by Michael K. Townsley | Sep 26, 2026 | Private Colleges & Universities in Crisis
Most financial problems can slowly erode a college’s financial foundation. However, these five conditions can force a college to close immediately.
- Not making payroll.
- Not paying employee taxes.
- Not paying utility bills.
- Violating debt covenants.
- Not paying debt service.
Any one of these events can force a college to close. When a college fails to pay its employees, they will not work, and they will sue the college. When a college fails to forward federal employee taxes, the U.S. Treaurey follows a simple rule – pay up immediately or have your funds impounded. Utility bills may seem to have little immediate consequences until a utility terminates its services due to a string of unpaid bills. Another operational-dependent service is IT. Failure to pay a third-party contractor who either provides direct administrative services, or operational hardware and software can result in the loss of those services. In today’s world, very few colleges can survive when they lose critical administrative and academic services.
The two last conditions – violating debt covenants and non-payment of debt services – can quickly close a college, Debt holders have little patience with debtors which fail to meet these two conditions. The debt holder will push a college to take immediate steps to resolve these failures, or they will force a college into bankruptcy.
When a financially distressed college is aware of these conditions, they must take immediate steps to find money or prepare an orderly plan to close.
by Michael K. Townsley | Sep 26, 2026 | Financial Strategy and Operations
There was a recent article about widespread credit card fraud in the local government. This article reported that 848 employees had credit cards and made over 60,000 transactions valued at $24 million over a two-year period.
After reading this article and given my experience in higher education, broad distribution of credit cards can lead to undocumented, and unnecessary purchase that too often are made for personal benefit. From time to time, I hear stories of unaccountable spending with credit cards that add to the woes of colleges in financial distress.
Here is a simple rule for the distribution of credit cards, and even this rule will not necessarily stop purchases that only benefit the holder of the card. Only the president and the head of building and grounds with a possible third exception of the head of advancement should have credit cards. Every purchase using the card should have a legible receipt with a written explanation of why the purchase was made, be it for goods or services.
by Michael K. Townsley | Sep 26, 2026 | Financial Strategy and Operations
There are so many private colleges teetering on the brink of financial collapse, it is surprising that groups of these colleges have not formed affinity operational systems. The colleges could maintain their academic identity and campus but could join large administrative systems that would conduct institutional administration, academic administration, financial operations, debt management, IT or AI, marketing campaigns, and outsourced services. The cost advantages would be sizeable, which would leave the identity of individual colleges intact. The affinity grouping must be large enough so that spreading the costs of the administrative systems across the set of members will result in an average cost substantially below the current costs for each member.
Unfortunately, too many colleges slip away because they either believe that they will grow out of their current fiscal struggles or cannot find worthy partners. Here are several possible sets of colleges that could form an affinity operational system.
- Catholic Universities in the Philadelphia area;
- Catholic Universities in the Chicago – Milwaukee region;
- Catholic Colleges in New England;
- Private unaffiliated colleges in New England;
- Private unaffiliated colleges in Mid-Western States;
- Any set of private colleges that have common missions and are concentrated in a geographic region.
This proposal is not meant to be a magic bullet for private colleges, but it does offer possibilities of survival rather than waiting until fate drives private colleges over the brink.
by Michael K. Townsley | Aug 29, 2026 | Private Colleges & Universities in Crisis
A recent report by CUPA shows that adjuncts make up 46% of all faculty in private colleges. While the report dealt mainly with compensation policies, a major underlying question is – could private colleges and universities survive without the cost savings of using adjunct rather than full-time faculty? Given the current and future state of finances in higher education, a case could be made that private institutors are surviving on the cost savings generated by using adjunct faculty. The implication, if this is a fair assumption, is that in order to survive the grinding financial distress of the next decade the percentage of adjuncts will grow and the correspondingly the percentage of full-time faculty will shrink.
Of course, the wild card is AI which has the potential of wiping out a huge swath of adjunct and full-time faculty
by Michael K. Townsley | Aug 29, 2026 | Private Colleges & Universities in Crisis
Standard and Poor’s joins Fitch’s and Moody’s as the latest credit agency warning that finances in higher education, in particular private colleges and universities, are continuing to deteriorate. According to Standard and Poor’s the outlook is definitely negative for the coming year and maybe longer. The reasons for this by now are well known – the demographic cliff, changes in prospective student preference for college, price competition, the impact of new technology, and colleges trapped with a fixed cost budget model that lacks flexibility. Given the long-term demographic trends, the number of colleges facing deep financial distress will surely increase.
An interesting side note about shrinking margins is that studies have suggested that many sectors of the higher education market operate in an oligopolistic market. This may no longer be true for a larger swath of higher education because shrinking student markets and aggressive price competition indicate that higher education is losing market power and no longer can control pricing. The loss of market power is evident for private colleges with enrollments less than 2,000 students. The disconnect between tuition discounts and enrollment means that higher tuition discounts are going to offset the loss of revenue through higher discounts.
The business model for smaller, tuition-driven college is broken. They either must find new revenue streams or make huge cuts in their expenses. Even then, there are other factors, such as location of the college, accreditation restrictions, tenure structure, and other policies constrain major changes in a college. Broken business models will push many more colleges over the brink to oblivion.