preserve the historic Princeton campus and maintain Westminster’s ‘separate identity,’” Afran said. “The merger agreement did not give Rider the right to benefit financially from the sale of the campus.”

The coalition did not share any financial details about its spin-off proposals.

“We have had a frank and productive discussion with Rider’s leadership and have proposed that, instead of litigation, Rider and the coalition begin discussions to return Westminster to its former status as an independent educational institution,” coalition member Howard McMorris said in a statement. “We believe good-faith discussions like this can aid Rider in its financial future while preserving Westminster Choir College as an independent, world-class cultural institution.”

(Update: Rider provided a statement Thursday morning.)

The coalition asked for a meeting, and Rider's leaders listened to the group's concerns, said Kristine Brown, university spokeswoman, in a statement. Rider agreed to consider a spin-off proposal, which it is now waiting to receive.

"We appreciate the interest of the coalition and others in the future of Westminster, while at the same time the process to identify other interested parties to acquire Westminster continues," Brown said. "Our goal remains the same: to find an institution willing to acquire Westminster and maintain its important legacy."

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Wheeling Jesuit Sells Campus to Diocese

Wheeling Jesuit University in West Virginia announced Tuesday a deal in which it sold its campus in order to cut costs and get out from under long-term debt. The university sold its campus to the Roman Catholic Diocese of Wheeling-Charleston and will subsequently lease back that campus. In exchange, the diocese paid off the university’s bond debt.

It is the second cost-cutting move Wheeling Jesuit has pursued of late. The university earlier this year offered early retirement to faculty and staff members. About 40 of its nearly 400 employees took the offer.

The moves are part of an effort to balance Wheeling Jesuit’s roughly $30 million annual budget, said its president, Debra Townsley. She is working to balance the budget within two years.

Trustees asked the diocese for help lowering operating costs earlier this year. An analysis showed annual payments on the university’s long-term debt were not sustainable. The debt was largely from building construction over time, Townsley said.

Townsley and the university did not release financial details of the transaction with the diocese. Wheeling Jesuit’s most recent federal tax forms, for the year ending in June 2015, showed the university with slightly less than $12.1 million in tax-exempt bond liabilities.

“This is certainly a substantial chunk of relief,” Townsley said. “The diocese has asked me not to speak about the specific financials of this transaction, and given how generous they’ve been to us, I am going to abide by their wishes.”

The diocese originally gave the university the property in 1952. It will not be responsible for operating the university going forward. The diocese will lease back the property to the university at a nominal rate.

The transaction closed Monday. University leaders said it will help them stabilize financial operations as they seek to position the institution for the future.

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Pressure Builds From Low Endowment Returns

A growing number of universities are lowering the rates of return they expect to earn on their endowments, which could be paired with other important decisions on endowment spending policies, investment strategies and fund-raising demands, according to Moody’s Investors Service.

More and more universities are dropping their assumed nominal endowment returns to a range of 6 percent to 7 percent, Moody’s said in a report Friday. In the past, universities have typically assumed returns of 8 percent to 9 percent when crafting their spending plans.

That is changing as average endowment returns have fallen substantially below levels needed to keep up universities’ standard endowment spending rate, widely considered to be 5 percent. Over the last decade, endowments have posted an average annual return rate of 5 percent. After inflation is factored in, that would mean a 5 percent spending rate would create a shortfall of 2 percent to 2.5 percent, driving down endowment values over time, Moody’s said.

As a result of the crunch, universities could choose to reduce their annual spending levels. Some are gradually cutting spending to the 4.5 percent to 5 percent range, according to Moody’s. However, large reductions are unlikely in a current climate of political scrutiny that has included Congress making noise about taxing large endowments at colleges and universities that do not spend substantial amounts on student financial aid.

Colleges and universities could also choose to pursue strategies like moving to passive management to try to match market returns. Such a strategy would likely limit their possibility of outperforming the market, though.

Others might take on increasing risk. Some colleges and universities may turn to fund-raising and retained cash flow to shore up their long-term endowment returns.

As a result, the wealthiest universities would appear to have the most potential for future endowment health. Such universities tend to disproportionately benefit from fund-raising and cash flow because they have wealthy donors and strong brands commanding more money. They also tend to have the endowment size and flexibility required to invest in the alternative and riskier assets that could yield the highest returns.

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