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Mary McGrath, a rising college senior, asks the tough questions about colleges to Dr. Gary Stocker. Dr. Stocker has researched the financial health and viability of every public and private college in the U.S. His College Viability app is used by students and families across the country to compare the financial health and viability of colleges.
If you want more guidance on whether your college is financially strong, we will post this podcast every Wednesday. Mary will have developed questions from the perspective of students and parents to ask Dr. Stocker.
Send your questions to marym@collegeviability.com
Mary McGrath (00:03)
and welcome to the podcast, Beyond the Brochure, Guidance on College Decisions. My name is Mary McGrath and I'm a rising college senior at Lynyrdun Wood University. My co -host today will be Dr. Gary Stocker, founder of College Viability. And I will host a weekly podcast as Dr. Stocker and I discuss and debate both the challenges that students and families face in making decisions about college careers and much more. Dr. Stocker, welcome to the podcast.
Gary (00:29)
Mary, thank you very much. I presume after we're done with this on a Wednesday afternoon, you are planning some 4th of July festivities.
Mary McGrath (00:35)
Yes, definitely a lot of family time this week, so I'm very excited for that.
Gary (00:38)
Excellent. Well, that's good. I wish you and your family the best.
Mary McGrath (00:41)
Thank you, you too. Well, to start us off, I know we've been, obviously, most of these podcast episodes, we've been discussing college closures and also signs of colleges in financial distress. So for these colleges who might be facing a closure soon or find themselves in some sort of financial trouble, are any of them using alternative revenue streams such as online courses or partnerships with different industries to help improve their financial health?
Gary (01:08)
Yeah, and that's an important perspective for parents to ponder. And your question is, are they using other streams to generate money? Well, they all talk about it. And they all, in some form or fashion, almost all, in some form or fashion, look at online courses. They all talk about partnerships. They all talk about STEM careers to improve their financial health. And some are successful with that, Mary. But many are not. And this is something we probably talked about in previous podcasts. Here's why.
You know, a college may decide to add online courses. Well, thousands, hundreds if not thousands of public and private colleges have online courses. And yes, they may generate an additional couple hundred dollars, couple thousand dollars of revenue from some online course or set of courses. But because everybody else is doing that, they're not going to generate any materially significant revenue that will change their financial outlook.
So are they considering alternative streams? Absolutely. Does it mean anything? Absolutely not in almost all cases because there's so much competition for that business they can't generate enough materially significant revenue to make a difference.
Mary McGrath (02:20)
And I know in prior episodes, we've also discussed colleges who may find themselves in some financial distress decide to cut certain programs or majors. So is there a certain, like, how do they go about deciding what to expand, what to maintain? And especially from a student's perspective, how can they expect what kind of programs might get cut?
Gary (02:42)
Yeah, and a couple of ways that I want to answer this one, Mary. And yes, colleges, both public and private, and that's an important distinction. Private colleges are much more likely to close. Publics rarely, if ever. But both publics and privates, all of 2024, in news almost every day, are cutting programs, majors, courses, and that kind of stuff. And for the most part, it's fair to say they're cutting the low enrollment courses, the low enrollment majors.
You and I would do the same thing if we were running a college. But from the student's perspective and from the parents and family perspective, there's another way to look at this. And I'll get to that in a second. There's something online called the College Navigator. It is run by the federal government, I think from the National Center for Education Statistics. But you can search on College Navigator. Matter of fact, I think I have a YouTube video out there that shows how to do that.
And you can compare. You can't compare it. You can look at a college's graduation numbers per major. Let me make this easier. Let's say, Mary, that you wanted to be a journalism major or that your sister or your brother or sibling wanted to be a journalism major and they were looking at three colleges and all three colleges were effectively the same. And I'll cry. The grass was green. The buildings were covered with ivy and the trees were tall, whatever. If college one
graduated five or six journalism majors per year. College two graduated a couple dozen journalism majors per year. And college three graduated 75 to 100 journalism majors per year. I offer that's an important distinction for students and families to consider for the very reason you talked about that low enrollment, low graduation, low major graduation number at college one puts that
major at more of a risk of closure, Mary, than for college two and college three. So it's not just that all three have the same tuition, the same everything else for the purposes of our discussion. If the enrollment is low in a major you're thinking about, be careful. Now, you're majoring in marketing, you're majoring in finances, those are rarely an issue in terms of graduation numbers, except for the smaller colleges. Smaller colleges may still just graduate a handful or two.
of business majors, not even a handful or two of finance or accounting majors. And it's not just the numbers. I can make the case that if I have 50 students in my journalism course, my journalism program, I have better faculty, I have better resources, I have more I can offer those students than if I just have five. So I can make a logical argument. It's still just educated speculation on my part, but I can make a logical argument.
that those students at a college of 75 students or 100 students graduating each year, you're going to get a better education.
