Recruiting slump bumps US private colleges into ‘market shakeout’

After colourful commencement ceremonies with audiences of beaming parents, the swell of Pomp and Circumstance, and the flutter of academic gowns, most US universities have in effect shut down for the summer.

A growing number of them will never reopen.

A years-long decline in enrolment and an inability to tame their costs continue to force small, tuition-dependent universities to close or merge at a pace that appears to be accelerating.

Mount Ida College in Massachusetts has closed. So have Morthland College in Illinois, Marylhurst University in Oregon, Trinity Lutheran College in Washington, Grace University in Nebraska, St Gregory’s University in Oklahoma, St Joseph’s College in Indiana and the Memphis College of Art. Wheelock College in Boston has merged with Boston University; Marygrove College in Detroit is shedding all its undergraduate programmes.

In all, some 100 private universities in the United States have closed since 2009 and at least 40 have merged since 2000, according to the research organisation the TIAA Institute. And a flurry of reports predicts that these numbers will soon triple.

They say a phenomenon may be under way that hasn’t previously affected US higher education: what Richard Freeland, former president of Northeastern University, calls a “market shakeout”.

A decline in the number of traditional-age university students has resulted in a six-year enrolment drop; there are nearly 3 million fewer university students than there were at the last peak of 2011, according to the National Student Clearinghouse, which tracks this.

“We’re in a very dramatic period because the demographics are going to persist for an extended period of time,” said Professor Freeland, who now works for the educational consulting firm Maguire Associates.

Universities, as a result, are being forced to forgo a record average 50 per cent of their revenue in the form of discounts and financial aid to fill seats, the National Association of College and University Business Officers reported.

Even this hasn’t managed to reverse the decline in student numbers, in part because the long-escalating average annual cost of college has increased to two-and-a-half times the median yearly income of the lowest earners, up from one-and-a-half times in 1996, the TIAA Institute says.

The bond-rating agency Moody’s has lowered its outlook for US higher education from “stable” to “negative”, projecting that revenue will not keep up with expenses. It predicts that the number of closures and mergers of small institutions will triple in the next few years. In a Gallup poll, fewer than half of chief business officers of private universities said they were optimistic about their institutions’ financial stability.

In their wake, the campus closures have left angry students, parents, employees and alumni, and millions in unpaid debts. Students and faculty at 118-year-old Mount Ida were particularly incensed that the institution’s leaders continued to act as if nothing was wrong, recruiting new applicants and extending employee contracts even while knowing that the school was struggling under $70 million (£53 million) of debt; the president and trustees skipped the final graduation ceremony after being asked by students not to come.

But being honest about financial problems and failing to operate as usual risks alienating potential applicants, including all-important international ones, and prompting faculty to flee, only exacerbating the problems.

The emotional toll of the closures is also evident in the responses of alumni. Antioch and Sweet Briar colleges, whose governing boards announced that they would be shut down, have been resurrected and remain in business, relying heavily on outside contributions. St Joseph’s is also trying to raise money to reopen.

The more immediate impacts are on still-enrolled students and laid-off faculty and staff. Mount Ida sacked all 280 employees – even more when contract workers are considered. A total of 120 faculty, staff and adjuncts lost their jobs at Grace and 110 at Wheelock. Students at Mount Ida were offered places at a public university 70 miles away, but it doesn’t offer all of the same programmes. In many cases, students of closed institutions are forced to plead for seats at other providers that have already accepted their incoming classes.

Not only private institutions are affected. The public University of Wisconsin is merging two-year campuses with nearby four-year ones in the wake of a precipitous decline in enrolment, for example.

Other universities are dropping programmes in the humanities in favour of career-oriented disciplines most in demand by cost-conscious families. Some are repeatedly cutting services and staff, or selling off property.

“It’s a challenge to know, in the midst of austerity, where do we invest,” said Mary Marcy, president of the Dominican University of California, who wrote a white paper about the crisis.

But many are stepping back and trying other kinds of strategies, such as adding high-demand majors and new ways of delivering them.

“A few years ago, I would say there were a lot of places that were in the ‘let’s wait for things to get better’ mode,” said Dr Marcy. “I think now there’s no question that people know there needs to be innovation and change.”