Dive Brief:
- According to a recent Moody's analysis of private colleges, 70% of the wealth in higher ed is concentrated between 20 institutions, while most others continue to struggle with declining revenues and negative investment returns.
- Nearly one-third of small colleges across the country were operating in the red in fiscal 2016. This number represents an increase from 20% three years ago, and shows a steep contrast to large institutions, which saw a decline in institutions facing operational deficits from 20% to 13% in the same period.
- Expense growth is outpacing revenue growth, though by small margins, while the median return on cash and investments last fiscal year was -1.8%.
Dive Insight:
A second report released by the investor's service revealed that increasing pressure on institutions to keep tuition low — and, in many states, caps on tuition increases — will be a continual challenge for a sector which derives over 75% of its revenue from student tuition and fees. A focus on recruitment and enrollment is important, but a dwindling feeder population and market saturation mean leaders have to find ways to be less reliant on tuition dollars to keep the doors open, while simultaneously focusing on retaining the students they do have.
And though private philanthropy is on the rise, many of those gifts are concentrated at the top, with 20 of the top brands receiving a majority of the large gifts for endowment-growing and operational and cash flow purposes. The larger, wealthier institutions have done a better a job of diversfiying revenue streams and being less reliant on student fees. And smaller institutions with large endowments have been able to draw from their endowment revenue to stay afloat.
But for the smaller institution with low endowment pools — often, these are the institutions which serve the greatest proportions of minority, low-income and first-generation students — this means more must be done to cultivate a greater number of small gifts and diversify revenue streams.
From real estate developments to finding ways to attract businesses to campus or partner with industry to compensate for cash flow gaps, campus leaders are getting more and more creative to solve the problem. But many are still missing what is perhaps low-hanging fruit: using social media to engage young alumni and influencers who could leverage their networks for the benefit of the institution.