by Michael K. Townsley | Jun 9, 2026 | Private Colleges & Universities in Crisis
What is breathing room? It is simply the amount of cash needed to survive for one year, in particular enough cash to make it through the summer months. How does breathing room disappear here are the baker’s dozen ways:
- Borrowing to the point that all the property and buildings are 100% collateralized leaving no capacity to borrow money in an emergency.
- Waiting too later to cut expenses when expenses grossly exceed net revenue
- Raising tuition discounts (unfunded financial aid) to the point where the college receives only pennies on the dollar from tuition revenue.
- Losing the opportunity to add new revenue generating programs because there is insufficient cash to pay for the start-up.
- Delaying faculty buyouts, in particular tenured faculty, until there is not enough cash to pay for the buyouts.
- Continuing to enroll students in programs that do not produce enough revenue to cover the cost of the program or overhead.
- Postpoing negotiations with a lenders until the college has lost any leverage with lenders to either restructure debt or permit the college to delay interest payments several years.
- Over invest in private equity, which do not have an active market because they are not easily sold to generate cash. Some private equity positions, if closed early, could result in losses of more than 50% of the original cost.
- Carrying administrators who do not have the skills to do their work. This is particularly devastating when the borderline competent administrators are chief financial officers or the chief marketing officer.
- Failing to monitor average class sizes with the result that small classes do not cover the cost of the faculty.
- Deferring until too late the termination of academic programs tin which the revenue generated does not cover their direct costs or make any contribution toward administrative expenses.
- Keeping buildings open, in which they have large amounts of unused space or in the case of residence halls, they are short the number of residents needed to cover operating expenses and debt service.
- Keeping recruiters and gift officers, whose efforts fail to cover their pay.
by Michael K. Townsley | Jun 9, 2026 | Private Colleges & Universities in Crisis
When a college is entering deep financial distress, there is one question that the president needs to answer – how many administrators and staff are needed to run the college. This administrative model has guided colleges for generations – a chief administrator is needed for every department and the department needs as many staff as the administrator claims to be needed to do the work of the department. However, in times of deep financial distress, this model is no longer workable. Here are several suggestions on downsizing an administrative structure. These suggestions will substantially increase the workload of those administrators or staff who remain, but the reductions must happen for the college to survive. There are several more points at the end about what to cut during a period of deep financial distress.
- Dismiss the position of the Chief Academic Officer. The president should be able to do the work of the Chief Academic officer.
- Dismiss the positions of assistant academic department administrators and staff. Academic department heads should be able to the work of their subordinates.
- Retain only the Development Officer, all other administrators and staff should be dismissed.
- Are all revenue centers – residence halls, dining halls, bookstore, athletics, and any other revenue center producing net positive revenue after the allocation of fixed costs? If a revenue center is not producing net positive revenue contributor, contract it out or close it.
- Retain only one administrative officer as head of all non-academic revenue services. As long as the college has a sport program, it will need to keep the athletic director. Preferably, the athletic director should coach one of the sports.
- End all free items for new and current students because these costs can result in large expenditures.
- End internal mail delivery services, the departments should pick up their own mail.
- Replace the head of building and grounds with a hands-on worker, if the current head can do the work, keep the person. Eliminate remaining maintenance staff. Keep only one member of the ground staff to handle grass cutting, trimming and snow removal. Only emergency repairs should be made.
- Revise expensive benefits by requiring larger contributions for health insurance, reduce or eliminate the contribution to retirements accounts, and reduce or eliminate any other employee benefits that require cash payments.
- Replace the Chief Financial Officer with a Chief Accountant. Eliminate all other financial and office positions except for the Bursar and Payroll.
- All expenditures no matter how trivial must be approved by the Chief Accountant. Anyone who makes a purchase that violates this directive will be responsible for the cost or will have to return the purchase.
- Can the CIO run basic operations with just one assistant? The CIO should find the least expensive phone and internet service for the colleges.
- Only offer summer courses and programs, if they generate sufficient net positive revenue to cover fixed costs.
- Cancel or postpone all construction.
- Stop all travel except that needed to save the college.
The Big Rules
Economize, Save Cash, Look for New Sources of Cash