by Michael K. Townsley | Aug 29, 2026 | Private Colleges & Universities in Crisis
Recently the news was published that St. Michael’s College in Vermont has been authorized by the court to make withdrawals up to $30 million from its restricted endowment fund. This request followed a public notice from NEASC that the college was running dangerously low on cash.
According to President Richard Plumb, they had no other option but to request the court to authorize the withdrawal. Plumb stressed that without the extra cash the college faced a credible risk of being forced to cease operations.
Enrollment seems to be the culprit in the need for cash because it has fallen by nearly 45% over the past ten years. Given that tuition is a prime source of funds for tuition-dependent colleges, the enrollment collapses of this scale create a major financial risk for the college. As enrollment fell, the college began to report serial deficits, which are a warning sign of rising risk. Even though a large proportion of the college’s enrollment comes from outside the state, the nearest states have also been vulnerable to shrinking student pools. It should not be surprising that a college in Vermont is facing serious enrollment challenges because the New England region is the weakest when it comes to the size of the potential student market.
As a result, Moody’s credit rating service has downgraded it credit making it more expensive for the college to borrow from public lenders. This may explain why St. Michael’s chose to take money from the endowment fund rather that going after a loan from public lenders.
You would think that an elite college like St. Michael’s, a second-tier elite institution, would be a safe haven. However, as daily reports of colleges in trouble are showing there may be any safe havens except for the super wealthy institutions.
by Michael K. Townsley | Aug 29, 2026 | Private Colleges & Universities in Crisis
This blog will list several major threats to survival. Regrettably, I do not have any sure-fire solutions to these problems. May be my readers will have suggestions.
Problem #1:
State education agency dawdles on sending funds, even though the colleges is in compliance with the conditions of the funds. What do you do? Pull out all the political stops for a joint meeting with the governor and head of the state education department.
Problem #2:
You fail to meet a debt covenant condition because you have a deficit or you fail to meet the cash to debt service, and the bank immediately threatens to call the loan. Of course, the college does not have the funds to cover the call. What do you do? Does the college have any asset that can be sold immediately and cover the loan? If not immediately meet with the president of the bank to ask if the call can be negotiated. Do not waste time with a loan officer; they may earn incentive pay when a loan is called.
Problem #3:
Your cash forecasts shows that the college will not be able to cover its payroll or bills over the summer? What do you do? Let’s assume that you have at least a semester to solve the problem. First, cancel any summer programs that do not generate positive net revenue. Second, cancel all faculty or staff travel for whatever reason. Sell any unused or underused assets. Cancel or postpone all construction and maintenance projects. Ask board members if they know of any sources for a quick cash loan. Ask wealthy donors for a cash gift to carry the college over the summer.
Problem #4:
The severe cash problem described in ‘Problem #3 will probably continue through the start of the next academic year and grow even worse next summer. What do you do? The problem may be the one that forces the college to look for a mergers or takeover. The Chronicle of Higher Education says that a college in this state of deep financial distress may not be choosers. These colleges need to find anyone who will take them over including major liabilities. The best outcome is somehow the name of the college will be retained by the takeover college. Possibly, the later college will keep the name if the distressed colleges have any unique academic programs or they may keep the name in some other way. Regardless, under these conditions, the college must take immediate action.
Problem #5:
One or more donors are threatening to sue to have their gifts returned because of dissatisfaction with news about financial problems. What do you do? The best that you can do is meet with each donor and then with the donors as a group to explain plans to end the financial distress.
Problem #6:
Student attrition is increasing at dramatic rates because students are leaving after hearing rumors that the college will close and because they see deteriorating services. What do you do? You have to meet with student leaders, students by academic programs, and possibly have an open forum, although that can be risky in today’s political environment.
Problem #7:
Colleges often have made decisions in the deep past that come back latter to haunt a college. These decisions may include promises to: some graduates twenty years ago to cover the tuition of their children; athletes on a championship team deep in the past that when a new gym is built that it will be named after them, but when a new gym in built thirty years later, no one recalls the promise except for the few members of the team who are still living; major errors in accounting from the deep past that were not corrected at the time and new auditors insist that they be corrected in the current audit leading to a sizeable deduction in net assets; or donors that their gifts would be used for certain purposes, but no one made a record of the promise and the current administration needs to use the gift for immediate needs. What do you do? Since many colleges were not diligent in record keeping a presidents must insist on deep research to determine if some action in the past will have an adverse effect on the present. Unfortunately, since as noted, the promises were verbal and not recorded or financial records are inaccurate, there is only one rule – Honesty is the best policy. Under these circumstances, the persuasive powers of the president will be sorely tested.
by Michael K. Townsley | Aug 29, 2026 | Private Colleges & Universities in Crisis
The Public Agenda recently reported that many young men are more doubtful than young women of the value of higher education. The belief of these men who took the survey seems to rest on the contention that college is better suited for the needs of women. The survey cited in Public Agenda titled “Listening to Young Men” was conducted in November and interviewed 3,559 American adults aged 18 or older.
In addition, a large proportion of men and women taking the survey believe that the value of a college credential is less than it was a decade ago. Moreover, half of the men and 57% of the women said that college degree will be worth less in a decade. Furthermore, more that 50% of men and women see a college degree as a “questionable benefit”.
Given the imperfections of surveys, the findings fit the general impression of reports in the general media about young men and women in college. This data does not bode well for higher education. This finding implies that the prospective student market may believe that the investment is no longer possible, because the cost of a degree is so high and the income from a degree is so low that they cannot earn enough to justify the degree.
Higher education faces a real dilemma if the preceding suppositions have any validity. First, colleges are having a difficult time reducing the operational costs of producing a degree, and second, lowering the price of tuition through larger tuition discounts is not generating sufficient cash to support operation.