Mary McGrath (05:44)
And are there, I know you mentioned tuition during that. Are there any certain factors that might influence a college's decision to increase or even decrease its tuition for students?
Gary (05:54)
It would be the same thing if you and I were running a coffee shop and we need to pay our employees. And that's the first thing that pops up in the mind in college leaders is being able to pay their employees. Now you can pay your employees.
You can pay your employees a livable wage, for lack of a better word, or you can pay them the market wage. The market wage is going to be a lot higher than the livable wage. So when colleges look at increasing tuition, increasing or decreasing, that rarely happens, but increasing tuition, a big part of that is being able to pay their faculty and keep those faculty there. Because if faculty, and it's happening all the time right now,
Faculty leave because especially small private colleges, especially a small rural private colleges because the compensation they receive is not what they could earn elsewhere. Now the challenge those professors face, those faculty face in smaller schools looking to go somewhere else with all the layoffs taking place, Mary and higher education, the opportunities are much more limited to move elsewhere than they were a decade ago.
Mary McGrath (07:11)
So like you said, most of the time colleges are deciding to increase rather than decrease their tuition. So how do they kind of find that balance between increasing tuition for their own needs, but then also trying to remain affordable towards students and families?
Gary (07:16)
All right.
You know, the affordability question is one that's asked all the time. And I can make the argument that it's not affordable, especially at this price, right? If a college has a list price, private college of $40 ,000, you and I both know, Mary, that very few of any students pay $40 ,000. They all pay discounted tuition. It can be called merit aid. It can be called the presidential scholarship. It can be called the Gary Stocker scholarship. It's unfunded discounts.
But what's really happening, and I've heard college presidents share this with me, is they've talked with parents and parents, this is a stunner kind of, Mary, parents prefer a high price, high discount model. So let me explain what that means. So a high price, so instead of 40 ,000 this year, 44 ,000 next year, but I'm giving you the Mary McGrath Scholarship for $24 ,000.
or I'm giving you the presidential scholarship or I'm giving you merite, it doesn't matter what it's called. Well, now parents can tell their family and friends and others that my child has earned a $24 ,000 scholarship to go to private college U. And so that's really what's happening is colleges are kind of incented by the families themselves to raise the price of tuition.
But yeah, offer on the backside, massive discounts and the average discount in private colleges now is 55%, something like that. So if a college has a list price of 40 ,000 and you send a child there, it is, what is it, 40 ,000? It costs 20 ,000. And so that high price, high discount model is what many, many, if not most colleges are engaged in right now. So is it high? Yes. Does everybody pay the list price? Hardly anybody does.
Mary McGrath (09:19)
So are any of these college adapting their financial strategies in response to different demographic shifts? Because obviously, every year it looks a little different with the number of high school graduates and kind of their family background and their own background. So what does that kind of look like?
Gary (09:36)
Yeah, you know, if the public relations people are saying that at all these colleges, the public relations people are writing press releases that say we're adapting to everything, all the stuff you just mentioned in your question. But in reality, in my mind, and again, educated opinion here, informed opinion, colleges are not adapting to anything materially significant, Mary, that would impact what they're doing.
as a college and that's period. Public relations says yes, we're adapting, but in reality, these colleges don't have the cultural ability to make the change. They don't have the leadership ability to make the change and they don't have the recognition in the market to be able to make changes that will continue to let students come to their colleges. So the easy answer is no, not so much.
Mary McGrath (10:32)
So obviously when we experience a college closer, kind of the first person we think of that it might affect is obviously the students and their families, which obviously is very important. But I feel like oftentimes faculty and staff are kind of forgotten about in that equation because they're out of a job now. They just lost a job. So do these colleges have any specific support systems in place for these faculty and staff when they do close?
Gary (10:56)
One of the many tragedies associated with all of these colleges that are closing is no, they don't. And I'll give you a couple of examples. May 31st, the University of the Arts in Pennsylvania, Philadelphia announced its closure and closed on June 7th, seven days later. In April, I think it was, maybe earlier in May, Wells College, I think also in New York state did the same thing. My observation in the last many months,
is more colleges have been closing on short notice and giving both their students and their faculty and staff next to no time to move on, students to graduate, and faculty and staff to be able to support their families. And the question that begs, especially for students and their families who are listening to Beyond the College Brochure podcast, is how do I know?
How do I know if a college that I'm considering might close? Well, of course, you and I are marketing through this podcast and many of the resources, the College Viability app. And there is one for private colleges that's dedicated to just students and their families, cost 29 bucks.
And you can take a look at that. And I'll give you two areas to look at. If you go out and grab that version of the app, $29, and we'll make sure we have the link in the show notes, is look at the enrollment trends.
