The confluence of economic, market technology, demographic, workforce and competitive forces are hitting higher education at relatively the same time. The solutions lie in unpacking each of these trends and looking at the root cause, impact and strategic solutions. As its name implies, Campus Innovations Group offers the skill, talent, experience and capital resources to partner with higher education to perform both comprehensive analysis and offer strategic funding solutions for the institution.
The Crisis
- The Great Recession changed the landscape of American higher education
Persistent high unemployment, an inability or unwillingness of consumers to sacrifice to meet educational goals for their children, the historic availability of state, federal, and private grants and loans, and the increasing variety of options offered through educational providers has shifted public perception negatively on higher education's "value proposition"
- Often, employers are focusing on "credentials" over "degrees"
Patterns of corporate support indicate disproportionate shifting to basic education, with post secondary support increasingly directed to two year "workforce preparation" programs in key areas like STEM disciplines and technical training
Print and social media, consumer groups and politicians reacting to polling negatively present the value of American higher education to families and potential students
For profit providers, on line education, and scrambling to offer new academic programming by traditional providers has broadened or increased but failed to differentiate product, and therefore, quality
The Financial Problem
- The comprehensive fee charged by American college and universities (tuition, fees, room, and board) has outstripped inflation by an average two percentage points annually
Sticker price - the advertised price paid by full-pay-students -- will approach $65,000 per annum at some institutions next year
The tuition sticker price does not cover the full cost of education, even when supplemented by revenue from auxiliary expenses, endowment, and fundraising, among other sources, that now approaches $100,000 per student per annum at most selective colleges and universities
Cash drawdowns from endowments, especially at complex large research universities, are heavily restricted by category and often disproportionately segregated for medical, business, law and other professional and graduate schools to the disadvantage of undergraduate students
Key research universities depend heavily upon government grants and contracts and are therefore subject to wild fluctuations in political climate and held hostage to national political stalemates and election cycles
Absent increases in the comprehensive fee, American colleges and universities must look to other sources: auxiliary revenue, fundraising, and bonds to meet operational and capital needs
Revenue from auxiliary enterprises, especially taken from depreciated dorms treated as "cash cows," has only delayed and masked the failure to develop an academic program that is supported through robust revenue growth
Fundraising, at all but perhaps 25 American colleges and universities, cannot keep pace with demands generated by rising labor costs, growing capital infrastructure deterioration, and government reporting mandates
Even the most successful fundraising programs often direct cash raised at restricted programs or schools that do nothing to strengthen institution-wide strategic goals
While endowments have recovered from the impact of the Great Recession, the draw down rate is largely funding existing priorities and not new experimentation and creativity
Endowments at most private colleges and universities are on average less than $25 million
Boards of trustees have limited the percentage of an operating budget that can be devoted to bond repayment, effectively capping bonds
Many colleges and universities are at the end of their bond capacity
Moody's and other credit raters are looking increasingly at the strength of management, key metrics like the level of net tuition revenue, fundraising, student persistence, and key outcome assessments to offer a negative outlook for many colleges and the higher education sector as a whole
There are quiet discussions among bond holders about whether they can force changes in management, programming, capital expenditures and maintenance by threatening to call full bond repayment on colleges and universities
Colleges and universities have been slow to look for experimental - including consortial - approaches to finance and refinance their enterprises
American higher education institutions have failed to adapt current business practices to post-Recession market conditions
Included in these practices is a thoughtful reexamination of how to use better underperforming assets, including academic program, real estate and energy, and technology