Subscribe
Share
Share
Embed
Career education is a vital pipeline to high demand jobs in the workforce. Students from all walks of life benefit from the opportunity to pursue their career education goals and find new employment opportunities. Join Dr. Jason Altmire, President and CEO of Career Education Colleges and Universities (CECU), as he discusses the issues and innovations affecting postsecondary career education. Twice monthly, he and his guests discuss politics, business, and current events impacting education and public policy.
Jason Altmire (00:04):
Hi everybody, this is Jason Altmire and today on Career Education Report we have Ben Unglesbee. He is the senior reporter for Higher Ed Dive. Many people in higher education start their day by reading the news clips from Higher Ed Dive and getting a little bit deeper into the issues on higher education. Ben, welcome to the show.
Ben Unglesbee (00:26):
Hi, Jason. Thanks so much for having me on.
Jason Altmire (00:28):
I wanted to start by learning a little bit more about you. People want to know about the folks writing in higher education and where you came from and what your interest is in this beat. So what's your background?
Ben Unglesbee (00:41):
Sure. So higher ed was actually my first beat coming out of graduate school. I covered the University of Kansas for the daily newspaper in Lawrence, Kansas. So the university beat was my first beat as a professional journalist and it was a fun one. A lot of issues are the same, a lot of new issues. Since then, I've been mostly a business reporter, so Higher Ed Dive is part of a larger company with numerous publications covering different industries, everything from healthcare to waste to the legal industry. I've spent most of my time here covering retail for a retail dive publication. I've also covered supply chains and I also did a stint covering higher ed for, it wasn't called Higher Ed Dive just yet at the time, it was called Education Dive, but we had a higher ed daily newsletter and I was there for six months in late 2018, 2019. So I've gone back and forth to higher ed over the course of my career and I'm back and it's a really interesting time to be writing about it and reporting on it.
Jason Altmire (01:56):
And I wanted people to hear that background because I think the intersection of business and higher education is something that people either don't like to think about or just don't think about because higher education, they have the same issues of meeting the bottom line as any other entity that is providing a service. And the fact that you have the business background as well as the higher education background journalistically I think is really important. It's important to our listeners and our schools, but just for expertise on the issues that you write about.
(02:29)
And I wanted to focus on an article that you wrote. You attended the Higher Learning Commission meeting in the spring and you wrote a very thoughtful, and I thought very insightful article related to institutional closures. And it seems like we're seeing more and more of those in the news recently. I don't know that a week goes by where you don't see in the morning news clips one or two or more schools that have unfortunately had to close their doors across all types of schools and leadership and sectors of higher education. And I was interested in what you wrote about. So can you maybe talk about what was discussed at that meeting and then we'll get into some specific issues related to school closures?
Ben Unglesbee (03:13):
Yeah, so that came out of a panel discussion by, it was a couple of HLC officials and a higher ed finance expert and basically looking at, okay, we've seen some closures recently. We're going to study them and try to learn how to get faster at predicting them. A lot of times in a college closure, especially if it's a sudden closure, for when the college faces the question from students and often even faculty and staff, what happened? Why didn't we know this is coming? Why didn't we know that the institution was in such financial trouble? Those questions make their way up to the accreditors as well. People ask the same questions of the accreditors, why didn't you see that this institution was in such imminent risk?
(04:09)
And so, for the accreditors, they're trying to protect students. I think they're probably trying to protect their own reputations a little bit as well because they are, I mean, they are in a way, they oversee universities and colleges. And a lot of the financial indicators that are available, they lag. They lag behind some of the biggest risks in a lot of cases. And I mentioned earlier that I've done a senate Higher Ed Dive before. We were looking at the same problem in 2018, 2019. At the time, it was a lot of for-profits that had closed suddenly. While I was there, we saw the Dream Center meltdown and schools closing basically overnight and trying to figure out can we see this happening soon enough to prevent the worst fallout, again, especially for students. And here we are, it's five years later and we're still thinking about this issue.
Jason Altmire (05:15):
There was a report that you referenced in your article and it came up in the HLC meeting that it was a government report that showed there were 1,100 college closings between 2010 and 2020. And the gist of the panel, as I understand it, was that accreditors had a responsibility to do more, to know earlier when a school was in distress and to do more to protect students. What does it mean that the accreditor should have more accountability? What exactly would that look like?
Ben Unglesbee (05:50):
I mean, it depends on what perspective you're taking. I mean, if it's from the point of view of the federal regulators and state regulators. I think for the accreditors part, they're trying to fulfill the obligations that they already have on paper to keep track of schools and their financial health. So I think there's a lot of reasons to get better at it, to get better at predicting, I mean, for everyone, because I think the ed department wants to know this is happening, wants to know, be able to predict distress and risk before they can, the accreditors want to, the colleges want to. And so, it's a matter of isolating those factors that can give you sort of signals before there is such distress that things might happen so quick that you can't do anything to mitigate it.
