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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 (00:01.067)
Hello and welcome to the Beyond the College Brusher podcast where we provide you guidance and information about college financials and decisions. My name is Marie McGrath and I'm a current senior at Linwood University and my co-host today is Dr. Gary Stocker who is also the founder of College Viability. Gary, welcome back to the podcast.
Gary (00:18.36)
Mary, always a pleasure to chat with you. I believe basketball season is getting closer and closer, right? The full schedule is out. I've already put it on my calendar. I'm already arranging substitutes for the days I had conflicts on Thursdays. Mary, I'm going to be there, I think, maybe every home game to provide not only you guidance, but of course, as we talked before, the referees need my guidance.
Mary McGrath (00:25.951)
Yes.
Mary McGrath (00:31.619)
you
Mary McGrath (00:40.523)
Yes, of course.
Gary (00:40.65)
as well. I look forward to that. That's about five, about six weeks out, right? Five, six weeks? Yeah, 32 days. Very good. I am going to be there. What kind of questions do have for me today? Yeah, so to start us off, what would you say are some of the more important factors that may contribute to a college's financial stability? You know, it's somewhat of a complex response, but let me kind of give you the highlights. And it's easy to say enrollment.
Mary McGrath (00:46.179)
Yeah, 32 days till tip off.
Mary McGrath (00:52.875)
Yeah, so to start us off, what would you say are some of the more important factors that may contribute to a college's financial stability?
Gary (01:08.914)
And this is the time of year, and I think I've talked about this, where many, many colleges are saying, have great enrollment. All right, that's fine. I'm sure they do in most cases, although some of them are spinning it. But enrollment doesn't pay the bills. Enrollment doesn't keep the lights on. Enrollment doesn't pay faculty. It's the tuition and fee revenue generated by those enrollments that make a difference. And you'll find colleges rarely, if ever, talk about the actual tuition and fees associated with enrollment because they don't like to talk about money.
Colleges like to think that they are these esteemed organizations that do things for goodwill, but yet Mary, they're a business and they need to generate at some point more cash coming in than more cash going out. I think reputation of a college plays some part, not a big deal. I also think that location. I really believe we're in the midst, and we'll find this out here in a month or two or a year or two, that we're in the midst of the market, like students like yourself and a little bit younger than you.
are starting to move away from rural locations or non-urban locations, they're starting to move away from smaller locations. And Mary, think I'm just seeing the beginning edges of that this fall with some of the big publics announcing they don't have rooms for students, because they've got so many going there. Now that's happened on occasion in years gone by, but I'm really watching to see if that trend is developing.
And so not only will it be the enrollment, but it could be the location that becomes a significant indicator of a college's financial stability.
Mary McGrath (02:39.947)
And I know you kind of mentioned the reputation of a college in there. So would you say that the financial instability of a certain school can have a negative effect on its reputation, whether it be in the perspective of students and families or even the community that they reside in?
Gary (02:41.038)
in the reputation of a college in there. Would you say that the financial instability of a certain school could have a negative effect on its reputation, whether it be in the perspective of students and families or even the student need to be residing? Yeah, good question. And we're still in an era when, even when I went to college, when my children went to college, and when you started and the students starting this year, precious few folks, precious few families, precious few students,
think about a college's financial health and viability as part of their college decision-making process. The underlying assumption is that all colleges are financially healthy. And Mary, that's not true. It's not even close to being true. And while about one private college per week has closed so far this year, to slow down a little bit, there have still been, since 2017, dozens and dozens and dozens of private nonprofit colleges closed.
So it's not necessarily an individual college, although I do reports and we do our college financial health show on Tuesdays. It's a live video show on YouTube that shows weaknesses in individual colleges. We did one last Tuesday, this past Tuesday, on Ryder University, is out of New Jersey. And Mary, unless they change things drastically, this and many colleges like it, they're not going to be able to survive either at all.
or in any semblance of the kind of college they have been historically. It's not always the reputation of the individual college, but now I think we're looking at the reputation of a genre or type of college. If you're small, less than a thousand students, give or take. If you're not in an urban area, I think we're starting to see the market. College students and their families say, you know what? There might be less risky opportunities besides small colleges in rural locations.
