LI's private colleges face declining revenue
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Long Island's tuition-dependent private colleges, facing tough economic headwinds, are under pressure to drastically change the way they do business.
Leaders at four-year, nonprofit institutions including Adelphi University, Dowling College, Hofstra University, LIU Post, Molloy College, New York Institute of Technology and St. Joseph's College said they are putting everything on the table -- budgets, operating models and programs -- while working to prove their value to prospective students and parents who are intensely focused on tuition costs and their "return on investment" in an uncertain job market for the graduates.
The schools must find revenue streams apart from traditional student tuition, offer courses that mirror the job market and hunt for new students outside the region, the college presidents and higher education experts agree.
The private schools face stiff forces in the higher-education marketplace, they say: stagnant or lower wages from the recession; a decline in the number of high school students in the Northeast; a greater awareness of student loan debt; fewer older students returning to school; competition from online programs; and costly infrastructure and technology upgrades.
"This is the most difficult era I've ever seen for private higher education," said Hofstra president Stuart Rabinowitz, whose time at the Hempstead university as a professor and administrator spans 42 years. "I think that there are private higher-ed schools that are in danger of not existing anymore if they don't change, and that schools are going to look differently than they used to look.
"As one person put it, 'Ten years ago, you never gave a thought to filling your classes. It was just thinking about quality. Now, every year you have to think about whether you are going to fill your class.' "
These private colleges are an important economic engine for the Island. The seven schools employed about 13,000 people, excluding vendors and other contract workers, according to a 2012-13 economic impact survey by the Long Island Regional Advisory Council on Higher Education. The schools' combined operating budgets then were $700 million, and together they planned nearly $445 million in capital projects through 2018.
While there still is great demand for undergraduate degrees and overwhelming evidence of the long-term gains for students attaining those and advanced degrees, experts said some private institutions are threatened in the current climate.
Unlike some institutions with centuries-old reputations that can turn away the majority of applicants, experts said, private schools with higher acceptance rates may be competing with each other for a dwindling pool of students -- many of whom are looking for the best deal.
Students and their parents likely have more leverage at these private colleges, particularly in the Northeast where there is a drop in college-age students and a healthy supply of schools, said David Hawkins, director of public policy research at the National Association for College Admission Counseling.
"The market is more crowded and the population has more choices," Hawkins said. "It's sort of like 'a buyer's market' in real estate."
Challenges force cost cuts
Today's realities mean the schools must lure students with deep discounts off the published tuition or "sticker price" -- a practice some analysts questioned as neither sustainable nor fiscally responsible when tuition is the primary revenue source and operating expenses continue to rise.
The average tuition discount rate has steadily risen, from 37.2 percent in 2000 to 45 percent in 2012, according to the most recent data available from the National Association of College and University Business Officers (NACUBO).
The percentages represent discounts given to first-time, full-time freshmen, as reported by colleges participating in the organization's tuition-discounting survey. Over the years, the majority of survey participants have been private colleges, including Hofstra and NYIT; some public schools are included.
At the same time, a NACUBO survey and a recent Moody's Investors report show that revenue from tuition at both private and public colleges nationally is declining.
"At some point, it will be unsustainable -- if we haven't reached that point already," said Kenneth Redd, director of research and policy analysis at NACUBO. "I wouldn't say you'll see wholesale school closures, but you'll see cost-cutting and more fundraising campaigns focused on scholarships and financial aid."
That is precisely what Long Island's private schools are doing.
Dowling College is among the most fiscally challenged. The small, liberal-arts institution has faced falling enrollment, rising debt, poor credit rating and unstable leadership. Since 2006, the college has had five presidents. Dowling eliminated staff positions, consolidated student housing and altered programs, among other cost-cutting measures. The school ended fiscal year 2013 with a surplus of $447,000, according to a recent report by the auditing firm KPMG.
