In the wake of the recession, leaders at private colleges in Eastern Iowa say the long-term financial health of their institutions rests in part on boosting enrollment and increasing private fundraising.
Private colleges across the nation took hits to their endowments during the economic downturn, and presidents at several Iowa schools say they’ve finally climbed back to or near where they were before 2008.
“I think we are definitely seeing ourselves back on the track that we were on in 2008,” Cornell College President Jonathan Brand said. “We’re in good shape, but it’s still a fragile environment.”
Most private colleges are tuition-driven, meaning tuition funds most of the budget — upward of 85 percent at some schools — with the rest coming from endowments and fundraising.
Schools in need
The endowment investment funds of many colleges dropped by 25 percent to 30 percent in 2008 and 2009, as the economy faltered. Coupled with that was increased financial need of many students because of the economy, so schools were providing more aid.
Among the 27 members of the Iowa Association of Independent Colleges and Universities, none decreased the amount budgeted to financial aid during the recession that he’s aware of, association President Gary Steinke said. The colleges found other ways to cut costs, such as delayed building maintenance and campus upkeep, he said.
In the past year or two, many schools are seeing slight enrollment growth, Steinke said, and endowments are rebounding.
“I’m hearing very positive things in the last year that I didn’t hear in the past five or six years,” he said.
Coe College and Mount Mercy University, both in Cedar Rapids, were among schools that saw endowment growth in fiscal 2012, according to a national report. Coe’s grew 7.9 percent and Mount Mercy’s 7.4 percent, in a year when the national average was essentially flat, returning minus 0.3 percent.
As private college leaders look to the future, several said growing enrollment and raising more private dollars are keys to success.
At Mount Mercy, officials in recent years have let the tuition discount rise in a controlled way, with an expected increase of about 2 percent this year, President Christopher Blake said. The tuition discount is the average amount a college gives in aid; few students at Iowa private colleges pay the full sticker price, officials said.
Mount Mercy officials are trying to be more sensitive in financial aid decisions, Blake said, knowing enrollment is populated by many regional students who are often first-generation students or transfers from Kirkwood Community College.
Making sure low-income students can attend must be balanced with the college’s reliance on net tuition revenue for its budget, he said. Mount Mercy gives back about $8 million annually in student aid, with only about $1 million of that from the endowment, so the rest is from tuition revenue, Blake said.
“All institutions have to be thinking about financial aid and financial aid policies” after the recession, he said.
Fundraising has been scaled up at Mount Mercy, Blake said, aimed at projects like campus facility needs and a new graduate education center.
Coming out of the recession, private giving has been impacted, Coe President James Phifer said, with young alumni especially less able to donate due to the economy. Still, Coe recently finished a fundraising campaign that garnered a record $90 million, much of which will go to financial aid, he said.
The two biggest factors that will determine if a private college thrives in the changing higher education landscape are the size of the endowment and the size of the student body, Brand said, and Cornell College officials want to increase both. Cornell leaders are crafting a strategic plan that will include aggressive growth targets, Brand said. The college enrolls about 1,200 students, and he expects the goal may be in the 1,500 to 1,800 range.
Cornell has a budget of about $30 million, and on top of that, the financial aid budget is about $24 million, Brand said. Most students get aid from the school — more than 95 percent of them, he said — but there may be a future discussion about the average tuition discount level.
“It’s a real delicate balance. We don’t want to see it come down because we want to make sure our students can afford to come here,” he said. “But we’d love to see it come down because every dollar that we don’t need to use for financial aid we can use on salaries, we can use on course offerings, for off-campus study.”
After 18 months of discussion, Grinnell College’s board of trustees recently voted to retain its financial aid policies for now. A big part of that discussion centered on the tuition discount level, President Raynard Kington said.
More than 50 percent of Grinnell’s budget comes from the endowment, which at more than $1.3 billion in 2012 was the largest of any Iowa school. But Grinnell’s average tuition discount is 62 percent, among the highest in the country, Kington said.
“We have one of the largest endowments among peers, but when we looked at our net tuition revenue per student ... we were at the bottom of the list,” he said. “On one hand, it’s good to be known as a place that cares about providing opportunities to all students. The downside is this isn’t sustainable.”
The board voted to affirm commitment to need-blind admission and meeting 100 percent of a student’s demonstrated need, but also to conduct annual assessments of endowment performance, fundraising and net tuition revenues. The board will decide by fall 2015 if there is sufficient progress toward fundraising and net tuition revenue goals.
“We have to slow down and decrease our discount rate and increase our fundraising,” Kington said.