Mary McGrath (04:33.729)
And would you say that state and federal funding play a role in the stability specifically of public colleges?
Gary (04:33.998)
And would you say that state and federal funding play a role in the stability specifically of public colleges? Well, for sure. And you'll read new stories over the past many years where state funding of public colleges has gone down. It seems to have stabilized a little bit. And of course, that's one of the big advantages that public colleges have over private. So subsidized. You and I pay taxes to subsidize all of the public colleges in Missouri or Illinois where you're from.
So there's a competitive advantage there, but the essence of it is, and there's also the Pell Grants. And the Pell Grants are federal subsidies, federal grants really, that they will give to any college when a student is eligible. And I don't remember the eligibility requirements. It's $7,300 in change. But that hardly pays for even a semester.
of college tuition and fees at almost every college that there is in the country. And so some colleges will take that as full payment. Well, all right, they're certainly entitled to do that. But that means if you're paying full freight, less price or something, less price, less a discount, you're really subsidizing those federally subsidized students using Pell Grants. I don't know how that's going to shake out long term.
But the federal funding through Pell grants, there's movement in Congress to raise that amount, but not enough to make a materially significant difference. It's really the state appropriations that play a big deal just yesterday. Illinois had a story where they're going to look at different ways to fund public education. Well, all right. They may have one of the worst public colleges in the country in terms of finances at Western Illinois. You'll play basketball against them a couple of times this year.
They're a mess, absolute mess, financially, enrollment-wise, staffing-wise. have presidents more often, you have a cup of coffee, I think, up at Western Illinois University. I used to say it won't close. And I still believe that. It's very difficult to close a public college. But I'll tell you what, the folks at Western Illinois University are working really hard to prove me wrong.
Mary McGrath (06:38.997)
And do you say there's any or do you think that there are any specific types of colleges or programs in certain colleges that are more likely to experience these financial troubles or even a closure?
Gary (06:39.278)
And do you think that there are any specific types of colleges or programs in certain colleges that are more likely to experience these financial troubles or even the closure? Well, we've kind of talked about the closures. Let's focus on programs. And in one of the apps that I've created here at College Viability is one called Program Completion. And it takes, for all public and private colleges in the country, it takes a look at 16, I think it is, program level.
completions and programs. For example, you're in business and finance, you're in business major, includes business, marketing and management. That's a program. You're doing marketing, you're doing finance. Those are some sub components in the program level of business, marketing and management. But if you're looking at a college, I think, you know, I've talked about this before, Mary.
be careful of choosing one that has a real low number of program completions. And I think the example I always use is journalism or communications. If you wanna be a journalism major when you grow up and you're looking at colleges, check out the program completions for communications and journalism. It goes all the way down to the major level. And if a college looking at has had five journalism majors graduate on average the last three or four years,
Be really, really careful because if that college has financial issues, the first thing they're going to cut, Mary, are those low program completions. In this case, for my example, it's journalism. So just be really, really careful with those. Choose a college, Mizzou, for example, here in Missouri. One of the strongest journalism programs in the country. I don't know how many completions they have, but it's hundreds, if not thousands. That's where you're going to get the better deal. That's where you're to be assured that that program will continue for a long, long,
long time.
Mary McGrath (08:27.265)
And I know that earlier you were talking about how enrollment is a factor you can look at actually on the college viability app. So would you or how do declining enrollment numbers impact a college's finances?
Gary (08:30.702)
is a factory you can look at actually on the college viability app. So how do declining enrollment numbers impact a college's finances? It's just like, again, I use a coffee shop example. When you and I go buy a cup of coffee somewhere, that's how they survive. They take our $4 for a cup of coffee, and that's the revenue they use to pay for the rent, to pay for the coffee, to pay for the labor, all that kind of stuff. The same analogy holds for colleges. But it's a much, much more complex environment. It's not a simple amount.
for a college education is for a cup of coffee. And it's more analogous to what you and I pay on when we go on airlines, on airplanes. You and I might be sitting next to each other on going from St. Louis to Chicago, and you're paying $400, and I'm paying $200.
