In today’s economic climate, and especially in light of the COVID-19 pandemic and its effect on the economy as a whole and education in particular, parents are understandably concerned about the value of a college degree and the viability of certain institutions. When creating a college list most people understand the value of assessing the likelihood of being accepted, the depth and breadth and the course offerings, the culture of the campus, and the cost (or return on investment). However, now more than ever, it is also imperative to evaluate the financial health of the institution. No one wants to get into a school only to have that school close its doors, merge with another institution (losing its unique identity), or eliminate your major.
Of course, there are no 100% guarantees, but there are ways to research the relative financial health of various colleges and universities and to evaluate their risk of failing. Some risk factors to be aware of are a decrease in freshmen enrollment and retention over time, a higher percentage of non-need based (aka merit aid) vs. need-based aid offered with an increase in the rate of merit scholarships awarded, a high percentage of international students, and a relatively small endowment. Another red flag is a downward trend of net tuition, especially if tuition revenue makes up the largest portion of the institution’s revenue stream. And, if the institution is borrowing from their endowment, this may be an indication of the school’s financial stress. In general schools with higher endowments, lower admit rates (and therefore larger waitlists), and less reliance on international students (who almost always pay full tuition) are considered less vulnerable to economic disruptions.
A good independent educational consultant will be able to help research and explain not only the risks and benefits of the academic and social environment of an institution but also those risks and benefits of its financial well-being.
Of course, there are no 100% guarantees, but there are ways to research the relative financial health of various colleges and universities and to evaluate their risk of failing. Some risk factors to be aware of are a decrease in freshmen enrollment and retention over time, a higher percentage of non-need based (aka merit aid) vs. need-based aid offered with an increase in the rate of merit scholarships awarded, a high percentage of international students, and a relatively small endowment. Another red flag is a downward trend of net tuition, especially if tuition revenue makes up the largest portion of the institution’s revenue stream. And, if the institution is borrowing from their endowment, this may be an indication of the school’s financial stress. In general schools with higher endowments, lower admit rates (and therefore larger waitlists), and less reliance on international students (who almost always pay full tuition) are considered less vulnerable to economic disruptions.
A good independent educational consultant will be able to help research and explain not only the risks and benefits of the academic and social environment of an institution but also those risks and benefits of its financial well-being.
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