Region’s Colleges Battling Tough Revenue Climate
It's no secret that the higher education industry is facing its share of challenges. As if to underscore that, last month Moody's downgraded its outlook of the entire sector to negative, citing several financial pressures.
Since 2009, the credit-rating agency had given a negative outlook to all parts of the industry except market-leading research-driven institutions, which Moody's deemed stable. But now, the agency says even those colleges and universities could face a hard road ahead as revenue prospects decline. It recommended that schools lower their cost structures to guarantee long-term stability and fund future initiatives.
Among the reasons it cited for the revenue declines:
• Fewer families finding higher education affordable;
• A declining number of high school graduates;
• Research and federal funding cuts; and
• A volatile investment market for school endowments.
More Challenges In Mass.
Assumption College's executive vice president for finance and administration, Chris McCarthy, said it's difficult for most schools to argue against the trends Moody's cited and that Massachusetts colleges have even more challenges to overcome.
He said the number of students New England colleges have to vie for is dropping and will continue to do so until it bottoms out around 2017, before it rises again. For Assumption in particular, as a private, Catholic liberal arts college, the competition is steep. Undergraduate enrollment at the Worcester school has been less than full for about three years, McCarthy said. The limit is 2,150 and enrollment has averaged about 2,000. He said that in the 2008-2009 academic year, Assumption exceeded the limit. But those losses have been somewhat offset by a growing graduate program.
“Massachusetts is very unique in that, historically, the majority of students go to private colleges, but the rub is (there are) 70 private colleges in Massachusetts alone,” he said. That's a problem when the chief source of gaining revenue is by growing enrollment.
So, Assumption has begun what McCarthy calls “fishing in other ponds.” The school has one full-time admissions staffer each in Providence and New York City and a part-timer in Orlando.
“You could argue we've always had students from Rhode Island and the greater metropolitan New York area, but we're trying to cover those areas in a more scientific kind of way,” he said.
It has also launched an initiative that has brought about 20 Puerto Rican students to Worcester.
At Nichols College in Dudley, which focuses on business education, administrators are also pushing for higher enrollment to grow the top line, but President Susan West Engelkemeyer said the school would have to build more facilities to handle more students, so it's branched out to Worcester, Auburn and the Internet.
Nichols has also been more thoughtful about how it does online scheduling.
“That's something we think has a lot of potential for growth, and expanded blended classes,” she said. Blended classes are a mix between online and in-person. Engelkemeyer said Nichols has had those classes but is aiming to step up its marketing of them.
While schools are looking for ways to increase revenue, they're also looking for ways to cut costs, with less federal and state support in recent years.
At Fitchburg State University, President Robert V. Antonucci said more students are taking advantage of the state-funded dual enrollment program that allows high school students to take college courses, and helps offset the school's costs. It also essentially allows students to complete a bachelor's degree in three years after high school.
Meanwhile, at the Cummings School of Veterinary Medicine at Tufts University in Grafton, Dean Deborah Kochevar said research funding for the school has declined.
“If you look back over the last 30 years, there's been a very definite cycle with (National Institutes of Health),” she said. “What isn't entirely clear this time is how quickly the government is going to come back from that or if it's a reset for research funding.”
She said NIH funding was buffered for a few years by federal stimulus funds, but “those went away ... We're still getting grants funded, but it's harder.”
Keep On Raising Tuition?
And at a time when enrollment is declining for some schools and they look for new revenue streams, hiking tuition rates isn't the option it once was.
Engelkemeyer said about five years ago, tuition could be raised by double digits and “nobody batted an eye” but today, a 4-percent increase can draw criticism.
McCarthy agreed. He expects Assumption's tuition to rise just over 3 percent next year, the lowest increase in 15 years.
“I think it's just a recognition of market realities that families are having a very difficult time paying,” McCarthy said.
Rich Novak, senior vice president of the Association of Governing Boards, said small, private schools will have the most difficulty going forward because of their relatively small endowments, tuition-dependency and lack of name recognition. And in general, all schools need to make sure they get the most out of every dollar of funding they receive and continue “strategic financing.”
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