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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 (00:00)
Hello and welcome to the podcast of Beyond the Brochure, Guidance on College Decisions. My name is Mary McGrath and I'm a rising college senior at Linwood University. My co -host today will be Dr. Gary Stocker, who is the founder of College Viability. I will host our weekly podcast as Dr. Stocker and I discuss and debate the challenges both students and families face in making decisions about college careers and much more. Dr. Stocker, welcome to the podcast.
Gary (00:25)
Well, Mary, always good to chat with you. It's been a crazy week of college closures. And for those college students and their families listening to this podcast, we're going to talk about this. Mary has some questions I know for me. It's a time when the old Latin phrase caveat emptor, buyer beware. Mary is an important consideration for folks looking at private colleges in general, but really most colleges.
The financial challenges are so tough that it's important for families to check out the finances of colleges, just like the colleges check out the finances of families with the FAFSA. And I know the troubles of FAFSA this year.
Mary McGrath (01:05)
So I've read recently in some news that colleges unfortunately give their students very little notice that they're closing and I'm sure that can be tough on families and students especially with the fall semester coming up. So what do you know about this? Have you heard anything about that?
Gary (01:19)
Well, of course I follow college closures all the time. That's what I do. And what I'm starting to see, Mary, is in an increasing pattern where colleges, and again, we're talking mostly private colleges here, when they give not just their students very little notice, but the faculty and staff and even their communities very little notice. Now I can engage in educated speculation on this, and that's these colleges don't have a good handle.
on their finances. They don't have a good handle on how much cash they have available to meet payroll, to keep the lights on, and those kinds of things. And they're just, they're so surprised by the sudden loss of ability to make, to pay bills, just like you and I have to pay bills, we pay, that they just close without even thinking about the impact on colleges and students. I'll give you an example. Northland College.
in the North part, really they're not, North part of Wisconsin, back in March of this year, said they needed to raise $12 million in 30 days, Mary, to stay in business. 30 days passed, they raised 1 .5 million of the 12 million they wanted, and they didn't close. They said, you know what, we're just gonna lay people off. And through the other podcasts that I do, the regular This Week in College Viability podcast that posts every Monday,
I chastise them and here's why, and this answers your question. If your college is in financial straits, Mary, today, in this market, students and their families listening to this, in this market, they're not gonna recover in almost every situation. And I beg colleges like Northland to do the right thing and turn the lights off, close the doors, let their students, let their faculty, let their families, let their communities get on.
because colleges like Northland are very, very, very unlikely to survive. They're just prolonging the agony.
Mary McGrath (03:13)
So I've also seen things that even if the full university or college isn't closing, unfortunately they are cutting certain programs and majors. So how can students and families know what specific programs or majors are at risk?
Gary (03:26)
Yeah, great question. And there's a specific tool that you can look at, and I'll talk about that in a second. But this is one of the areas that is impacting both private and public colleges. Because for a variety of reasons, the market is shrinking, public legislatures, government legislatures, state legislatures are not providing the funds colleges want or need, that both public colleges and private colleges are cutting back programs and majors.
and laying off both faculty and staff. Now the mix is different from college to college, but the pattern is layoffs and cutbacks. Matter of fact, on my Monday podcast, the first section I talk about is layoffs and cutbacks and closures, because Mary, those happen every single week. Now here's how you want to think about that. If you are either an early college career person, freshman, sophomore year, or in those last two years of high school and you're thinking about a college, go to a place called College Navigator, one word.
College Navigator, and there's a way to look up the colleges that you're considering to see how many students graduate with a major you're considering. I use the example that I always use, Mary. And say you want to, your student wants to be, or you want to be a journalism major. Look at the colleges, go to the College Navigator, and for the colleges you're considering, see how many folks have graduated in that major in the last three years.
If you're looking at a college that has five journalism graduates in the last three years versus a college that has 55, be really, really careful about choosing a college with only five journalism majors. For obvious reasons, that kind of program with low enrollment, low graduation rates is at much more risk of being canceled or closed than a program like business or a program like nursing where there's lots of majors.
So don't go to colleges with low enrollments on the majors that you're considering would be my advice.