Look at the FTE enrollment trend. FTE stands for full -time equivalent enrollment trend. And if it's gone down, Mary, for the last eight years, we show eight years on the app, if it's gone down for the eight years, don't you let that college, students and moms and dads, grandpas and grandmas, aunts and uncles, don't you let that college tell you they're going to fix it next year. It's not going to happen. The second one to look at, and Mary, make a note if I get on my soapbox here, is the graduation rate.
And the other thing, one of the other things, I think it's five or six reports we track from the federal government in the college viability app is a four year graduation rate.
Mary, only 46 % of colleges, both private and public in the United States, graduate at least half of their students in four years. Let me say that again. For every 100 colleges, both public and private, only 46 graduate half of their students, just half of their students in four years.
The other 54 % do not. And some four -year graduation numbers, Mary, are so miserable, 30%, 40%, that I've coined a phrase that if you can't graduate at least 40 % of your students in four years, you're not really a college. What you really are is a tuition collection agency, a tuition collection business. Because sure as heck,
I didn't say the bad word that time. You're sure as heck aren't graduating students. And Mary, isn't that what a college is for? And yet more than half of them do not. And some are abysmally low.
Mary McGrath (14:07)
Well, that kind of answered it already, but it brings me into my next question, which I was going to ask, is there a specific amount of time that these institutions are required to give students and faculty before they close, or is it just right away they can close their doors?
Gary (14:20)
Yeah, not yet. There's really been no, there's no federal requirement. Now, Massachusetts was the first state, four or five years ago, to start enacting legislation. They had a classic short notice closure of a college called Mount Ida, Mount Ida, excuse me, Mount Ida, I -D -A. It was in the Boston area, as I recall. And this was back in 2018, something like that, 19, 17, something like that.
and they announced their closure in mid -April and locked the doors in mid -May. And the folks in the Massachusetts legislature were embarrassed. There was all sorts of public hearings and threats of litigation and all that kind of stuff. And Massachusetts now has enacted legislation that makes colleges, private colleges, report their finances to the state. All right, fair enough. I have yet to see one piece of information from the state of Massachusetts.
saying that there's a college in trouble. And yet I know for a fact looking at the financial data, financial statements, the college viability reports from the 1990s, that there are many private colleges in Massachusetts that aren't going to make it. The challenge governments face, Mary, is if anything leaked out that a university might be in trouble, it becomes a self -fulfilling prophecy.
because now you're not going to go to college, right? Where the media says, be careful, this college might close. And so, state agencies, regulatory agencies, even that aren't based in the state are having the same challenge. How do they provide oversight of colleges finances without putting the college at unnecessary risk? And I was telling you before we started recording the podcast today, that I just posted a blog earlier this afternoon.
that talks about how the Department of Education, the regulatory agencies, and there are six of them across the country, they're regional, and boards of trustees are failing to let you and I and all of the high school, all the college students, their families, their faculty and staff giving us a heads up that this college is almost certainly not gonna survive. And that's why the college viability app is the one resource that can at least give you a heads up. If your enrollment is down,
the graduations are bad, if the endowment is low, below 50 million, five zero million is my threshold, be careful. Yeah, you can still choose that college, but make sure you're comparing it against others because it's, we compare everything else. We compare phones and cars and houses and clothes and food. Why not compare the financial health and viability of colleges and even the FAFSA? I think you and I have talked about this before, but of course for the FAFSA, families like yours submit their financial data.
to the federal government. And I make the logical case that the college viability app is kind of informally the reverse FAFSA. It lets your family and all the other millions of college families across the country look at the finances, the comparative finances of colleges. And in my mind, it's only fair if they're looking at your stuff, you should be able to look at their stuff.
Mary McGrath (17:32)
Yeah, so unfortunately a lot of these colleges that are closing do reside in small communities or communities with not a very large population. So when these colleges close, is there any like large economic impact that those communities face from it?
Gary (17:47)
especially in the rural ones. Absolutely. And in most cases, and you'll see this in a lot of the literature, Mary, that in most cases, the college and small communities is the major employer, not always, but many cases is the major employer and provides not just jobs and the income from jobs, but kind of a cultural component that may not exist if that college doesn't exist. So absolutely. And if you're a community leader,
I'll use a generic term, in a small community that has its own private college.
You don't want the student and family version of the College Viability app. You want to find the resources to buy the more expensive, I won't give you the price here, the more expensive executive analysis version, because that gives you a thorough look at all the private colleges in your region across the country. And you can start the discussion. If a college is in trouble, don't wait for them to tell you because they're not going to. You've got to start the discussion yourself. And the College Viability app, among other resources, is an excellent tool to be able to do that.
Mary McGrath (18:50)
Yep. So on that note, it'll be a wrap for myself and for Dr. Gary Stocker. Thank you for joining us today on the Beyond the Brochure podcast, where we provide guidance on college decisions, financials, and much more. Hope to see you next time.