The Demise of the Small Private College

universityIt’s happening. No longer is it a future threat. The small, private liberal arts college is under siege. No, not every college, but those without a strong reason for being are seeing their enrollment plummet, and in many cases deservedly so.
How did this happen?

Backing up it’s fair to say academia is out of control. Universities have not been run like businesses, but rather like academic fiefdoms immune to the reality that price/value is important in every industry.

What is the value of a $50,000-60,000 a year college education? Is it many times more valuable than a public education? Do tenured professors really deliver value, or are adjuncts just as capable of delivering the same level of academic product to students? The underlying dilemma is that business side of academia is hitting the wall and the concept of a student entering the working world with $30-40-50,000 of debt is mind blowing, and enrollment is down dramatically at many smaller private colleges.

Not every kid is an Einstein and has the earning power to repay heavy loans, particularly ones related to an average private college. Of course the top private institutions have great value for brilliant students who can attend. Their return on the investment dollar was, is, and will always be great.

Why have the smaller private colleges hit the wall? For 4 simple reasons:

1. The demographic trends show a decline in 18 year olds
2. The cost of a private university not subsidized heavily by scholarships (not loans) is far too costly
3. Lower cost and, in many cases, higher quality public colleges have a stronger reason for being
4. The tremendous growth of community colleges, which offer a low cost, 2-year start, combined with far easier entry into tougher to enter public universities

The Star Ledger recently looked at declining enrollment at smaller private colleges in New Jersey in an article on November 8, titled Where have all the students gone? The declines in 5 NJ smaller private universities were dramatic–since 2009 declines in enrollment in College of St. Elizabeth (-35%), Georgian Court University (-24%), Centenary College (-21%), Drew University (-21%) and Rider University (-12%).

In the article, there was a quote from a senior executive at Moody’s Investor Services, “Enrollment declines and lost market share for smaller colleges continue to spur closures and mergers, as students increasingly opt for larger colleges with greater resources”, said Dennis Gephardt, VP/Senior Credit Officer.

This is a hardly just a New Jersey problem. In the Philadelphia area, LaSalle University is struggling financially and others are similarly trying to cope with a new reality.

What will the future hold?

1. Fewer universities as some can’t cope with the financial realities of decreased revenue
2. A greater share of students attending public universities
3. Greater cost control by academia in general–not always a bad thing

In the end, the data supporting the lifetime value of a college education is still overwhelming. Forgoing a college education and entering the work force at 18 is not the best financial strategy for most. On the other hand, is the value of $250,000+ education at an average liberal arts college worth 4 times more than a public education? For many, it isn’t.

More Strumings

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