Jason Altmire (06:44):
And that's exactly the concern that has been raised. You have faculty, the media, certainly students and just members of the public when a school closes, often suddenly they'll say, why didn't we know? How did this happen so quickly? What was the leadership issue that was at work for a school just all of a sudden say, hey, we're closing the doors. Part of it was COVID relief funding is now running out. And that gave a sense of security to some of these schools and perhaps they didn't manage the transition as well. But cash flows are cyclical and as you point out in your article, a lot of the issue sometimes rests with registration time. In the spring and the fall, the money comes in, you have more cash, and then you get a little bit later into the semester, later into the year and you can't pay your bills. And it's not like other businesses where you can ride it out for a while. They make a decision to close almost immediately. And that comes as a surprise. What is the dynamic of a sudden closure like that, which takes everybody by surprise?
Ben Unglesbee (07:52):
It really depends on the nature. It is the smaller schools that have the hardest time, especially with cyclicality of cash flows because they don't have necessarily large endowments that they can draw from. They might not have a credit rating or be able to go to the bond market and raise cash when they need to the way that larger colleges or businesses can. We've seen colleges basically just sort of shut down overnight or announced that they're closing overnight. Big one recently is the University of the Arts in Philadelphia. I mean, the time between the announcement and the actual closure of is days, I mean, just days.
(08:36)
And it came largely as a shock to everyone. Now, people might know that finances aren't great, that the college might be running a deficit, has budget problems. I've covered several college closures recently and faculty can see that things aren't going well. They see it in student prospects. They can see the dwindling numbers. I mean, they're the ones who are sort of at the forefront of a college's operations and staff as well. So they can see, but they don't necessarily get detailed financial information from their leadership. And that came up at the HLC panel as well. The HLC leaders were surprised when they would learn of faculty that just had no communication from administration over the financial state of the university, and they advocated for that. It is surprising to hear, and it's not uncommon. I recently wrote about the closure of Goddard College in Vermont.
(09:38)
Faculty, again, they knew that the college wasn't doing great and they were in the middle of planning a semester and talking to prospects and they found out from a public announcement that the college was closing. It came as an utter shock to a lot of them and there just wasn't information sharing until basically they were told that the university was going to close. And we're talking about the people who basically make the institution run. Again, your faculty and staff execute your operations. I mean, not only is there, do they perceive sort of a disrespect from administration? They might have ideas. Your staff and your faculty, they know your institution and administration could tap that collective brain and they might have ideas for how to help or how to restructure or where there might be wriggle room or where there might be waste. I mean, a lot of times it could be sort of a contentious relationship between faculty and administration, but to not share information I think that can hurt the institution because you're leaving ideas on the table. Again, you just leave everybody in this sort of state of shock.
Jason Altmire (10:54):
And the lack of transparency that you're talking about comes into play when the institution tries to solve the problem. An example would be often they'll explore the possibility of a merger and that merger partner is of course going to dig into the finances of the institution and find that that snowball is quite a bit further down the hill than they had been led to believe and the problem is deeper and much more serious than might have been publicly known. If schools are in financial distress, is there a tipping point at which the possibility of getting out of it, of solving the problem in some way just becomes too great and it really becomes impossible to survive?
Ben Unglesbee (11:37):
Yeah, I mean, that's a really good question and it's something I've been thinking a lot about is where is the point of no return? You brought up mergers, and that is something I heard multiple panels at the HLC conference and it's something I've heard just talking with people since I've returned to higher ed coverage. You want to start that early. You want to start those conversations because by the time that a college is in deep distress, they're not really an attractive merger partner. The acquiree, they don't always call it an acquisition, but usually the stronger institution I think of as the acquirer. The acquirer, they want the benefit, they want a healthy expansion. A potential merger taking on a partner that is all liabilities and all declining enrollment, all debt, all liabilities, that's just not going to be an attractive acquisition for most institutions except maybe there's interesting real estate. But in terms of an expansion, in terms of a partnership where you can share resources, share branding, no one's going to want that.
(13:02)
And so, one of the HLC officials said, people will call me up in deep distress, and I'm summarizing here, will call me up in deep distress and ask about a merger. And they're like, you're way past that, that ship sailed. So before it's sort of a meltdown scenario, you want to have those kinds of talks. I've covered distress for a long time since I started at Retail Dive in 2017 at the height of what everyone called the retail apocalypse. And I've spent a lot of time covering bankruptcies in retail, in fashion and manufacturing. It's really hard to predict who's going to fall when, it could be just like a really bad quarter that sends you into shut down mode. I think there is sometimes a bit of chance involved, but again, a lot of it comes down to your cash position. If you have a sudden big enough enrollment drop in just one semester, that could be enough.
(14:14)
I suspect that's what happened at Goddard, but I didn't get insight from the administration, still trying to figure out what exactly happened, or in the case of UArts, and with UArts, we're still all trying to figure out what this was. Administration just alluded to sudden huge expense, like unanticipated expenses in the tens of millions of dollars. They didn't say what they were, but that was enough. One apparently came out of nowhere, they weren't prepared for it, and that's it. And if you can't raise the money quickly, that's it. But again, to take another example, Northland College, another small private liberal arts school in Wisconsin, they were on the verge of closing and they were public about it. They set a sort of Hail Mary fundraising goal of $12 million, which for them was a lot of money. They didn't make it, but they raised enough money and were able to make enough changes that they restructured and we'll see how it plays out in the long run.
