The financial health of colleges is looking up. Alumni giving and endowment returns are on the upswing so the future is rosy, right? Well, not quite. Though returns in 2010 averaged 12%, endowments are still around 20% below their 2007 levels. And since schools typically draw down 5% of their endowments each year to cover operating expenses, this 20% decline means less money to spend on students, whether for academic programs, financial aid or capital improvements. The solution for many colleges is to raise tuition, which is why the cost of attendance continues to outpace the rate of inflation. The question begging for a satisfactory answer is, how long can this continue, especially since the bill for a four-year college education is already out of reach for most families?
How did we get into this situation? The race to attract students has motivated campus upgrades and enhancements to surpass the competition. Ask yourself honestly: if you have visited college campuses recently, were you most impressed by the schools with new dorms, student centers, state-of-the-art labs and sprawling athletic facilities? Unfortunately all of this now comes at the cost of academic programs and the increasing debt load that students are carrying.
With the exception of the colleges and universities that still have large endowments to support their student populations (and by that I mean the size of the endowment per student), most schools will not be able to continue along their current paths indefinitely. They will ultimately price themselves right out of business if they don’t change with the times and differentiate themselves through their programs and offerings. Many colleges have already come to the realization that they cannot be everything for everyone. SUNY Albany, for example, is in the process of phasing out its programs in Italian, Russian, French, the classics and theater.
Why is this important to families? The college your child is applying to today may have a different profile and focus in the future. Perhaps never before on this scale has the business of higher education been so desperately in need of a restructuring. In a way, colleges are experiencing what many individuals have recently had to face. The world has changed; what we know and the skills we possess may no longer be relevant, and we are then confronted with the task of reinventing ourselves to survive. Just like individuals, colleges that possess self-awareness and succeed in capitalizing on their strengths are the ones most likely to adapt to the changing times by embracing a clear mission and vision.
So when you visit college campuses, try to look beyond the newly renovated and air-conditioned dorms that you can now find at New England schools where it is cold throughout most of the school year, or the fabulous athletic facilities with the climbing wall that your child will never use. Read in between the lines and listen closely to how a college conveys its mission, or whether it has one at all. What majors have been eliminated and what are they now emphasizing? Colleges are starting to realize that they are just like people. They have to be flexible and adapt to the times.