"As of several years ago, the board of trustees knew that enrollment declines were on the horizon, and this, combined with the impacts of the recession, led to expected financial shortcomings," said Michael Puorro, president of Dowling's board. "But our carefully laid plans have brought us to a place where we are now showing a meaningful profit in our operations. Dowling is on the way up."
Norman Smith, the president who joined the school last June, has said he is meeting with potential donors, industry leaders and accomplished alumni to raise the school's profile. He hopes to market Dowling's low faculty-to-student ratio and bucolic waterfront campus in Oakdale to students who want a liberal arts education close to the internship opportunities of New York City.
Other schools have been forced to undergo belt-tightening in recent months.
Long Island University -- with main campuses in Brookville and Brooklyn -- laid off dozens of campus staff and made changes in top leadership roles.
The most recent report from Moody's Investors Service put LIU's credit rating at Baa3, just above junk bonds. The agency also issued a negative outlook report because of LIU's "softening enrollment and thin finances." New student enrollment was below that of the previous year, according to the report. Like most private colleges, LIU's operating revenue is 90 percent dependent on tuition.
LIU's new president, Kimberly Cline, who started at the end of last summer, has vowed to raise the school's credit rating, bring fiscal discipline and boost enrollment. The school's endowment is about $90 million -- which Cline said she hopes to double every five years -- and it has significant real estate holdings between its two main campuses, valued at $330 million.
Already, applications for this admission cycle are up because of intense recruitment in the high schools on Long Island and in New York City.
"It is like steering a battleship, not a speedboat," Cline said.
Other schools, such as St. Joseph's College, froze budgets and offered voluntary buyouts over the last year. St. Joseph's president, Sister Elizabeth A. Hill, announced plans to retire in June.
Administrators said they are more focused on fundraising now than ever before for capital projects and student scholarships. Last year, the school gave out $25 million in student aid. To be able to keep up the generous student financial aid packages, administrators plan to launch a major campaign for the school's 100th anniversary in 2016.
"Like all of the other colleges, moving forward we cannot look to tuition as our primary source of income," said Nancy Connors, vice president of institutional advancement. "We know we can't put the burden on our students. They just don't have it."
Keeping the sticker price from rising while offering financial aid and increasing revenue is the No. 1 hurdle Long Island private schools need to address, Adelphi University president Robert Scott said.
"There's a significant challenge with regards to disposable family income," Scott said. About half of Adelphi's roughly 5,000 undergraduate students come from families earning less than $60,000 per year, so increasing financial aid is a priority.
The administration has been mindful of staffing and is very cost-conscious, Scott said. Adelphi has not laid off staff but has asked employees to contribute more to their health-insurance coverage. The school also has fewer vice presidents than other universities of its size, he said, and any open staff positions are closely reviewed before a hire is made.
Even Hofstra, which has a strong credit rating three places from the top, with sound revenue and an endowment, plus investments worth $431 million, eliminated 12 clerk positions in its law school and changed the benchmarks for granting professors tenure, according to campus union leaders.
Rabinowitz said the university had to reduce staff at the law school because the enrollment target for the 2014-15 school year dropped from 300 to 250.
Compounding the fiscal problem, college leaders and some lawmakers said, is that federal financial-aid programs have either seen cuts or not kept up with the pace of inflation. That includes federal Work Study, the Supplemental Educational Opportunity Grant and the Pell Grant program, which is designed to defray the cost of college for low-income students.
"Frankly, they are in peril. These programs need to be protected but also expanded," said Rep. Tim Bishop (D-Southampton). "It would help every school, but it would particularly help the tuition-dependent schools because they face the largest gap in cost and student aid."
Offerings must change
The private colleges' leaders said they recognize that, in addition to cost-cutting, their institutions must keep pace with change, updating their programs and how they attract students. The financial challenges, cuts to federal student aid, and the creation of new benchmarks to gauge quality have private colleges retooling degree programs.
In answering the call of employers, state officials and President Barack Obama, the schools are undertaking a major and costly shift toward science and technology degrees.