(15:24)
But in the short term, they're much more, way more optimistic than they were just a couple of months ago. And that's part of I think what makes prediction so hard on the part of creditors and regulators. There is some random chance involved in terms of cash flows, in terms of unanticipated revenue or unanticipated expensive that can tip you one way or the other. The other thing I point out is that I think colleges, I mean, no one wants to be the person to close a college. No president wants to be the president to close a college. No president wants to be the president even to do significant downsizing or a merger. So there's some disincentive against taking a long view, planning out, looking at the trajectory and making decisions sooner. A lot of people in the field say it's sort of hope, you're running on hope. Meanwhile, things are slowly deteriorating and you draw down your resources, you draw down your assets until you are in a position where you have no options left, and then that's when things can happen very, very quickly.
Jason Altmire (16:45):
You've mentioned three schools so far in this interview, one in Wisconsin and then Vermont and Pennsylvania. Two of them closed, all experienced financial distress. And in the article, following your meeting at the Higher Learning Commission, you said that the HLC found that most of the closures they have seen come from private nonprofit colleges. The data has showed that that is in fact where most of the college closers occur across the country. And as you know, many of the listeners to this podcast come from the for-profit college sector. And certainly most of the members of our association come from that viewpoint. And it is a frustration to them that there are some that continue to paint this as a problem that is driven by the for-profit sector. That somehow for-profit schools are causing more damage by precipitous closures than other types of schools. So leaving aside the political interpretation of that, just as a journalist, what have you found with regard to school closures and the role of the different sectors?
Ben Unglesbee (17:57):
Well, I haven't done a close side-by-side study at this point. As I said previously, the closures that we saw when I was back in 2018, 2019, a lot of the major closures that we saw were for-profit. And a lot of those for-profits were large chains. So if something happens financially to the chain, it's a lot of closure. I mean, that's a lot of campuses that can close. Now, I mean, I think we saw a lot of consolidation in the for-profit world. And I mean, Jason, you probably know this better than I do, so jump in, but we've seen a lot of consolidation in the for-profit world.
(18:37)
So it's possible that industry has worked through a lot of distress that was there. The expansions that we've seen, I mean, I think the for-profit industry went through a lot of expansion following the recession. The nonprofit world and the public world have also done a lot of expanding. And this is something that comes up and Chuck Ambrose has a book out, Colleges on the Brink. One of the things he points to is a lot of colleges facing decreased growth in their enrollment. A lot of the ways that they tried to fix that was to expand. You add programs, you add buildings, you add nice shiny things on campus to try to recruit students to try to grow your enrollment.
(19:25)
Well, if enrollment doesn't actually grow, now you have new liabilities from that expansion. And so, I think that's something we've seen in both sectors. At the end of the day, a lot of the underlying structural forces are at play. If your costs are increasing, if your enrollment is declining, if your revenue is declining, you're going to have problems. And there's only so long that any entity, any organization can survive if they are running deficits between the revenue and expenses for too long. I mean, it's a fact of the business world, but that is a fact of life in any organization with a budget from a local PTA board on up.
Jason Altmire (20:14):
I think in closing, I'm going to ask the most important question, which I'm sure you'll agree and that is the impact on students. So when a school closes, those it's going to close, what actions can be taken to protect the students in that situation?
Ben Unglesbee (20:31):
Having firms teach out agreements in place is probably the step one, and that's what the accreditors look at. And that's why accreditors will ask for a teach out agreement before, but they do see signs of deep distress or potential closure. And again, I mean, forewarning can help so much. I mean, we have seen closures where they'll teach it out themselves. Or maybe not a closure, but we teach out a program. But sometimes the schools will have enough advanced warning to everyone that they can teach out the programs themselves. But in lieu of that, not everyone has the resources to stay open long enough to finish out everyone's degree. So teach out programs are absolutely essential. And again, before your cash burn is so bad that you're in a spiral, talk to your faculty and staff. Have town hall meetings, tell your students as well, but certainly the people who help you run your organization, your institution, let them know. Share with them the basics of the financial life of the institution and see if they can help you manage it or come up with plans.
(21:53)
The difference between closing with multiple teach out agreements in place and just closing overnight is a huge difference. And even the teach out programs are, I mean, some students can do it and some students can't. Students might not be able to travel to a teach out partner, or it might not quite work. It's tough for students under any scenario except for those cases where a college can do the teaching out itself. It's hard for a student not to be burned in some way, shape or form. It's a real tough hand for them to be dealt.
Jason Altmire (22:26):
Our guest today has been Ben Unglesbee, senior reporter for Higher Ed Dive. You can see more of his work at highereddive.com. Ben, thank you for being with us.
Ben Unglesbee (22:37):
Yeah, thanks so much for having me, Jason.
Jason Altmire (22:47):
Thanks for joining me for this episode of the Career Education Report. Subscribe and rate us on Apple Podcasts, Google Play, Spotify, or wherever you listen to podcasts. For more information, visit our website at career.org and follow us on Twitter @CECUed. That's @-C-E-C-U-E-D. Thank you for listening.