The Sale of Waldorf

Liberal arts institution, unable to balance budget, will become part of a for-profit, online university. The college will survive and grow, but tenure and the Lutheran affiliation will soon disappear.
May 6, 2009

Reached on the phone, Richard A. Hanson isn't quite sure he's ready to give an interview about this week's sale of Waldorf College. The college's president has talked quite a bit locally, trying to assure students, professors and the residents of Forest City, Iowa, that selling the liberal arts institution to a for-profit, online university is the best (in fact, only) option.

What persuaded Hanson to talk about what's happening at Waldorf is the question of whether he thinks other colleges will soon be facing the same choice. "You are going to be seeing a lot more of this from colleges like us," he said. So he agreed to describe why and how Waldorf decided to become a part of Columbia Southern University -- and why he is hopeful for the college's future (even if he isn't at all sure he'll have a job).

Many experts have been predicting -- just like Hanson -- that in the next few years more for-profit universities will buy financially struggling nonprofit colleges. And the model that Waldorf and Columbia Southern are following -- where the nonprofit institution retains some identity and a campus, even as it add programs linked to the larger for-profit interest -- appears to be growing.

It was novel a few years ago when Bridgepoint Education purchased the Franciscan University of the Prairies, also a small, religious Iowa college. Today the renamed Ashford University has both the former institution's campus (since improved), but also new online programs. While such purchases may not be taking place everywhere, they aren't so unusual anymore. Two weeks ago, ITT Educational Services Inc. announced that it would buy Daniel Webster College, keep the college's name and program, but make investments to add and improve programs. On Friday, New Mexico Gov. Bill Richardson announced a plan to save the College of Santa Fe, a private college, in which local officials would buy the campus and Laureate Education Inc. would manage the academic programs.

While details remain minimal on the Santa Fe-Laureate deal, and these sales all differ, they involve large for-profit entities taking over small, primarily undergraduate institutions that have found themselves unable


"We had been living on the backs of our donors and suddenly those dollars were not available."
--Richard Hanson


to balance their books in an increasingly challenging economy. And that is resulting in partnerships that might once have been viewed as unlikely.

Consider Waldorf and Columbia Southern. Waldorf was founded in 1903 by Lutheran leaders and the institution was proud of its rural, religious roots. When Hanson arrived as president four years ago, the college had only 600 students. Forest City is a city of 4,500 -- a few hours' drive from either Des Moines or Minneapolis -- that boasts of being the smallest city in the United States to have its own YMCA.

While Waldorf never attracted students for big city excitement, it had a degree of student-faculty interaction, and of everyone knowing everyone, that led to deep commitments to the institution. Faculty members -- about 50 of them in all -- know their students. Classes are small. Campus theater and cultural events are a big deal.

Columbia Southern, based in Alabama, proudly describes itself as student-centered, but in a very different way. All of the 17,000 students are enrolled online, and most courses are taught by the 180 adjunct faculty members, themselves spread across the country.

So how did Waldorf come to be selling itself to Columbia Southern this week, following months of negotiations? This wasn't a choice Waldorf embraced with speed. Indeed Hanson is frank that over a two-year examination of options, the college didn't talk to for-profit institutions until other options were explored and found inadequate. Waldorf's endowment never topped $10 million and the college was pretty much dependent on tuition, but with only 600 students (in good years), that wasn't enough.

The college survived based on raising $3-4 million a year from donors, with most of the money coming from three or four very loyal supporters (one of whom typically provided up to $2 million a year). Even before the economic meltdown last year, Hanson said that his board instructed him to start exploring options. First up, he spoke to the most loyal donors and they weren't sure of their ability to provide the same support over time. Then the stock market and economy collapsed last year.

"We had been living on the backs of our donors and suddenly those dollars were not available," he said. The big donors didn't drop to zero in donations but to "very low" levels of support. Alumni were surveyed on their willingness to provide more and many gave generously for their circumstances, but well below levels that qualify their gifts as "major" at most institutions. Lutheran leaders were consulted and couldn't offer much financially (and they have blessed the sale). Nonprofit colleges were approached about a possible merger and none found that viable. "They wanted to help. They did, but they couldn't."

"I went to our bond underwriter and told him to put out the word that we were looking for a partner," Hanson recalled. "He said, 'What kind of partner?' and I said, 'Any kind of partner.' "

The For-Profit Possibilities

Waldorf was approached by several suitors, all for-profit institutions, generally online only. For all of its problems, Waldorf not only had loyal students and professors, but something quite valuable: regional accreditation. When a college is purchased, accreditors review the circumstances, so the regional accreditation doesn't automatically simply transfer, but it can transfer, and many online for-profit institutions have felt stymied by having national accreditation, which many students and some institutions considering transfer credit or graduate applications consider inferior.

