How to Assess a College’s Financial Health (If You’re A Regular Person)

Guest Post By Sabrina Manville This post is adapted from an article that originally appeared on Edmit’s site. The coronavirus pandemic has seemingly changed everything, and college admissions is no exception. Students and graduates at every stage of life are adjusting, whether by doing virtual visits, considering test-optional colleges, or learning online when they did not expect to. Just as these are tough times for families, this is going to be a tough time for colleges. In recent years, the financial health of public and private universities has been a topic of discussion in policy and education circles. While many colleges and universities are non-profits, this does not mean they do not need to make money. Just as businesses need revenue to survive, so do colleges. And their economics are complicated: there is no one factor that makes it difficult for colleges to keep afloat. But it seems to be getting harder, and will be more so now in the wake of COVID-19. Why Financial Health Matters Edmit’s founders published an op-ed last fall on why Edmit believes information on this topic should be made more available to families. In short, the value of a degree from a college that goes bankrupt is potentially lower for students because the alumni network will be smaller in the future, as will “brand awareness.” If a college closes, current students will also have to transfer to complete their degrees, which could mean increased expenses, more time to graduate, and other significant downsides. How to Assess a College’s Financial Health Information on a college’s financial health is hard to find (though Edmit is working on making it easier and more publicly available!). Without becoming a higher education expert, here are some things you can do while researching colleges. Look at enrollment trends. Is the college in a region where there will be fewer college-age students in future years? Have class sizes dropped significantly in recent years? If the data is not available, ask the admissions office if they have met their goals. Unfortunately, 6 out of 10 colleges did not meet their enrollment targets in the fall of 2020, according to a survey from the Chronicle of Higher Education. Look at tuition pricing and “discounting.” Unless it is a very wealthy school, aggressive measures to provide scholarships and reduce prices can be a sign of trouble. Colleges who are struggling to find enough revenue are looking to enroll as many students as they can, and reducing prices is one often effective means to do that. If almost no one pays close to full price, the revenue of the college is likely to be less than schools with a more balanced class. Use your observation skills. On your campus visits, look at the state of the physical campus (not just the obvious buildings, as colleges could be spending money they don’t have to update high-visibility buildings like dorms). Listen for what new initiatives are being proposed or promoted to prospective students. Are there signs that budgets are tight? Consider the college’s resources. Does the college have a large endowment? How has state funding increased or decreased, if it’s a public university? How economically healthy is the region where the college is based? Look for signs of innovation. Colleges that are more adaptable can weather the storms that come. Those that are offering online programs, or have launched new initiatives and partnerships, are likely to have both the resources and mindset that make them more resilient. Search local news outlets or education news sites. When smaller colleges are struggling or even closing, it’s unlikely to make national news. Look at local newspapers and search education-specific sites like Inside Higher Ed to look for recent articles about the colleges on your list for any hints of trouble or recent moves. Ask. In any of these cases, if you can’t find the information or don’t know how to interpret it, ask. Remember, you’re the customer! Some colleges might have initiatives or information about the measures they are taking to protect their future. Evaluate their answers and whether you feel the college is acting wisely. Post-COVID-19 Factors As the higher education sector comes to terms with the impact of coronavirus, the above factors will take on even more importance. The stronger the position of a college going into this period, the better—and if a college is already struggling, the impacts of the pandemic may make them insolvent. In addition to the above factors on financial health, it would be wise to look at the following: Has the college refunded current students’ room and board after closing? For most colleges, doing so will be very costly. If they haven’t offered refunds, it may be because they can’t afford to. And that may mean that they are on shakier financial footing. How ‘online-ready’ is the college or university? What portion of the college’s students already study online? You can find this information in the Department of Education’s College Navigator. The higher that number, the more likely the college has infrastructure in place for online education. If the college closed its campus for the 2019/20 school year, you can also try to speak with current students to assess how smooth the process to transition courses online has been. While there’s no way to predict a specific college’s future, there are many ways you can learn about colleges’ financial health. It is wise to ask the above questions as you build your college list and make decisions about where to enroll. Sabrina Manville and Nick Ducoff are the co-founders of Edmit, which helps families make great financial decisions about college. This post was excerpted from their upcoming book, Better Off After College: A Guide to Paying for College Without Too Much Debt. To learn more and sign up for early access, visit https://www.edmit.me/betteroffbook.