Mary McGrath (05:21)
So moving from the student and family perspective to more of like a business perspective on these issues, many people in higher education don't think that colleges should be run like a typical business. Do you think that they're right or wrong in saying this?
Gary (05:36)
Now you got some profound questions coming out here. And yeah, there are many folks, there are many folks in higher education think it shouldn't be run as a business. So I'm going to be silly. So if you don't want to run it as a business, you go ahead and buy milk and eggs with a textbook. You go ahead and buy milk and eggs with a classroom chair. Of course, I'm being silly. I'm being ridiculous. Yes, every every nonprofit or for -profit has to have cash.
Mary McGrath (05:39)
Thank you.
Gary (06:04)
When you graduate from the Lindenwood University next year, you'll find a career opportunity somewhere. I'm assuming you'll expect to be paid, right? You're gonna expect to be paid for that first job? Yeah, absolutely. Absolutely. And how you can imagine and vision a college that doesn't run on the basic business premise that you need to take in more revenue than you pay out is just absurd. It's just absurd. Of course it's a business.
Mary McGrath (06:14)
Mm -hmm. I would hope so. Yeah.
Gary (06:33)
everything we do is a business because it involves convincing people to spend money on whatever your product or service is. And that it's an English course or a biology major. It's the same thing as a car or a computer or a phone. You got to spend money. And it's of course, of course, Mary, it's a business.
Mary McGrath (06:56)
So as I, and I'm sure most of our listeners know, you are pretty much an expert in predicting financial catastrophe within colleges and things like that. But most of these colleges that you look at, a lot of them have been around for many decades and some even more than a century. So why do you think that financial catastrophe is so soon for them?
Gary (07:19)
When you look at the history of American business, say, well, just say from the 1900s on, the last 120 some odd years, every industry I can think of has gone through up periods and down periods, higher education among those. And the other businesses across the other industries and airlines and hotels and automobiles and banks and financial services,
all have undergone periods of massive consolidation. And those include companies that closed and companies that merged or were bought by others. Higher education has really never gone through that to any significant degree. And as such, because for a variety of reasons, financial, cultural, return on value reasons, fewer people are willing to go to college. Now, you and I have talked before, this is a basic issue of supply and demand.
the supply of college seats, college chairs is way too much. Some folks have speculated as many as 2 million extra seats. And the demand from students like you willing to pay for those seats has gone down. And so we have high supply, low demand. And in any scenario, whether that's milk or college seats, eggs or college seats, the price pressure is downward.
So colleges are being forced to discount tuition and many of your peers at Lindner University are benefiting from that as well. I'm sure you are. So they don't have to pay as much. Well, that's fine for the students. That's great for the students. But that's the kind of revenue that colleges need to pay their faculty to keep the lights on, to make investments in technology, keep the building safe, all those kinds of things. And with on top of the FAFSA debacle, and I'll assume that the listening audience knows about that because they probably lived it.
This fall and probably in the next spring is going to be a time period where we go from about one private nonprofit college closure per week to I just talked with somebody earlier this afternoon on a podcast to probably two or three per week, well into 2025. It's going to be a catastrophe on the business sense for sure, but even more so, Mary, on the personal level. Right now the number is about 40 ,000 students have been left without a college in the last year or so.
What if that number doubles or triples or quadruples? That's a sad commentary. Envision you starting off and you're going to finish at Lindenwood. Envision a scenario where you couldn't because of no fault of your own. You finish at Lindenwood University. That's a personal catastrophe. That's not a business catastrophe. And it's going to happen.
It's gonna happen over and over and over again until that basic supply and demand scenario is fixed. And when you paid attention in your economics class, the fix is going to be that equilibrium where there's a better balance between the supply of college seats and the demand for students, whether they're 18 or 20 year old students or 40 year old students willing to pay for those seats.
Mary McGrath (10:27)
So despite some of the negatives we talk about when it comes to some of these smaller private colleges, do you believe that still going to college is a good thing for incoming students?
