From the Board Chair: The Existential Crisis Among Small Private Colleges Is Nearly Here

By Sharon Reishus    //    Volume 29,  Number 6   //    November/December 2021

For 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 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 college experience provides. Among the evolving options for students and institutions:

  • Online or hybrid, which the pandemic has proven is viable and attractive when designed well;
  • Certificate rather than degree programs, as more employers stop requiring bachelor’s degrees;
  • Community colleges and technical institutes, especially if the federal government ultimately provides free community college tuition for all (an example of a similar program can be found in Connecticut, where community college is free to residents); and
  • On-the-job training and applied educational benefits from employers while students work full time.

Further, private colleges have for the most part ignored the largest group of college students in the United States: those who are over 22 years old. Small private colleges continue to focus their time, attention, and resources almost exclusively on incoming freshmen, which does a disservice to the much larger pool of adult, nonresidential students. Trustees at private colleges must own up to their role in perpetuating the myth that the only “real” college student is the one fresh out of high school.

The first step as fiduciaries is to get the facts and then to face up to uncomfortable truths, wherever they may lead. All options must be on the table for the future, beyond seeking ever larger donations or relentlessly raising tuition, room, and board prices. These include mergers with stronger institutions, affiliations with other schools to collectively cut operating costs, generating alternative sources of revenue through serving a broader set of students by offering modalities other than full-time residential programs, or finding the strength to gracefully close if no other option remains viable. It is critical that boards plan and prepare for disruption during such transformations and should clearly define the desired outcomes with their presidents. The board and the president should also have written documentation delineating the role, scope, and authority of the President versus the board. In doing so, I would advise using a third-party facilitator such as AGB to get there in order for the board to consistently support the president, minimize backchannelling, and accelerate innovative change.

Unity College, with its environmental education mission and tiny endowment, has found a revenue model that works for us under the dynamic leadership of President Melik Peter Khoury, despite the intense grief expressed by some alumni and local critics who bemoan the loss of the school’s traditional two-semester four-year residential experience. We have demonstrated that online education does not mean recorded lectures and disaffected students. Unity offers hands-on, experiential distance education STEM coursework in the communities where the students live and work, and it creates cohorts of students and instructors who are deeply connected virtually in their shared desire to make a difference in the world.

As a result, our student enrollment outside of the on-campus program has grown exponentially every year. Unity has provided students, both traditional-age and adult, with greater flexibility and accessibility through shorter, more frequently offered terms that are more affordably priced than the traditional residential, two semesters per year model. Doing so has the real-world benefit of allowing our students to engage in internships and professional work year-round, not just during the summer.

The enrollment data for fall 2021 of Unity’s rising sophomores through seniors who have been given a choice of returning to campus full time or remaining as hybrid students shows us clearly that most of Unity College’s hybrid students who were previously enrolled in the full-time residential program, pre-pandemic, do not want to return to campus. Instead, under our flexible and less costly hybrid option, many are choosing to mix modalities, which allows them to live, work, and study from their communities across the United States when they choose to do so and to come for face-to-face learning when they feel the time is right.

We still have more work to do, including improving how we support virtual cohorts and finding alternative uses for or sale of physical assets we no longer need, but our student-focused hybrid offering has encouraged a new normal among our students: that of choosing a combination of low-residency and distance education that best meets their needs. Unity College can also hire highly skilled, innovative instructors and curriculum designers to fulfill our academic mission without regard to their willingness to relocate to a rural Maine campus.

The difficult changes that are necessary for many colleges to survive in the coming years will not be easy on your internal or external audiences. Resistance to change is natural and coupling that change with strong attachment to the traditional experience from faculty as well as some alumni can and will cause serious blowback. Many trustees may choose an easier route, and in doing so likely risk the closure of their institution rather than adapt to changes in the marketplace for college students. However, for me, the fear of our institution closing far outweighs the unease felt in the face of innovation. Know that you are not making these decisions in a vacuum, and that you are not alone in this process. I wish you all the best as we navigate these ever-more challenging waters.

Sharon Reishus is the board chair at Unity College, located in New Gloucester, Maine, with multiple locations in Unity, Moose River, Thorndike, and online. Unity College is the first institution of higher education in the nation to divest its endowment portfolio from fossil fuel investments. Sustainability sciences lies at the heart of its educational mission, offering environmentally focused degrees to multiple audiences.