Dive Brief:
- Iowa Wesleyan University, a private nonprofit liberal arts institution, announced Tuesday it would close at the end of its academic year in May.
- The 181-year old university attributed its demise to “a combination of financial challenges,” including inflation, changing enrollment trends, a major decline in donations, and the state’s governor rejecting a proposal to use a share of federal coronavirus aid money to sustain the long-beleaguered institution.
- It has arranged transfer options for students, called teach-out plans, with several Iowa colleges, among them William Penn University, University of Dubuque and Upper Iowa University. Officials said the university enrolls more than 850 students.
Dive Insight:
For years, Iowa Wesleyan, in Mount Pleasant, has tried to stave off closure amid tough financial straits. In 2018, the university mulled shutting down as it needed millions of dollars just to make it through the spring term.
It ultimately was spared, in part due to taking out a loan with the U.S. Department of Agriculture. It secured the financing through a USDA program authorized by a federal law, the Rural Development Act of 1972. The law enables the agency to lend money to “community facilities” considered essential, like those for healthcare or higher education.
It currently owes the department more than $26 million.
Two years later, Iowa Wesleyan tried to partner with a Florida institution in a path to financial salvation. However, the deal fell through, as Saint Leo University became leery of Iowa Wesleyan’s significant debts.
Now, Iowa Wesleyan has run out of options.
“Like many colleges and universities nationally that have recently announced closure, IW has been confronted with many headwinds including increasing operating costs, declining numbers of high school graduates nationally and insurmountable inflationary pressures,” Robert Miller, chair of the university’s trustee board, said in a statement. “We have worked tirelessly to find solutions at all levels but to no avail.”
Iowa Wesleyan had asked Republican Gov. Kim Reynolds for $12 million from federal coronavirus aid.
However, in a statement Reynolds said her office had only received the request Feb. 3. After the state hired an accounting firm to examine Iowa Wesleyan’s finances, it found the USDA loan could be called in as early as November of this year, Reynolds said.
Iowa Wesleyan’s own auditor said the university faced “significant operating losses and reduced liquidity,” according to Reynolds.
The hired accounting firm determined one-time federal funds could not fix systemic financial issues plaguing the university, Reynolds said.
“If the state would have provided the federal funding as requested and it was used to finance debt or other impermissible uses according to US Treasury guidelines, the state and taxpayers could have been liable for potential repayment to the federal government,” she said.
The USDA will become responsible for Iowa Wesleyan’s campus once it closes, the university said. Its average net price — what students pay after accounting for all financial aid — was $34,988 for full-time undergraduates in the 2020-21 academic year, according to the most recently available federal data.