Gary (10:37)
in a millisecond, absolutely. Myself and every member of my family, I'm the oldest of five, and old is the functional word here, I'm the oldest of five, and first generation college through my entire extended family, because I was the first born, and I have benefited beyond description, as have millions and millions of others. And I've even got a college manifesto. And the first thing says, college is good, go if you can.
The second one is going to college is good, graduating is better. And the third point, I think seven or eight points in the manifesto, the third one is some colleges will close, many will not. And those three really kind of illustrate where the market is. Absolutely, absolutely college is the thing to do, but it's not for everybody. There is some degree of intellectual and academic
Capacity skills required. If you didn't get algebra in high school or geometry in high school, if you didn't learn how to read and write the language well in high school, if you didn't learn the difference between extracellular and intracellular in high school, college is gonna be tough. And even now there are 40 some odd million Americans who have some college credits and many of those have debt and they'll never ever get that piece of paper that says I have my bachelor's degree.
And that is going to be an economic burden on folks in my generation and on your generation for a long, long time.
Mary McGrath (12:13)
So if we're looking at multiple colleges that may be in financial distress, do you think that they'll merge together or just both close separately?
Gary (12:23)
I ponder that question and pause for answering that for just a second to kind of pull my thoughts together. Yes, the capacity to merge or consolidate, those synonymous terms, exists. But what I'm seeing and what others are reporting as well is that these private colleges, for the most part, wait way too long until they have exhausted all their cash, they have leveraged all their buildings to borrow money.
and they have no resources available with which to be a valuable merger candidate. It's like you and I want to merge our businesses and you look at my bank account and I have 10 bucks in my bank account. What are you going to say? Well, Gary, you bring nothing to the table. And that's effectively what's happening with these colleges. They wait so long and mergers in higher education for a variety of reasons take so long to comply. If your college is in financial trouble today, you should have started looking at mergers two or three or four years ago. And that's just not
happening and that's one of the reasons I say colleges in trouble now Mary. They're the die is cast. There are no programmatic changes adding majors to leading majors. There are no marketing geniuses out there that will rescue colleges and financial straits. And if they've waited too long, there are no merger partners willing to take on their debt just to get a few hundred or a few thousand students.
Mary McGrath (13:45)
So I know we were discussing before that college closures can affect multiple groups of people, even some that you may not expect, like college professors, like you were saying before. So do you think that college sports could be impacted by the financial challenges they're facing?
Gary (13:58)
Yeah, that's a nice new topic to ponder. And I've just really started throwing some serious brain cells at this. I don't know that it goes to college finance as much as it goes to the NIL and the Power Four conferences. And you're going to experience this. You played a game at Minnesota last year, right? Yeah, Big Ten school. And Lyndon Wood was paid, I don't know how much, to go up to play, they're called pay to lose games, right?
and kind of in the vernacular, because it's unlikely that the Lindenwood University will ever beat a Big Ten team. It could happen, but it's not a likely scenario for a lot of reasons. What happens if those Power Four conferences, Minnesota and the Big Ten, SEC, ACC, and Big 12, decide, you know what, we don't want to do any more pay to lose games with the Lindenwoods of the world, with the Maryvilles of the world, with the Illinois States of the world.
Mary McGrath (14:29)
I'm sorry.
Gary (14:51)
with the Missouri States of the world, the sluice of the world, St. Louis University. We want to keep those game slots inside our Power 4 conference because we make more money doing it. I haven't thrown a lot of brain cells at that, but what happens if the university is like the Nunewood, lose that pay to lose revenue? I have no idea how much it is. It's substantial. What happens to their budget? It's tough to speculate. It's a podcast I want to do on my other channels another time.
But I really worry that that NIL and the Power Four breaking away is going to impact every other Division I, Division II, Division III, NAIA, and junior college sports program in the country.
Mary McGrath (15:34)
Yeah, well, I know for me that's interesting to hear about because that does have the possibility to directly affect myself as we discussed. I am a student athlete at Lynyrd Wood. So, well, thank you so much for coming on the podcast today, Dr. Stocker. And let's conclude this next episode of Beyond the Brochure, Guidance on College Decisions, where we talked about the financial health and viability of different colleges and the effects that it can have on students and their families.
Gary (15:44)
Right. Right.