A Brief Review of Higher Education

By Robert A. Scott, President, Adelphi University

The past year in higher education was exceptional: elites were humbled; publics were undermined; privates had mixed results; proprietary institutions made gains; and Congress served itself.

Losses in the stock market related to over-reliance on alternative investments resulted in many elite colleges and universities facing a liquidity crisis and borrowing heavily to cover cash flows and margin calls. Harvard, Cornell, Princeton, Dartmouth, and others had to freeze salaries, engage in lay-offs and furloughs, and halt construction projects because they relied upon investment income, which was reduced dramatically, to fund 15% to 50% of their operating budgets.

Other institutions were caught off guard when variable rate debt instruments soured and interest rates soared, often from a low of 3% to as high as 12% — in a day.

Meanwhile, the actual and psychological effects of the recession, especially mounting job losses, caused many families to focus on public two-year and four-year colleges as choices for their children. So, as applications rose at double-digit rates, due to the economy, state institutions faced draconian cuts in support, due to the economy. For SUNY, the Governor approved a tuition increase, but then kept 90% of the revenue for other purposes. The big questions for the public are whether state-supported institutions can provide the quality of education promised with reduced staffing and increased class size, and whether a four-year degree can be completed on time.

For private institutions in general, the effects of the economy are mixed. Most don’t rely heavily on investment income, so losses in the market are not so much of a problem. But most rely to a very large extent on tuition income, so meeting enrollment targets is critical. For those with prestige, or a strong niche, enrollments are okay. For those without a strong identity or in a rural area without a strong population base from which to draw commuting students, times are tough.

On Long Island, private colleges in general have the benefit of students deciding to stay home, or come back home from colleges out of the area, and most are doing fine. However, a kind of “bidding war” is developing, with some campuses aggressively discounting tuition and calling that a scholarship which they waive in front of parents who want the prestige of a “scholarship” even when the net tuition price is still higher than at another institution offering less aid.

For institutions which have pursued a conservative fiscal path; used reliable data and talented teams, as well as knowledgeable and committee boards of trustees, for strategic decisions; managed enrollments as a matter of design; have sufficient population density from which to attract students; and can appeal to students and families on the basis of academic quality as well as affordability, these times are not as daunting as they are for others. However, they like others must prepare for future demographic changes in terms of cohort size and college-going traditions, as forecasts indicate more challenges ahead.

Congress has not helped. In fact, Congressional actions over the past two years have exacerbated the effects of the economy. In October, 2007, Congress cut nearly $20 billion from the Guaranteed Student Loan Program, effectively taking $100 billion of loan funds from qualified families. As a consequence, some lenders left the business, and new, “alternative” sources came into play, charging 12% to 16% interest rates. In response to this, Congress is now talking about taking over all educational loan functions and managing them through the U. S. Department of Education. So, in one branch, the federal government is trying to save the banks, while in another they want to take over an important part of their business.

In addition, Congress has adopted many complicated and costly regulations for traditional non-profit institutions of higher education. At the same time, it is attempting to make it easier for the for-profit career colleges to earn all of their income from federal student aid programs — and in the process eliminating safeguards Congress had added years ago in response to scandals in the sector.

For Adelphi, the fall promises to bring the largest and best-prepared freshman class ever, a renovated Woodruff Hall, a new and more competitive athletic conference, and a second year with world class performing arts and recreation-sport facilities.

For the fourth consecutive year, Adelphi was named one of the 24 “Best Buys” in American private higher education by “The Fiske Guide to Colleges” and was once again cited by “The Princeton Review” as one of the best campuses in the country.

Nevertheless, challenges loom. The pace of economic recovery will affect college decisions by families and fundraising by colleges. Annual giving and capital gifts have slowed.

New technologies are helping change the way students learn and communicate, and campuses must be ready with the equipment and trained faculty to meet the challenges inherent in such change.

In addition, campuses must be prepared for returning veterans who will take advantage of the new G.I. Bill, something I am pleased to say that we at Adelphi helped craft.

The next year looks promising, even with the challenges, but then we believe that 90% of good luck is good preparation.