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Monday, June 24, 2013

What You Need to Know About Colleges Closing

On June 3, 2013, St. Paul's College in Virginia announced that it would be closing its doors at the end of the month. This follows closures of Chester College of New England, Wesley College in Mississippi and Lambuth University. A recent article in the Chronicle of Higher Education shared that analysts from Moody's Investors Service anticipate more closures for “these types of colleges” in the near future.

As rising high school seniors plan their targeted college searches in the coming months, families should be alert for red flags that may indicate that a college is in trouble. While college closings have been rare in the past, those small colleges that have been relying primarily on student tuition and other fees, may be at risk. Most of the recent college closings demonstrate a pattern across several years, and by doing the research and asking the right questions, families and students may be able to determine a college's financial footing. Here are a few things to consider:

  • Is the college very small and privately run? Those smaller private schools that have not distinguished themselves with a strong brand or market position may be in a precarious financial position.
  • Has the number of students remained steady or gradually increased over the past 5-10 years? If there has been a consistent pattern of decreased enrollment, ask questions and do some digging. This may indicate a college that is in financial trouble.
  • Ask questions about the college’s debt and where they spend their money. Has debt markedly increased over the past 5-10 years? Is the college investing in the areas that you think are most important?
  • While tuition has been on the rise at nearly all colleges, look at the pattern over the past 5-10 years of tuition and student charges. Has the college consistently been making cuts to services or has it been unable to make needed improvements, all while increasing tuition and costs?
  • How much support does the college receive through annual giving and endowment? Has the college been dipping into that pool of money while the support has decreased? While some of this information about donations may be available on the college website (sometimes in the form of urgent pleas for needed donations), those interested in more in-depth information may need to contact an administrative office, such as institutional advancement or institutional giving.
There are many small, private colleges that are on even financial footing. Students don't want to be caught with partially completed degree from a university that suddenly announces it will be closing. Ask the questions and look for the signs in advance. You are investing a great deal of time and money into a higher education and you want to make sure that investment is with an institution that will have its doors open for be many years to come.