Trusteeship - November/December 2021 - 38

FROM THE BOARD CHAIR
The Existential Crisis Among Small Private
Colleges Is Nearly Here
BY SHARON REISHUS
F
OR THE SAKE of future students
who would benefit from your
mission, let us acknowledge as
fiduciaries the painful truth that
the business model of the semi-selective,
tuition driven, small private residential
college is close to broken. This is a
structural problem, exacerbated by but not
fundamentally the result of the financial
crisis that our institutions have weathered
during the recent global pandemic.
Putting aside those highly selective
undergraduate institutions with their
massive endowments, which face different
pressures and strategic decisions ahead,
most private liberal arts colleges in the
United States must fully cover their current
operating budget from some combination
of tuition, room, board, student fees, donations,
and a bit of investment income. For
the last decade or more, many small colleges
have relied on raising the price they
charge their customers each year, placing
their rising costs squarely on the backs
of students (and often their parents) to
finance this model, made possible through
ever larger student loan balances.
College students have volunteered to
finance this model for years under the
once-reasonable assumption that doing so
would lead to better economic outcomes for
themselves. While surely more than a few
undergraduates also value a liberal arts education
for its own sake, many students are
looking for the preparation and credentials
that will land them either a good-paying job
or a seat at a decent graduate school that
a successful professional career requires.
Yet upwards of 40 percent of undergraduate
students in private colleges drop out
38 TRUSTEESHIP NOV.DEC.2021
before earning a four-year degree, while still
bearing in many cases tens of thousands
of dollars of debt and little to show for it.
Even those students who do obtain their
degree frequently suffer economic distress
finding jobs that make it difficult to pay off
their loans. I find this to be an unconscionable
act of hubris on the part of trustees to
accept this situation as the norm.
The future looks even bleaker for
those colleges that are not preparing now
for a strategic pivot. Trustees should be
well aware of both the demographic cliff
that will begin in 2026 when the pool of
18-year-olds starts to shrink substantially,
as well as the fact gleaned from recent
national surveys that show large numbers
of families increasingly believe that a college
education is not worth the price. Even
prestigious employers such as Google, IBM,
and others are starting to seriously question
whether a college degree is necessary to fill
many of their jobs. It is irresponsible for
those of us who serve as trustees to refuse
to admit that these trends are happening.
Doing so will almost certainly lead to an
existential crisis in higher ed among private
colleges when demand starts to noticeably
decline, putting the financial solvency of
our own institutions in doubt.
Who supports this failing business
model? Long-serving faculty members who
enjoy their sinecure, without appreciating
how revenue shortfalls may ultimately affect
their livelihood, will continue to vigorously
argue the high-minded merits of a residential
liberal arts education but have thus far
shown little interest in acknowledging that
necessary, painful changes are coming. And
successful and well-meaning alumni who
may not be as burdened as recent students
are with massive debt often feel intense nostalgia
for their own coming-of-age campus
experience. However, the traditional residential
undergraduate program, set within
intimate classrooms, manicured lawns,
and comfortable dorms, while no doubt
providing a formative and positive young
adult experience for those who can afford
it, is economically unsustainable for many
small colleges now, given the extraordinary
cost of delivering that specific product to an
ever-shrinking pool of prospective students
who are willing to borrow enough to cover
the price of that four-year experience.
The private residential college model
must evolve or, as several prominent
strategists have pointed out for a decade
or more, colleges in the United States will
likely start closing at a rapid clip, leaving
only those who can carry on as usual with
their billion-dollar endowments or those
with reputations strong enough to attract
both well-off students who can afford to
pay close to the sticker price and generous
donors to cover the annual operating shortfalls.
The desire of semiselective small privates
to emulate the lovely experience that
defines the elite colleges blinds many of us
as trustees to the reality that, with rising
college costs outpacing inflation, incomes,
and donations, we can no longer ignore
student dissatisfaction with our price tag.
After the massive experiment in online
learning that COVID-19 forced upon us all,
students have and will continue to find viable
alternatives over the next few years that
will provide them with an attractive set of
alternatives and outcomes at a better price
than what the typical private residential col
Trusteeship - November/December 2021

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