Columbia Southern was among several entities with accreditation from a nationally recognized agency interested in Waldorf. Hanson said he didn't just look for the highest bidder. "I evaluated on two or three levels. One was financial capacity, but more important was their character, their willingness not to just flip us," he said. "I was interested in their willingness to let us stay in Forest City and be pretty much who we are."

"Most of those criteria were met," Hanson said. Columbia Southern is clear that it will keep the campus and invest in better facilities. The university stressed its commitment to the long term, and its history as a family owned company, not one reporting to thousands of investors. Columbia Southern sent numerous officials to Forest City to meet those on campus, and it brought faculty members to visit the Columbia Southern headquarters in Alabama. A delegation from Columbia Southern was back last week for graduation ceremonies. "I don't think they had seen anything like it before," Hanson said.

Robert Mayes Jr., president and co-founder (with his father) of Columbia Southern, said he sees many benefits to acquiring Waldorf. There is the accreditation, of course, and Mayes said that should speed the way for the university to enter nursing and education programs more broadly than it can now. But Mayes said that he thinks even current online students want to feel some connection to a place, to a campus. "Even if they never come, they feel a connection," he said.

And Mayes said that he envisions Waldorf soon attracting many more students. With help from Columbia Southern, the college is introducing five new majors this fall -- in fields such as organizational behavior and fire science -- that will feature some content provided online by Columbia Southern. Soon, existing Waldorf programs in business and education, among other subjects, will expand into master's degrees, Mayes said. In fact, the only change in Waldorf's name that he can envision is changing from "college" to "university" down the road.

"We are definitely committed to staying there, and to opening doors for the college," he said. He noted that students "rave about the faculty" and that Columbia Southern wants them to stay. While the college has been through several rounds of jobs being eliminated, Mayes anticipates growth in the years ahead.

One change he acknowledged the faculty will have to accept is the elimination of tenure. Waldorf has a traditional tenure system and Mayes said that will be replaced with contracts. He stressed that it will be possible for faculty members, especially those with tenure now, to earn multiple year contracts.

David Damm, in his 21st year teaching communications at Waldorf (his alma mater), said that the lack of tenure is a worry. "It would disappoint me that it might make it more difficult to attract quality faculty who want a tenured position," he said.

At the same time, Damm said he was optimistic about the future for the college. Damm is among the faculty members who were involved in the negotiations and who advised both the president and their faculty colleagues about it. He praised college leaders for keeping professors and students in the loop. "I think this is a good opportunity for Waldorf. It puts Waldorf on the leading edge of what's happening with higher education, the merging of residential campuses and online education." All of that will be new for Waldorf, he said.

Damm said he would have preferred originally for Waldorf to join with a similar, residential college. But he said he was won over as he learned more about Columbia Southern and "found that they are running a quality online institution." He said his main advice to professors who find themselves in a similar situation in the future is to "get to know your potential partners." He said that lengthy conversations with Columbia Southern faculty members and administrators were key for him. "I had to get to know them," he said. "You have to know what people value."

He also said it was important to be realistic about your institution. While Waldorf calls itself a liberal arts college, Damm noted that some of the most popular programs -- in education, psychology and his department of communications -- are in fact applied programs, with a strong emphasis on job skills. While he said that Columbia Southern "clearly uses a different method of education," he said that Waldorf (and many similar colleges) have long moved beyond the most traditional definitions of liberal arts institutions.

Hanson, the president, said he was focused on the positives at this point. The college is remaining open. Waldorf just admitted a new class of students and deposits are up a bit. Enrollment could top 500 for the fall, a significant improvement. The college isn't facing layoffs or scrambling to find spots for students at other colleges. As he looks back on the past two years, and particularly on the time since the economy fell apart, Hanson said his prime advice for others facing such situations is to start early. He said that he is glad the college was able to explore multiple options, even if they didn't work out.

But even with time to plan, there are still harsh realities. About 30-40 percent of students at the college are Lutheran. Hanson, himself a member of that faith, said he understands why Columbia Southern won't maintain the Lutheran ties and he stressed the respect he feels for those who are buying the college. But Hanson said he is working (with the approval of Columbia Southern) to convert an independent foundation that supports the college to one that will support the position of a Lutheran pastor to serve the Lutheran students who enroll and to reflect the values of the college's founders.

As he gets that set up, Hanson said, and even knowing that the college had no other viable options, and feeling this is the right one, these past weeks have been trying. Regulatory and accreditation approval will take months, but Saturday's graduation ceremonies were almost certainly the last under Waldorf's current status.

"At commencement on Saturday, it was emotionally very difficult," he said, pausing, speaking slowly. "A lot of us were upset. I'm a traditional academic. It's all I've known. It's really frightening."


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