Will More Colleges Merge?

Recent moves by some private institutions -- combined with worsening economy -- have some experts predicting more consolidation in next few years.
August 25, 2008

In most years, some college closes for good. Usually it is a small college that has been struggling financially for years. Sometimes it shuts down. Other times it is merged into another institution. When these closures take place, they are frequently accompanied by predictions that many more closures will follow and that small, private colleges are somehow endangered. To date, these predictions have not been accurate: New colleges have been created, and there has been no major shrinkage. As the National Association of Independent Colleges and Universities points out, the total number of private colleges has been remained at about 1,600 since 1980.

But some experts on the economics of higher education -- including some who have in the past been skeptical that more mergers would take place -- are now predicting that more colleges will be forced to take that step. No one is predicting that "for sale" signs are about to go up on hundreds of colleges. And many colleges have decades of history of operating successfully with little money and only the most minimally balanced of budgets. But a number of experts think that we are about to shift from a period in which one or two colleges closed or merged each year to a period in which that figure is significantly greater.

"For a long time, colleges with small endowments, tuition-driven, sensitive to the need to constantly recruit students, have found amazingly imaginative ways to thrive," said Richard H. Ekman, president of the Council of Independent Colleges. But they are now being hit with too many "negative external factors" all at once: huge increases in energy costs, students who will enroll only if offered deep discounts, an economic downturn that limits families' ability to pay and donors' ability to contribute.

"Now we may be in an environment in which colleges in difficulty are going to be willing to try more ambitious solutions, such as mergers," Ekman said.

"There have been occasional closures for the past 20 years, and typically some have assumed that they were the beginning of an avalanche, and that's been overstated, and it would still be. But the circumstances now are more extreme than they have been," he said.

To those who say that every year or so features a closure or merger, there is evidence that there is already an increase. This month, Woodbury College announced that it would merge into Champlain College, a fellow Vermont institution. In July, John F. Kennedy University announced it would merge into National University, a fellow California institution. Antioch University has shut down Antioch College -- at least for the time being -- and while there is currently some talk of reviving it, and some faculty members have formed an alternative program to replicate the experience, the college will not be operating this academic year. New College of California shut down this spring. Sheldon Jackson College suspended operations a year ago to determine whether it had a viable financial future.

In June, a judge in Ohio approved the sale of Myers University, for nearly 160 years a nonprofit college offering business education programs to working-class Cleveland, to a private investor. Myers is among several nonprofit colleges that have been purchased by for-profit interests that have appeared to represent their primary chance of survival or growth. Bridgepoint Education has in recent years purchased both the Franciscan University of the Prairies and the Colorado School of Professional Psychology. And Sierra Nevada College, facing possible closure, has been rescued by an alliance with Knowledge Universe Learning Group, Michael Milken’s education company.

Running Out of Options

There are numerous differences among the missions and circumstances that led to these mergers and closures. But there are also common characteristics, which are shared by many other private institutions: Most of these colleges were small, and had been operating on tight budgets for years. As Ekman noted, it's not that small colleges used to be wealthy and all of a sudden have lost funds. It's more that institutions that have been scrambling for years -- often providing a much better education than might have been predicted with their budgets -- have run out of the options that were available a few years ago.

Sean Gallagher, a senior research analyst at Eduventures, said that many have been expecting to see more mergers of private colleges for some time, and that this may be the period when there is a notable increase. The demographics of higher education are moving away from the Northeast, he noted, and there is increased competition for everyone from online and for-profit higher education. "I think there is a question about whether a certain number of other colleges [that haven't merged] can be run on a sustainable basis," he said.

Some experts are skeptical that there is any significant change going on in terms of closures or mergers. David L. Warren, president of the National Association of Independent Colleges and Universities, said that the private sector of higher education "has always been in some degree of flux, which is natural given its market orientation." Given changes in demographics and student interests and competition, he said, "there will be a handful of colleges opening, closing or merging," but he added that he sees "no compelling evidence that we are entering a new era of consolidation in private higher education."

