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Winter for Higher-Ed
Small Colleges Sink Further into the Red

While top colleges are receiving more applications than ever before, small, middle-tier private schools have been hit hard by declining enrollments. With plateauing tuition funds and small endowments, they have been forced to shutter departments, merge with other schools, and sometimes even close. Worst hit were those that invested heavily in expensive facilities before the economic downturn.

To illustrate their predicament, Bloomberg profiles Dowling University on Long Island, which built a costly second campus to house an aviation program:

As the economy went into decline, enrollment at Dowling began to slide, falling 45 percent to 2,438 full-time-equivalent students last year from 2009, according to Moody’s. While local budget cuts undermined the demand for teachers, the aviation center on the new campus failed to live up to its promise of attracting students from around the world. […]

Two weeks before Dowling’s Fall term began, [new president Norman] Smith shuttered much of the Brookhaven campus. Before he arrived at the school, much of the aviation program had been outsourced to a local company, which also bought the college’s small fleet of planes. The satellite campus accounts for most of the college’s $55 million of debt, according to Smith, who said he’s currently negotiating with creditors who hold bonds for the facilities.

The school eventually closed the aviation facility and is pursuing an aggressive plan to bring paying students back to the school while cutting faculty to save money. Nonetheless, the school was downgraded by Moody’s last month to the abysmal grade of Ca, and the school may not be able to stay solvent going forward.

Investing heavily in aviation is relatively unusual for American colleges, but the general contours of Dowling’s downward trajectory are not. Over the past few decades, such mid-tier colleges spent wildly on expensive facilities and other amenities to compete for students. Those large investments have left them poorly positioned to attract today’s more price-conscious students: they’re not prestigious enough to charge a premium for the education they provide, and they’re not financially secure enough to lower tuition. Smart management may be able to save some of these schools, but many others are likely to perish.

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