It's kind of that way for colleges. The folks you're sitting next to in your senior level marketing classes, your senior level finance classes, bet you a buck 50. All of them are paying a slightly different amount for that same experience that you are and each of the others are. So it's really a function of can a college generate enough total, use the word net enrollment dollars.
because gross enrollment would be, know, at Linda Wood University, think the list price is somewhere in the vicinity of $21,000. And Linda Wood discounts at about 50%, give or take. So they're collecting somewhere in the vicinity of 10,000 and change for every student on average. If they can pay their bills, and they can, and meet their payroll, then they're fine.
But the challenge becomes when there's so much competition, as there is in colleges now, that colleges have to discount tuition well beyond 50 % to be able to get students to say, I'm going there because it's a lower price. Just like you and I do for everything else, Mary, we buy clothes because they're less expensive. We buy food. We go to restaurants. We buy cars. We buy computers, watches, everything, almost everything, because it's less expensive. And for colleges,
Gary (10:30.208)
It has become so much less expensive that these colleges that are closing can't afford to stay open because they don't have enough net cash coming in the door.
Mary McGrath (10:42.857)
And looking at it from more of a colleges perspective, would you say there are any specific strategies that these colleges can implement in order to prevent closures?
Gary (10:45.55)
Would you say there are any specific strategies that these colleges can implement in order to prevent failures? Well, quit using dartboards. There's a smile. So quit using dartboards. I should finish that, right? I should finish the thought. Quit using dartboards to do your budgets. Create realistic budgets based on realistic enrollment numbers on realistic net average tuition per student. And quit making things look rosy.
Excuse me, Mary.
Gary (11:20.046)
A better way to do it would be to say, balance your budget, balance a realistic budget. And again, on the college financial health show I do with Matt Hendricks every Tuesday, he says this all the time and he's right. The way to get out of your mess is to balance your budget. Now that may involve laying off a large number of faculty. That may involve cutting some significant number of programs. But if you can't generate the net revenue needed to pay those salaries to keep those programs going,
you're at the end of the day, you're a college that's not going to have the resources, the funds, the dollars, the cash available to pay its bills in whatever form they are. And you're going to have to come to a point where you look at the wall and say somebody has to turn that light out, which is my euphemism for saying a college has to close when you have to turn out the lights.
Mary McGrath (12:08.423)
And if a college does happen to find themselves in the midst of a closure, what steps might they take to ensure that their students are able to complete their degrees either on time or even possibly transfer those credits to another university?
Gary (12:10.67)
themselves in the midst of a closure, what steps might they take to ensure that their students are able to their grades either on time or even possibly transfer those credits? Yeah, and there have been, again, dozens and dozens and dozens. Scores of colleges closed over the last seven or eight years, and a fair number have done it correctly. They have given their students, faculty, and communities a heads up.
of months, and in some cases a year, year and a half, even two years. Fontbon here in St. Louis announced their closure earlier this spring, and they will actually lock, close the doors, and I think end of May 2025. That's well done. Give them credit for doing that. Others have done it as well. But there are other colleges, University of the Arts in Philadelphia, Wells College, come to mind off the top. The one up in Wisconsin, it's not coming up in my name, Cardinal Stritch a couple of years ago.
They're part of a trend of short notice closures. Now, I'm going to stretch the truth a little bit, but the essence of a short notice closure is they tell their students on Friday and their faculty and communities on Friday that they're to close and they lock the doors on Monday. Now, again, I'm exaggerating to make a point, but these short notice closures give nobody a chance to prepare. If you were victimized by a college closing, you have to find another college to go to.
Now, colleges do, those that are closing do, for the most part, a token job of doing something called a teach-out. Well, they will line up other colleges so that Mary McGrath can finish her finance and marketing degrees. But what I found, even with some of those teach-out colleges, and Fontbonne is one of them, there are lining up colleges who themselves, Mary, are financially distressed.
