RESEARCH: Private Higher Education Watch

10 November 2017
Thomas M Cooley Law School, Sweet Briar College, and New York Law School were the top three enrollment decliners among the 151 private universities and colleges that we reviewed in our first edition of Private Higher Education Watch.
 
Enrollment losses between FY12 to FY16 for the above three schools were 63%, 62.3%, and 49.4%, respectively. Such observation also reflected the overall deterioration in student demand and student population at law schools nationwide, amid a shrinking legal job market.
 
OVERVIEW
 
Private schools rated “A-“ or lower are likely to be the most vulnerable segment of the private education sector. As a result, Debtwire Municipals decided to focus on schools in that rating cohort for our first Private Higher Education Watch.
 
Private and non-profit colleges and universities have long competed with each other and with publicly-supported state institutions of higher education. Private schools by their nature are more vulnerable to enrollment and financial problems than their public competitors, and private schools’ creditworthiness as a rule suffers in comparison.
 
This report will be updated annually, as most schools report enrollment and financial information on that basis.
 
CLICK HERE for an excel copy of our private higher education analysis.
 
FINDINGS
 
Enrollment and applications
 
Our analysis showed that 82 schools had declining enrollment between 2012 and 2016. Of those 82, 18 had enrollment declines of 20% or more in those years.
 
In terms of applications rather than enrollment, 25 of the 82 schools also had a decreasing number of applications between fall 2015 and fall 2016. The decreases ranged from 0.1% at Suffolk University to 54.4% at the University of the Sacred Heart. In the table below, of the 82 schools with shrinking enrollment, we list the five schools with the largest application declines from fall 2015 to fall 2016:
 
 
 
Tuition discounting
 
Many private universities provide tuition discounts, the process by which a school reduces its publicly stated price. However, a combination of shrinking enrollment and rising tuition discounts is cause for concern, as it usually undermines revenue and also serves as a sign that a school may be attempting to forestall enrollment declines.
 
According to the National Association of College and University Business Officers, the average tuition discount rate for private institutions hit a record high of 44.2% in 2016. Based on our analysis, 39 schools on our list have a higher-than-average tuition discount rate, and 24 of those 39 also face shrinking enrollment. The most notable example of this trend is Sweet Briar College, which lost 62.3% of its enrollment during the past five years and featured a 54.7% tuition discount in FY16.
 
Top enrollment gainers
 
Not all schools lost enrollment, as some underwent moderate expansions in student population. The table below shows the top enrollment gainers based on a five-year time range:
 
 
 
Harrisburg University of Science and Technology and Concordia University both more than doubled their enrollments over the past five years. Each school is unusual in that their enrollment consists primarily of graduate students, most of whom are enrolled through distance-learning programs. Harrisburg’s decision to recruit international graduates in January 2014 was a factor for much of its enrollment growth, as illustrated by the increase in its graduate enrollment to 1,896 in fall 2014 from 338 in the prior year.
 
The reason for Harrisburg’s decision to emphasize online learning is its limited physical space. While the school had a profit in FY15 due to surging enrollment, its weak selectivity, low graduation rate and the shift toward online learning may hurt its reputation and eventual demand for its services.
 
Concordia underwent a similar expansion, hiring in 2009 a private company to operate and grow its online graduate programs. This resulted in a steady expansion of its graduate enrollment, but also a two-year investigation by the US Department of Education (DOE), which questioned the relationship between Concordia and its contractor. Colleges can be excluded from the DOE’s federal student loan program if they violate rules on outsourcing and incentive pay, i.e. if they pay recruiters based on enrollment. The investigation was resolved in 2015, when Concordia and its contractor agreed to pay a claim of USD 1m.
 
Distance and online learning
 
The following table shows schools that are both dominated by undergraduates and that enroll more than 50% of those students through distance-learning programs.
 
 
The following table shows the schools with student bodies dominated by graduate students, and that enroll more than 50% of graduates through distance-learning programs.
 
 
 
Satellite campuses
 
Some schools attempt to increase their enrollments by establishing satellite campuses in different areas and even different states. Concordia University, for example, saw some enrollment growth via its launch in August 2012 of a satellite law school campus in Boise, Idaho.
 
Satellite campuses do not always guarantee enrollment growth, however. Of the 151 schools we reviewed, 22 operate satellite campuses in multiple states. Only seven of the 22 reported enrollment growth in the past five years.
 
Law schools
 
We found law schools among rated institutions to be a major source of enrollment stress. Of the 24 law schools on our list, 20 are part of a larger school and only four - Thomas M Cooley Law School, New York Law School, Albany Law School and Brooklyn Law School – are independent.
 
While independent law schools enjoy autonomy and sometimes benefit from locations in major metropolitan areas, they do not always provide amenities which a university-based law school can offer. In addition, affiliations with universities can provide a pool of undergraduates as a built-in source of applications.
 
The law schools on our list are characterized by substantial declines in applications and enrollment. Most law schools are also becoming less selective, as suggested by higher acceptance rates and lower LSAT scores. Many schools reported declining rates of bar passage and weaker job placement, which in turn may continue to suppress student demand. It is worth noting that recurring enrollment declines at university-based law schools might hurt the operations of their affiliated institutions, especially if the law school makes up a significant portion of total university enrollment.
 
Stetson University fits exactly these criteria. Enrollment at Stetson’s law school accounts for about 19% of its total enrollment. While enrollment at the law school fell 22.6% in the past five years, total enrollment at Stetson rose 11.7% amid a shift in management’s focus toward STEM-program expansion, and at the cost of a higher tuition discount, which was 47.7% in FY16 compared to 37.8% in FY12. Despite a larger student population, Stetson barely broke even in FY16 with the help of endowment income, following recurring operating deficits during the prior three years.
 
Three other schools also rely moderately (more than 15%) on law school enrollment: Lewis & Clark College, Suffolk University and Yeshiva University. During the past five years, each of these law schools lost more than 18% of their enrollment.
 
Methodology
 
Our criterion for choosing the private universities and colleges in this report is an underlying rating of A- or lower from S&P Global Ratings. Our sources of information for the attached tables include annual financial reports and operating data posted to Electronic Municipal Market Access (EMMA), the National Center for Education Statistics (NCES) and the American Bar Association (ABA).
 
We examined admission statistics and enrollment trends for 151 private higher education providers. The report also includes other information that is key to the schools’ operations, including tuition and tuition discount, retention rate, graduation rate and debt position.
 
Admissions statistics we reviewed included the number of applications, acceptance rates, matriculation rates for fall 2015 and fall 2016 if the data were available, and SAT scores for fall 2015. The maximum score for any segment of the SAT is 800.
 
For law schools, we included Law School Admission Test (LSAT) scores as provided by the ABA. The maximum LSAT score is 180.
 
Medical schools require the Medical College Admission Test (MCAT, maximum combined score of 45).
 
The NCES provided the following:
 
Enrollment data and mix of undergraduate/graduate students,
Percentage of in-state enrollment (if available),
Five-year percentage change in enrollment,
Data regarding online programs and other distance learning education formats, and
Tuition, retention, and graduation rates.
 
Tuition discounting and outstanding debt were calculated from financial statements found on EMMA. In some cases, debt included capital lease obligations. Where possible, we also included the debt service coverage ratio for FY16.
 
All rating information is as of 17 October 2017. by Greg Clark and Zhilun Xu