"If you are offering a last-century curriculum and your faculty is using last-century methods, then that's not giving value," NYIT president Edward Guiliano said. "I can't see myself cranking out PhDs in English for a job market that doesn't exist."
Applications to NYIT for this fall are up 50 percent. Guiliano said the college is not freezing tuition or giving out any more financial aid than in the past, only promoting its strong focus on engineering and health professional degrees. Colleges with an enrollment of fewer than 3,000 students and a liberal arts bent will be in trouble, Guiliano believes.
Hofstra, known for its law, communications, education and social science programs, has repositioned itself over the last five years. The university is expanding its medical, engineering and health sciences schools.
LIU and NYIT have promoted degrees in growing fields such as genetic counseling and cybersecurity. Molloy College in Rockville Centre began offering a doctoral degree in nursing, expanding on one of its core disciplines, and a new MBA in health care.
Recognizing Long Island's tourism industry, St. Joseph's College last fall began offering a bachelor's degree in hospitality and hotel management, which will expand after the recent award of a $1 million state grant, officials said.
The schools also are putting coursework partially or fully online to reach more students and cut costs.
Online courses allow students from outside the commuter radius to enroll, save classroom space and answer the demands of nontraditional and older students. They also help fast-track undergraduates who want to take courses during winter and summer sessions.
In another recent push, local colleges are starting or growing their combined or accelerated undergraduate and graduate degree programs. The programs guarantee tuition dollars for the school while saving costs for the student, and graduates may be better positioned for a well-paying job.
The schools are forging better partnerships with employers and promoting their internship and co-op opportunities, as well as setting up campus business incubators, like one that recently began at LIU Post, where officials said they want students to begin thinking about a career starting in their freshman year.
"I don't think we are moving away from liberal arts. All we are doing is integrating what comes next while they are here," said Cline, citing the example of a performing arts student who would minor in business management.
Recruiting outside region
The anticipated drop in the number of college-age students on Long Island and throughout the Northeast over the next decade is a major concern for those in charge of enrollment at the private schools. Nearly all, however, are reporting a record number of applications for the current undergraduate admissions cycle.
Many private college administrators said they are looking to regions of the country with better population trends, such as the South and West.
Marketing and recruiting students internationally, particularly from Southeast Asia and Eastern Europe, has occurred for some time and is becoming even more robust. The international students aren't eligible for financial aid and often pay full tuition. The top international students, however, do get merit scholarships, college officials said.
And, amid efforts to cast a wider net for prospective students, there is concern about keeping natives of the Island here for their college years.
The private college leaders said they are signing agreements with Nassau Community College and Suffolk County Community College to ensure they get a steady stream of students. The agreements would ease the admission process and help make sure students don't lose credits when they transfer into four-year degree programs.
The local community colleges traditionally had fed students into the public schools -- Stony Brook University, Farmingdale State College and the College at Old Westbury.
Competition from lower sticker prices at state colleges and universities pose a significant obstacle for the private schools' admissions officers. To prospective students and families, they promote smaller classes taught by tenured professors, leafy campuses and student financial aid that could bring the cost of attendance down lower than that of state schools.
Schools such as LIU, NYIT and St. Joseph's College market their New York City campuses as well as those on Long Island. Adelphi recruits students to satellite sites in other locations. NYIT gives students the option of studying at one of their global campuses, located in China, Canada and Abu Dhabi.
Molloy College opened its first student housing in the fall semester of 2011 to allow for recruiting outside the commuter area. A second dorm building is slated to open this fall.
Drew Bogner, Molloy's president, and other leaders said the debate at the national level about whether attending college is a worthy investment can make their recruitment efforts more difficult.
While schools are rightfully being put to the test, he said, there's no numerical measure of the value of obtaining higher education, both for the personal experience and the potential for social and economic mobility.
"We are questioning something that has never been questioned in America before," he said.