Colleges' "Last Lecture"

This week I started studying the colleges and universities that have closed since 2015. It has been a sobering exercise. If you’ve perused The Chronicle or Inside Higher Education over the past couple of years, you can see scholars and economists make dire predictions regarding the state of higher education. In 2011, Christenson and others warned that half of all colleges would close within a decade. Since then, he and Michael Horn have reassessed the market and determined that 25% of colleges and universities in each category will fail: public, private not-for-profit, and for-profit institutions. While the lessons we can learn from their demise are not proffered from a lectern in the vein of Randy Pausch, they are still very important to consider.

Dan Bauman and Brian O’Leary published a list of colleges that have closed between 2014 and 2018: 1,234 institutions. At first glance, that is apocalyptic. However, once you look more closely, you see that most (95%) are for-profit institutions. A handful of others are very small niche institutions like the Emil Fries Piano Hospital and Training Center in Vancouver, Washington with its five students. Nevertheless, there are about fifty universities that have closed that are worth considering. Seven of the institutions had enrollments of 1,000 to 3,000. An additional eight had enrollment between 500 and 900. Sixteen of the institutions had fewer than 200 students. Five of the institutions that closed were part of the same university in Puerto Rico – Dewey University – and closed down specific campuses. It’s easy enough to conclude that small colleges are vulnerable. There is plenty of research that reinforces this. Yes, but was size the only factor? For each institution, I searched for stories in hopes of identifying factors that may have contributed to their demise. Based upon my search, I learned some key lessons:

1. You can be a bigot if you’re big enough.

Countless groups protest Chick-Fil-a because of its support of anti-LGBTQ efforts, and yet the company continues to thrive amid the criticism. It appears that they are big enough to weather the critics. The same can be said of universities. For exhibit A, let’s consider Liberty University. It is an evangelical university in Virginia. Like its chicken-breaded organizational doppelganger, Liberty has been the subject of a number of strong critiques, but its growth is testimony to its ability to withstand the critics. In the past quarter of a century, the university has grown from 8,500 students to 100,000. The same cannot be said, however, for small evangelical colleges. Of the fifty nonprofit institutions that have closed in the past four years, thirteen are affiliated with fundamentalist Christianity or conservative Protestantism. An additional three institutions are Catholic institutions. None of those with active web sites indicated any message of inclusion related to the LGBTQ community.

I realize most universities that are closing are small private institutions and, by and large, many smaller institutions have religious affiliations. I’m not attempting to replicate the crazed-evangelical-minister-proclamation phenomenon of arguing causality. God’s not smiting these institutions for their bigotry. However, there is a pattern, and the pattern continues when you consider the colleges that have the greatest percentage of enrollment declines in the past decade. Over half of the twenty private universities who have experienced the greatest percentages of lost enrollment are fundamentalist, conservative Christian institutions, and those institutions are not inclusive. I do believe it is safe to say that the right lane of the religious institution market is congested. Institutions like Liberty are the Wal-Mart of academia, crippling all the mom-and-pop equivalent institutions out there. Once you discount those actively seeking a fundamentalist institution who are opting for Liberty or its large and predominantly online equivalents, you are left with a market of students who are less inclined to seek out a more fundamentalist setting. Explicitly excluding or being less welcoming to any population – whether it’s the LGBTQ community, the African American community, or different/non-believers – doesn’t play well in small businesses or small colleges where market is the means to survival.

2. Jesus will forgive you, but your accreditor won’t.

Of the fifty private non-profit colleges and universities that have closed recently, at least nine lost their accreditation and/or received sanctions from the Department of Education. To some degree, this can be characterized as a chicken vs. egg phenomenon. When a college or university is struggling financially, it is often put on probation by its accreditor or it loses accreditation. However, in the case of some institutions, fraud leads to losing accreditation.

Half of the closed institutions that lost their accreditation were faith-based institutions, and of those, at least three were closed because of fraud. This was the case with Morthland College, where the institution was investigated by the Illinois Board of Higher Education (IBHE) and was charged with numerous financial and ethical violations. As a struggling institution, Morthland used entrepreneurial tactics and initiatives – online programming and a partnership for sports academies – to generate revenue. IBHE found issues with “. . . the structure of the distance education offerings, contractual relationships, and online faculty interaction and qualifications” and removed their ability to accept Title IV funds.