Still others argue that the number of colleges officially merging may understate the extent to which smaller colleges are considering radical shifts (many of them based on collaboration with other institutions) to survive. Shimer College last year up and moved -- from Waukegan, Ill., to the Chicago campus of the Illinois Institute of Technology. While the move was only 40 miles, relocating is not something institutions undertake lightly; Shimer officials felt significant change was needed. Shimer is a "great books" college, where much of the program is based on small seminars and close readings of classic works. Struggling to keep enrollment at 100, the college decided to lease space from an institution that offers a very different kind of education, in a very different setting.

The idea has been to attract some IIT students to individual Shimer courses, while letting Shimer students sample IIT courses. In addition, Shimer -- an institution that has made a pure liberal arts experience fairly central -- has become much more open about promoting practical education. This year the college started a joint B.A./J.D. program with the Chicago-Kent College of Law. In all of these changes, Shimer has remained an independent college, but it is much more connected to other institutions than was previously the case.

Chris Nelson, chair of the Shimer board and also president of St. John’s College, in Annapolis, Md., said that the experience at Shimer demonstrates that "it's all about admissions and enrollment" for small colleges without a financial cushion to fall back on. Shimer sees the shift it has made paying off with an entering class that is double last year's -- an increase that will bring total enrollment from about 75 to about 100. While there are many large universities where 25 students would be a rounding error, Nelson said he believes that getting steady enrollment and some enrollment growth is the key for the smallest colleges.

In Shimer's case, he said that the "cross-pollination" with IIT is allowing that to happen without a merger.

Robert Zemsky, a professor at the University of Pennsylvania and CEO of the Learning Alliance for Higher Education, through which he advises many colleges on strategy, sees two kinds of mergers likely to increase -- and he sees them as quite distinct.

For small, cash-poor colleges, he said, "we are going to see increased rates of failure," as more of them simply run out of funds. While these colleges have loyal students, professors and alumni -- and any closure or merger is traumatic -- Zemsky said that the larger impact on higher education would be minimal, given that these institutions aren't very big.

The other kind of merger will ultimately affect many more people, he said, and that involves colleges that aren't in danger of going under, but that see a merger as a better approach than gradual growth to improve or diversify their offerings. A model for that form of merger may be the New York University-Polytechnic University combination, approved this year despite significant opposition from some supporters of Polytechnic. In theory, the combination gives NYU a major science campus and Polytechnic access to Manhattan. While NYU is the wealthier partner by far, Polytechnic was not on the verge of going under, which has been the case for some other private mergers.

Zemsky said he knew of one other pair of private universities currently engaged in similar discussions about a merger, institutions he declined to identify but with "strong market positions" that could fit well together. In this case, he said, two presidents saw markets in which they didn't think they could grow individually, but might with joined forces. "I think we are going to see more consolidation like that, not of schools that are weak, but places that will use mergers as platforms for growth."

He also predicted more such mergers in public higher education -- particularly when a university with a relatively narrow focus (on technology or the health professions) might join forces with a broader institution. The recent merger of the Medical University of Ohio with the University of Toledo is an example of this type of merger, he said.

While many in higher education have traditionally extolled the virtues of individual colleges' unique features and missions, Zemsky predicted that there would be much less emphasis on those values in the years ahead. "We have a highly mobile population, with people saying 'I want to move and I don't want to start over again,'" Zemsky said. So there will be an increasing emphasis on similarity, which encourages mergers and collaborations, he said.

"People want systems of higher education with interchangeable parts," he said.

Is that a bad thing? Not according to Zemsky. He stressed that we aren't about to see tons of colleges do this, and leading institutions would be able to continue to operate independently, with their own missions. "We're not talking about MIT here. We're talking about a system that is teaching 17 million students a year in a lot of outlets, and that will see more standardization." And that's fine, Zemsky said, because "the non-standardization is so wasteful."

Others see the possible change with more concern. "The diversity of the types of American colleges and universities has always been the wonderful strength of the American system," said Ekman of the Council of Independent Colleges. "To me it's a shame when any college goes out of business or needs to sacrifice its distinct identity."


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