And what a terrible way that would be to go have one college close on you, start taking courses from another college, and it closes as well. Mary, that's happened to more than a few students.
Mary McGrath (14:02.965)
And just kind of a follow up on that, because of that, would you say that, like in that example you gave, would you kind of call that kind of like performative steps in a way? Just kind of doing it to show that they're doing it instead of.
Gary (14:05.358)
Because of that, would you say that, like in that example you gave, would you kind of call that kind of like performative steps in a way? Just kind of doing it to show that they're doing it? Yeah, yeah, token effort. Yeah, it is. And that, but you know what? Now that I think about it, there is some legal requirements. They would have some culpability, Mary, if they didn't do that. I don't remember what the details are, but yeah, and a big part in all the media that I do, the podcasts that I do, the shows that I do, a big part in my mind, right or wrong, of college leadership.
is they do management by PR. They announce through press releases, either through their internal organizations or through local media, and effectively say, are great. And Mary, they're welcome to do that. We all spin things. But that's why people like me are out there to say, hey, wait a minute. Wait a minute. You're not telling the entire truth on this stuff. And that's one of the things you and I do with College Viability. Part of our efforts are to get the message out that, hey,
Be careful what colleges tell you because they're spinning things and they're entitled to. You and I don't have any reason to spin things. We'll give this the truth about the finances, about the enrollment, about the graduation rates. That hasn't even come up today. Pathetic to graduation rates are among more than half of public and private colleges in the country.
Mary McGrath (15:24.843)
And what would you say are some of the most important lessons that could be learned from recent college closures that we've been seeing?
Gary (15:25.71)
say are some of the most important lessons that could be learned from recent college closures that we've been seeing? Yeah, good question. would say for students and families, be aware. I think I've talked about this before. The first thing I would do if I have a child going to college is look at the financial health. Now, our children or adults, we went through this and did not look at the financial health. It wasn't an issue then. But these days, if you're looking at a college,
especially a private college, especially a small private college, especially a rural private college, really check their finances out closely. And you can use the college viability app. know, I have one designed for students and families. If you go into publics, they're unlikely to close, but they are certainly, as you and I speak, they're doing layoffs across the country. They're cutting back on programs. So make sure you're doing your research. And again, we have the program completion app for both public and private colleges.
And Mary, I'm gonna try and have a student or family version of that created sometime in the next couple of months so that you don't choose a college that subsequently cuts the major that you wanted to go into. Just awful, awful sequence of events. For faculty and staff, do your own homework, your academics for crying out loud. You're used to numbers, you're used to data. Use the college viability app that we've prepared for faculty and staff. Look at the data, compare it to colleges in your region, and don't take your administration's word for it. There are too many cases, Mary.
of college leaders not being upfront with their faculty. And when the bad news comes out, the faculty at least pretend shock. It may be actual, it may be fake. So do your homework. And then to college leaders and even boards of trustees, do whatever you wanna do. But we are in the money ball era for higher education. And there is a series of data entrepreneurs, and Mary, I consider myself one of them, that is making that data available.
to students and families and family and staff, communities, political leaders, community leaders, you name it, so that we know. I can tell you right now which college is at the greatest risk. And we often do that on the College Financial Health Show on Tuesdays with Matt Hendricks. We know. If you want to spend things, go for it. But if we catch you, we're going to call you on it. And we're going to show the actual data because we have tools you don't have, college leaders, college board folks.
Gary (17:47.694)
because we have made the effort to make this process more open so that students and families and faculty and staff and communities know now if their college is in trouble and they don't wait for that email to come and say, mom, they just closed my college. It's a tough scenario and Marriott's not gonna get better anytime soon.
Mary McGrath (18:10.211)
Yeah. And with that, it'll be a wrap for myself and for Gary Stocker. Thank you for joining us today on the Beyond the College Bursar podcast, where we provide you guidance on college decisions, financials, and much more. If you have questions or concerns about the financial health of colleges, please send them to marym at collegebiability.com. Once again, thank you for making time to join us today, and we hope to see you next time.