Ricardo Azziz has held quite a few govt positions in increased schooling and led the merger that resulted in Georgia Regents College, now Augusta College. He’s principal at Strategic Partnerships in Greater Schooling, or SPH, Consulting Group.
He writes the common Merger Watch opinion collection on company restructuring in increased schooling.
The variety of institutional closures continues to extend, just lately occurring at a price of about one new announcement per week.
Per this pattern, the variety of increased schooling establishments that qualify for Title IV funds (in a position to obtain federal monetary assist, together with Pell Grants, on behalf of their qualifying college students) has declined considerably from 7,021 within the 2010–11 tutorial yr to about 5,500 faculties immediately.
That interprets right into a lack of some 1,500 establishments — or roughly one-fifth of all Title IV establishments of upper schooling since 2010.
Whereas a few of these establishments merged, SPH Consulting Group information signifies that many extra closed, together with after failed merger makes an attempt. This consequence happens a lot too actually because institutional leaders begin exploring main restructuring choices — together with mergers — too late, when most belongings and assets are exhausted. To emphasise some extent that I make usually: Mergers shouldn’t be thought-about the tactic of final resort.
Ricardo Azziz
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However just lately, as I converse with school leaders occupied with exploring strategic partnerships and mergers, what’s developing extra steadily is the added stress of the continued debacle surrounding the Free Utility for Federal Pupil Help.
To briefly recap, with the 2020 passage of the FAFSA Simplification Act, Congress required the U.S. Division of Schooling to make important enhancements in how federal pupil assist is awarded beginning with the 2024-25 tutorial yr.
The laws’s objective of simplifying the FAFSA kind was desperately wanted. As a mum or dad who needed to fill three of those out, and who’s under no circumstances undereducated, I discovered the shape terribly complicated, prolonged and troublesome to finish. Sure, the FAFSA wanted a serious overhaul.
The issue was that the brand new simplified FAFSA kind, which now was tied to IRS reporting, was merely not prepared for launch. High schooling officers have been warned in 2020 that the redesign can be time-consuming, a problem possible worsened by the ongoing workforce deficit on the division.
Amongst different points, this resulted in important delays in sending faculties FAFSA applicant information, which is important to forming monetary assist packages and admission affords. These points have resulted in a big decline in accomplished FAFSA purposes relative to final yr.
It’s not all unhealthy information, nevertheless. The Schooling Division has offered some $100 million for added assist to schools and universities in processing FAFSA purposes and for direct assist to college students and their households.
Nonetheless, for many of the faculties and universities that depend on Title IV applications, these points haven’t solely worsened the enrollment challenges they already face, but additionally created important uncertainty round which college students are eligible for these funds and for a way a lot — making monetary and budgetary projections even trickier than earlier than. Whereas all Title IV colleges are affected, the affect is far worse for smaller faculties, or exactly these establishments which are already endangered.
For instance, a larger share of scholars at establishments that closed between mid-2004 and mid-2020, have been receiving Pell Grants in contrast with these attending faculties that remained open, 54.7% versus 45.8%, in accordance with a report from the State Greater Schooling Government Officers Affiliation and the Nationwide Pupil Clearinghouse Analysis Middle.
In SPH Consulting’s personal evaluation, utilizing federal information from 2022, we noticed that the smaller the establishment the larger the proportion of full-time, first-time undergraduates that have been awarded Pell Grants. On common, Pell Grant recipients made up 61.2% of the scholar physique at faculties with fewer than 1,000 college students, in contrast with 35.3% for establishments with enrollment exceeding 20,000. Consequently, the affect of the FAFSA rollout missteps is hurting the smallest colleges probably the most.
Smaller faculties are likely to have bigger shares of Pell Grant recipients
Common p.c of full-time, first-time undergraduates awarded Pell Grants by school enrollment dimension
Many of those colleges are already extraordinarily fragile financially and even occasions which usually wouldn’t trigger a college to shut — say a ransomware assault or an unanticipated giant invoice due — can put them over the sting into insolvency.
These establishments should not have the extra assets to have the ability to underwrite surprising extra pupil assist if the ultimate FAFSA calculations don’t assist the federal assist anticipated or hoped for. And definitely, they don’t seem to be resilient sufficient to have the ability to climate additional declines in enrollment.
A latest calculation by Gary Stocker, founding father of the School Viability App and a fellow on the Middle for Mergers and Acquisitions in Greater Schooling, explored the potential affect of the FAFSA debacle on school funds.
Evaluation of a pattern of 549 non-public faculties from all 50 states which have been enrolling fewer than 1,000 college students indicated that even a modest 3% decline in tuition and charge income would lead to common losses topping $3 million per establishment in all however six states. Most smaller faculties would have hassle sustaining and compensating for this degree of loss.
One other nail of their coffin.
The present FAFSA scenario speaks — as soon as once more — to the pressing want for faculty and college govt leaders and governing boards to suppose proactively past the yr’s funds and be prepared to face the (principally ugly) information offered by 3- and 5-year projections.
They need to be prepared to significantly and intentionally think about main institutional restructuring, together with mergers, and overhauling their enterprise fashions — and to take action quickly, not incrementally.
There are solely so many extra nails that susceptible establishments of upper schooling can tolerate earlier than their coffin is totally nailed shut.