Colleges that are struggling financially may be tempted to improperly use financial aid funds to solve an immediate need. This is what happened at Paine College in Georgia in 2012. University officials diverted $800,000 of their Title IV funds to make payroll. They were audited and sanctioned by the Department of Education, and now they are facing accreditation problems. Subsequently, Paine College lost more than half of its enrollment in the past decade. Financial troubles led to fraudulent behaviors that led to more financial troubles. Financial aid is not the only route to ruin. Institutions struggling with enrollment may make other decisions related to admissions and transfer credits that could trigger a state audit and subsequent accreditation sanctions.

Smaller institutions, particularly smaller faith-based institutions, often run on relationships and redemption. Particularly when these colleges and universities are located in geographically remote areas, they tend to have a closer knit community of faculty and staff. It is rare to find clear and strategic means of oversight in these institutions. First, oversight costs money, and many of these institutions do not have the financial means to justify this level of staff or to shift more administrative duties to a position where someone is already doing the work of two or three people. Second, these institutions often operate with the assumption that they know their colleagues, and their colleagues are doing the right thing. Sadly, this environment rarely welcomes whistle blowers. When questionable practices are identified, particularly if they are identified by subordinates, there is rarely a safe means through which the concerns can be addressed. As market pressures increase, these dynamics may lead to disaster for many smaller institutions. Smaller institutions will be under more and more pressure to grow enrollment. More will find themselves in difficult financial positions and struggling to meet payroll. This is bound to lead to more fraud. I predict that accreditors will significantly increase their investigations in the future, and far more institutions will fall as a result of their fraudulent actions.

3. Darwin Awards should create an institutional category.

Imagine that you are managing a household of four with an annual salary of $40K. You have substantial financial obligations (rent, car payments, etc.), but you want to buy a house. You have a buddy who’s mentioned that he would help you out if you ever get into a pinch, and some day your parents will pass away and you’ll get some money from their estate. Would you go to the bank and ask for a million dollar loan? If you tell the bank that a friend is willing to help you out if you can’t make a monthly payment and you plan on getting a much better paying job in the next five years, do you think they would approve the loan? No.

And yet, that appears to be what Jane O’Meara Sanders (yes, wife to presidential candidate, Bernie Sanders) did as president of Burlington College in Vermont. This college was located on two acres of land in Burlington, VT. When their 345 students complained that the campus did not have sufficient outdoor space to gather, the university borrowed $10 million to purchase a 32-acre lakefront property from the Roman Catholic Diocese of Burlington. In spite of having only $100K in endowment, the college was able to secure $6.7 million in tax-exempt bonds from a bank. The loan was based upon two misrepresented million-dollar donation promises and the expectation of doubling their enrollment in four years. Ten months after the purchase, Sanders resigned, and by June of 2014, the college’s accreditors sanctioned the institution based upon its financial troubles. By May of 2016, the college closed.

While not as newsworthy, but equally as stupid, Southeasten Bible College in Birmingham, Alabama closed in 2017. This 80-year old evangelical Christian college had 182 students prior to closing. In 1995, the college built two dorms. Incurring this debt led to financial struggles. What do you do when you are struggling? You give the appearance that you are not, and what better way to give said appearance that starting a basketball program? In 2016, the college started a basketball program as part of the National Christian College Athletic Association and hired an athletic director. Students were given athletic scholarships. The College had one small problem, however. They didn’t have a gymnasium. The athletic director was one of seven new positions created at the College, including a Director of a Center for Leadership Development. I think it’s safe to say, the institution lacked leadership as much as it lacked a gymnasium.

Yes, Ron White, you can’t fix stupid. You can, however, create organizational structures, policies, and systems of accountability to mitigate the impact of stupid decisions. In both of these instances, it’s reasonable to wonder, “Where was the board? How did they let these things happen?” Particularly in the case of Burlington College, there had to be countless individuals who were complicit in the decision making process. When Sanders arrived at Burlington College, she characterized herself as a “turnaround president.” Little did they know that she would turn them around and face them toward the ground before leaving. Friends, I cannot stress this strongly enough, if ANYONE in your organization characterizes himself or herself as a “turnaround” anything – turn around and run away as fast as you can.

Conclusion

Sadly, I predict we will get many more “last lectures” from colleges and universities as the number that fail continue to grow. It is easy enough to scan each story as it appears in Chronicle of Higher Education or Inside Higher Education. It is essential that faculty and administrators alike pay attention. I would recommend a study group at institutions – particularly those vulnerable institutions (private institutions with enrollment less than 3,000 that rely heavily on tuition revenue to operate) – that include faculty, staff, administrators, and students. Everyone needs to understand and take ownership in the state of higher education and the market challenges colleges and universities face in order to work together and thrive.