Ricardo Azziz has held quite a few government positions in larger training and led the merger that resulted in Georgia Regents College, now Augusta College. He’s principal at Strategic Partnerships in Larger Training, or SPH, Consulting Group.
He writes the common Merger Watch opinion sequence on company restructuring in larger training.
The variety of institutional closures continues to extend, not too long ago occurring at a charge of about one new announcement per week.
In keeping with this pattern, the variety of larger training establishments that qualify for Title IV funds (capable of obtain federal monetary help, together with Pell Grants, on behalf of their qualifying college students) has declined considerably from 7,021 within the 2010–11 educational 12 months to about 5,500 schools right now.
That interprets right into a lack of some 1,500 establishments — or roughly one-fifth of all Title IV establishments of upper training since 2010.
Whereas a few of these establishments merged, SPH Consulting Group knowledge signifies that many extra closed, together with after failed merger makes an attempt. This final result happens a lot too actually because institutional leaders begin exploring main restructuring choices — together with mergers — too late, when most belongings and sources are exhausted. To emphasise a degree that I make typically: Mergers shouldn’t be thought-about the tactic of final resort.
Ricardo Azziz
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However not too long ago, as I communicate with faculty leaders taken with exploring strategic partnerships and mergers, what’s arising extra regularly is the added stress of the continuing debacle surrounding the Free Utility for Federal Scholar Help.
To briefly recap, with the 2020 passage of the FAFSA Simplification Act, Congress required the U.S. Division of Training to make vital enhancements in how federal scholar help is awarded beginning with the 2024-25 educational 12 months.
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 not at all undereducated, I discovered the shape terribly complicated, prolonged and troublesome to finish. Sure, the FAFSA wanted a significant overhaul.
The issue was that the brand new simplified FAFSA kind, which now was tied to IRS reporting, was merely not prepared for launch. Prime training officers had been warned in 2020 that the redesign can be time-consuming, a difficulty possible worsened by the ongoing workforce deficit on the division.
Amongst different points, this resulted in vital delays in sending schools FAFSA applicant knowledge, which is essential to forming monetary help packages and admission provides. These points have resulted in a big decline in accomplished FAFSA purposes relative to final 12 months.
It isn’t all unhealthy information, nevertheless. The Training Division has offered some $100 million for added help to schools and universities in processing FAFSA purposes and for direct assist to college students and their households.
Nonetheless, for many of the schools and universities that depend on Title IV packages, these points haven’t solely worsened the enrollment challenges they already face, but additionally created vital uncertainty round which college students are eligible for these funds and for the way a lot — making monetary and budgetary projections even trickier than earlier than. Whereas all Title IV colleges are affected, the influence is far worse for smaller schools, or exactly these establishments which can be already endangered.
For instance, a larger share of scholars at establishments that closed between mid-2004 and mid-2020, had been receiving Pell Grants in contrast with these attending schools that remained open, 54.7% versus 45.8%, based on a report from the State Larger Training Government Officers Affiliation and the Nationwide Scholar Clearinghouse Analysis Middle.
In SPH Consulting’s personal evaluation, utilizing federal knowledge from 2022, we noticed that the smaller the establishment the larger the proportion of full-time, first-time undergraduates that had been awarded Pell Grants. On common, Pell Grant recipients made up 61.2% of the scholar physique at schools with fewer than 1,000 college students, in contrast with 35.3% for establishments with enrollment exceeding 20,000. Consequently, the influence of the FAFSA rollout missteps is hurting the smallest colleges probably the most.
Smaller schools are likely to have bigger shares of Pell Grant recipients
Common % of full-time, first-time undergraduates awarded Pell Grants by faculty 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 massive invoice due — can put them over the sting into insolvency.
These establishments shouldn’t have the extra sources to have the ability to underwrite sudden further scholar help if the ultimate FAFSA calculations don’t help the federal help anticipated or hoped for. And definitely, they aren’t resilient sufficient to have the ability to climate additional declines in enrollment.
A current calculation by Gary Stocker, founding father of the Faculty Viability App and a fellow on the Middle for Mergers and Acquisitions in Larger Training, explored the potential influence of the FAFSA debacle on faculty funds.
Evaluation of a pattern of 549 non-public schools from all 50 states which had been enrolling fewer than 1,000 college students indicated that even a modest 3% decline in tuition and price income would lead to common losses topping $3 million per establishment in all however six states. Most smaller schools 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 government leaders and governing boards to assume proactively past the 12 months’s finances and be keen to face the (largely ugly) details offered by 3- and 5-year projections.
They need to be keen to noticeably 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 training can tolerate earlier than their coffin is absolutely nailed shut.
