Survival of the Wealthiest

Study identifies the common characteristics among the private institutions that have closed since 1975.
April 17, 2009

If colleges have money, they won’t be forced to shut down. No surprise there, of course.

But in examining which colleges closed over a period of 30 years, research presented Thursday at the annual meeting of the American Educational Research Association, a new study also challenges some common assumptions about which colleges are most likely to be vulnerable to closure or merger.

Stephen R. Porter and Trina J. Ramirez, both of Iowa State University, studied what happened to all 824 private colleges and universities that existed in 1975 to see what happened to them – and found that 11 percent no longer existed as independent institutions in 2005. The authors note that this means that mergers or closures, while rare in any given year, “are not uncommon events.” (The researchers say that they didn’t examine public closures because they are so rare.)

Some have noted an increase in the number of college closures or mergers in the past year or so. And some experts predict more such closures with the economy in such bad shape. In the study presented Thursday, the researchers noted that the five-year period during which the greatest number of colleges ceased to exist (26) was 1976-1980, The high point for college survival (only 5 closures) was 1996-2000.

Porter and Ramirez then examined a number of factors to see whether they suggested colleges were more or less likely to merge or close. Some of the findings and the researchers' analysis:

  • Wealth: Endowment per student was a clear factor, with the wealthier institutions less likely to close. However, other measures that also relate to wealth and that some might have expected to correlate with closure, didn’t. The study didn’t find a link, for example, between percentage of total revenue gained from tuition and colleges’ survival rates.
  • Enrollments: Again, no surprise, but the more students a college has, the more likely it is to stick around. In addition, the more selective a college is in admissions the more likely it is to survive. But another enrollment factor that the researchers thought might be relevant wasn’t. They examined whether institutions solely or overwhelmingly focused on undergraduate education were more vulnerable, based on the belief that colleges that have added more professional and graduate programs earn revenue off those degrees. But despite conventional wisdom that an undergraduate focus may not be, financially, a sure thing, there was no correlation found. Similarly, single-sex status did not increase the odds of an institution closing (although the single-sex institutions that have started to admit both men and women would not count as closures, so the change in that sector may not be completely visible in this study).
  • Religion: While religious colleges include both large, well endowed institutions, and small institutions without much money, the study found that they were more likely than secular institutions to survive. The researchers say that they are unsure of why this is the case. But they speculate that there may be an enrollment advantage: even if religious affiliation means that some colleges have a smaller pool of potential students, those students may be more likely to enroll at a religious institution

Porter said that the economic downturn has increased interest in the topic of why colleges fail. The project was originally proposed and rejected for an Association for the Study of Higher Education conference, he said. "When it was accepted by AERA last November, I wasn't sure how much interest there would be. But then the economy tanked and now it's a hot topic."

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