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  • Tino Schuler

Financial Health of Colleges

Selective focus of statistics, "Quality Score" is clear.

Taking the financial health of a college into the analysis when choosing the right place to attend should be considered by all families. However, this is a tricky and not well understood task. As one goes through the exercise, multiple aspects need to be taken into account. These include the endowment, admissions statistics/trends, physical shape of campus, signs of innovation, and a search of any associated news stories. Here are some of the things that families should dig into deeper as part of their due diligence:

The College’s Endowment. This data is important in that it helps paint a picture of the overall financial situation. Endowments are made up by a combination of assets that the college has invested to support their long-term mission. Those assets come mainly from donors. The advantages and significance to a growing endowment for the institution are:

  • Provides an ongoing source of income.

  • Promotes prestige and stability.

  • Lowers the pressure on the annual fund.

  • Provides opportunity for growth.

  • Makes an institution more independent.

  • Allows college leadership a certain amount of flexibility.

  • Encourages additional future gifts.

  • Paves the way for donors to support college in other ways.

So, looking at just a specific dollar number is not sufficient. Try and compare endowment numbers and how they have evolved over the years. Many times, changes in leadership and the new teams’ ability to raise money can affect this dramatically. It is also wise to inquire about other sources of support the college gets through state and national funding, grant monies for research and other programs, etc.

Admissions Statistics/Trends. Some of the key things to remember and focus on here are: number of applications (are they growing year on year?), enrollment numbers and associated trends, net tuition revenue (trends associated with how much is each student is actually paying annually to attend?), and programs the college is using to help boost applicants and the effectiveness of those programs. One trap to avoid here is focusing on the discount rate, focus on net tuition revenue instead. Finally, there is definitely an “enrollment cliff” coming. This will see less college age students applying due to demographic shifts. So, look closer at programs that the college is using to get a better sense of how they strategically plan to offset this challenge.

Physical Shape of the Campus. During your visit or your search through the college’s website get a feel for the general appearance of the campus. Is there building going on? New dorms, or academic buildings, or athletic spaces? Construction is always a good sign! Investing in these types of aesthetic and functional areas shows progress.

Signs of Innovation. Higher education institutions are not always the quickest to change and evolve. However, the ones that do are the ones that will survive. Look at academic offerings and new programs that are being added. Do these programs align with the types of ares the kids of today want to study? Pay close attention to creative ways the career counseling department works to get students opportunities during the school year, summer, and upon graduation. Get a feel for professors and the work they are doing in their research and how they engage students to assist their efforts.

Search Media for any Associated Stories. Has the college been in the news? This can help families learn more about things that are going on and can also aid families in asking additional questions of college representatives during visits. Reminder that news stories can be misleading or incomplete, so use information as a tool to inquire more regarding things in the news piece.

Our final nugget of advice is an old fashioned one: ASK!! Put together a list of questions for the college and ask them. Getting feedback to these questions can be vital because, after all, part of a family’s decision is based on gut instinct. So, dive deep into all these areas and do as much as you can, and you will be able to move onto other aspects that will help you establish whether a specific college is the right fit for you and your family.


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