This survey is a quandary for presidents, chief financial officers, and especially chief marketing officers. How do you sell your college to your student market, when more than half of them do not believe that a degree is worth the cost.
Citation: The information for this report came from Steven Strategy’s Weekly Stats and Strategies on July 21, 2026. The report was reported by Sara Weismann (July, 2026) “Young Men’s Perceptions of Higher Ed”; Inside Higher Ed; Young Men’s Perceptions of Higher Ed.
by Michael K. Townsley | Aug 29, 2026 | Private Colleges & Universities in Crisis
This brief focuses on financial problems that make saving a college in deep financial distress. The challenge in these cases is that all the financial problems have to line-up and be resolved with the acquiescence of third parties, the willingness of the board of trustees and the faculty to support the changes. Support and lining-up the financial problems can result in delays and contradictory actions that may unsolvable.
Since the financial problems are often large, complex, and exceed simple solutions like cutting costs or raising money, the work of returning the college to a state of financial stability can exhaust the leaders physically and emotionally to the point that they may abandon the process.
Here are a typical set of factors must be resolved to end deep financial distress.
Debt – whatever form it takes, the problem with negotiating or eliminating debt depends on: purpose of the debt, the holder of the debt, scale of the debt, covenants, collateralization of the debt, debt rating of the college, and whether debt payments are up-to-date or delinquent.
- Purpose of the Debt – is the debt for residence halls, classrooms, sports facilities, or other types of facilities that do or do not generate revenue?
- Holder of the Debt – is the debt held by a local bank, a regional or national bank, a debt investment house, or a capital investor in a campus project?
- Scale of the Debt – does the debt represent a significant portion of assets, which represents to lenders, auditors, and debt rating services measures of the capacity to support the level of debt?
- Covenants – define the conditions that a college must follow to avoid the calling of the debt by the lender. Typical covenant measures include deficits, debt ratios, or adding new debt.
- Collateralization – is the percentage of college assets used to protect the lender if the college fails to make debt payment or the college closes or goes bankrupt. This constraint can severely restrict what the college can sell in the event of severe financial distress.
- Debt Rating – typically bond or credit rating agencies determine a colleges debt rating based on national standards or upon the set of other colleges that the credit agency rates. Low ratings besides increasing interest rates on new debt may make lenders reluctant to loan money.
- Delinquent Payments – is the college episodically delinquent or continuously delinquent in debt payments.
Financial Condition – this refers to the financial health of the college in terms of its budget, asset, liability, net assets, and cash.
- Budget Condition – does the college report deficits year-after-year suggesting that the college has a structural problem in its business model? For instance, the problem may be due to net prices shrinking to the point where very little cash is generated from tuition revenue. Or, the endowment draws and other revenue sources are too small to make up for the lost revenue and cash from net tuition. Then there is the very real problem that direct student expenses, in particular, student services and academic support is growing faster than net tuition revenue. Lurking at many private colleges – deferred maintenance – including safety on campus, infrastructure (buildings, heating and cooling systems) integrity, technology (hardware, software, security, and communications) keeping systems up-to-date and current with the market.
- Assets – is the endowment keeping pace with financial markets and are student receivables net of uncollectible student debt increasing because payments are not being made, which means that they are not being efficiently converted to cash, and is the real value of the plant declining because of deferred maintenance, which reduces the capacity of assets to support more debt? Has collateralization reached a point where there is insufficient asset capacity to support more debt?
- Liabilities – is the college borrowing more funds using short- and long-term debt to cover operational costs and does the college have the means to keep debt payments current?
- Net Assets – are net assets shrinking due to deficits and increasing debt?
- Cash – remains king and must be sufficient to cover operations. If cash reserves are shrinking and cannot be replenished from either short-term loans or endowment draws, then the grand circle of structural deficits, over collateralized assets, and spiking debt make it difficult to break the cycle of the depletion of cash reserves?
Financial Drivers – include enrollment, compensation, ratios or rubrics for estimating the number of positions needed, and the labor market that shapes student decisions.
- Enrollment drives revenue and expenses at most colleges. The problem is that as the demographic cliff steepens and revenue slides, expenses do not fall at the same rate because nearly all college expenses are fixed rather than variable. As a result, as enrollment and revenue shrink, expenses move down in a discordant step-down fashion.
- Compensation typically encompasses 70% of total expenditures and is fixed by contract, policies, or government regulations. However, it drives the amount of revenue needed to cover compensation expenses. It also affects the amount of plant needed to house the assigned space of employees, classrooms, labs, and athletic facilities.
- Ratios and Rubrics – are values that colleges and universities use to estimate the number of administrative, faculty, and staff positions that are needed.
- Labor Market Conditions – affects student choice about going to college, what to take at college, and the amount of debt that they are willing to incur.
This list is not intended to be a full catalog of all factors that make ending financial distress difficult. While these factors will be different for each institution, presidents’ musts understand the specific factors that determine the cause of their college’s financial decline and must also understand what factors must change and how to change them to return to financial health.
by Michael K. Townsley | Jun 9, 2026 | Private Colleges & Universities in Crisis
Many presidents of private colleges and universities recognize that the demographic cliff, changes in student preferences for degree programs, shrinking donations, and closer auditing by the government could severely damage their institution. However, it seems that a large number of presidents sincerely believe that they can meet the challenges by growing enrollment and increasing donations. This is a massive non sequitur, and therefore is not a rational response to imminent and destructive events that will place unbearable financial stresses on most private colleges and universities.
Unfortunately, impartial observers can only wait and hope that these presidents will see that they are living on the edge of a calamity and have the time to respond. Time is everything as known events unfold and push private colleges into deep financial distress.