Private Colleges Cry "Help!"

Fewer kids, higher costs spur a scramble for funds

It might have been a scene from the activist 1960s. State police were called out to prevent violence as angry students jeered after being ordered to leave the premises. But unlike the protesters of the Viet Nam days, the demonstrators who struck last month at tiny Windham College in Putney, Vt., were battling to keep their school open, not close it down. They failed. After a long period of financial scrambling, the once prospering 27-year-old school was some $6 million in debt and unable to pay salaries or even its heating bills. Enrollment at the modern campus, designed for 1,000 students and built at a cost of $10 million at the height of the educational splurge of a decade ago, was down to 260. Lamented the financial vice president, Herbert Flaig: "We have lost a battle, and the fall has not been easy."

Windham's fall is scarcely an isolated case. For America's 1,500 private colleges, the 1970s have proved as much a time of retrenchment in higher education as the 1960s were a period of headlong expansion. Ten colleges shut their doors in 1978, bringing the total of closings for the decade to 129, more than double the number of new colleges that have opened. The campus kill ratio seems sure to soar in the years ahead. A Carnegie study predicts that as many as 300 institutions will vanish through the 1980s. Some educators expect an even greater number to lose their present identity through mergers and drastic cutbacks in the range of courses they offer, as well as outright bankruptcies. "One way or another," says Dartmouth President John G. Kemeny, "if present trends continue, about half of them are going to go out of business."

Why is the outlook especially glum for private colleges? A chief reason is that they must compete with public colleges, which get regular subsidies from state governments to keep tuition low. The average yearly private-college tuition is now $2,970 (not including room and board), compared with public-college tuition of $600. And there is pressure on the private schools to continue raising fees, since tuition now pays for less than half of a private-college education; gifts, endowments and Government grants must make up the difference. At Harvard, tuition, room and board charges have risen this year to $7,500. Others in the nation's most expensive five: Bennington, $7,540; Yale, $7,500; Massachusetts Institute of Technology, $7,440; and Sarah Lawrence, $7,440.

It's very hard to sell at a fair price what's being sold down the street for 25% of cost," says Peter Armacost, president of Florida's Eckerd College, a 911-student private school. Adds Stanford President Richard Lyman: "At some point, and I don't know where that point is, it will no longer be a rational decision to attend a private institution, regardless of the value of its education."

Economists argue that private colleges are as affordable as ever, since aftertax income has risen as fast as tuition, or faster. Yet by that reckoning, public colleges are a bigger bargain than ever, since the gap between public and private student tuition has grown from $416 yearly in 1956 to more than $2,000 today. The four-year premium for a private B.A., a sum approaching $8,000, is large indeed.

Yet, while private colleges are in danger of overpricing themselves, they have still not raised tuition fees enough to cover the impact of inflation. The University of Chicago, for example, first chopped its operating budget by 10% in 1970; today, despite rising tuition, Chicago continues to allow its faculty to shrink through attrition by 1% to 2% per year. Nearby Northwestern University lost $1 million last year, and expects a similar shortfall this year. Yale's 1978 deficit was $2 million. Dallas' Southern Methodist University is wrestling with a cumulative deficit of $6 million. "We're caught between the goddam rate of inflation and the miserable performance of the stock market," says University of Chicago Provost Gale Johnson. "Our costs go up, and our endowment goes down. It's a vicious crossfire, and I don't see an end to it."

At the big and famous schools, the shocks have been cushioned somewhat by hefty endowments and hordes of solicitable alumni. "It's not as if 100 Princetons have closed," notes Vanderbilt Chancellor Alexander Heard, referring to the schools that have gone down the drain in the past several years. In gravest danger are the small, unselective liberal arts schools: with tiny endowments and few Government research grants, they lean on tuition for 80% or more of their revenue. Unfortunately for them, that prop will soon begin to wobble. With the great postwar baby boom petering out, the number of 18-year-olds in the U.S. population is about to decline sharply. The crop should peak at 4.3 million this year, then drop annually, falling a total of 25% by 1992. Notes Harvard President Derek Bok: "The institutions that closed in the past few years did so without the impact of the decline in enrollment. The decline will provide much more serious pressure on closings in the next generation."

Predictably, private colleges are trying to beef up endowments and other non-tuition income. For many, the paradigm is Stanford, which in 1977 completed a five-year campaign that raised $304 million--then a record for private institutions. Almost all of the larger schools seem to be planning or conducting the biggest fund drives in their history. Harvard College plans to launch a campaign this summer whose goal is likely to be at least $200 million and which will be coordinated by 100 paid staffers. The half-dozen most ambitious drives currently under way (see box) are seeking a combined total of $1.56 billion.

One of the most prominent is Yale's struggle to raise $370 million. Last December, one year after the cutoff date Yale had originally announced, the school had succeeded in topping Stanford's record by pulling in $316 million, but Yale officials were disturbed at being so far short of their goal. The chief problems: the unsettling mid-campaign departure of President Kingman Brewster, and overreliance on volunteer solicitors (more than 5,400 of them). Though 44 contributors pledged $1 million or more (biggest single gift: $15 million from New York Publisher-Philanthropist John Hay Whitney), there were fewer fat-cat givers than had been expected.

Yale officials sunnily maintain that they will eventually meet their $370 million goal by June as contributions dribble in. But to their dismay, operating costs have risen so sharply that they now estimate they will need an additional $50 million a year in the future. Says the Yale drive's executive director, Terry Holcombe: "We've learned that we can't retreat to a peacetime posture between drives."

Other institutions are facing powerful inflationary pressures. Stanford's annual energy bill rose in three years from $1.6 million to $3.9 million; similar increases have hit the University of Southern California, which is one of Los Angeles' top ten electricity consumers. At Illinois' Northwestern, many buildings are left unheated on evenings and weekends in midwinter. "We'll issue sweaters," gibes Vice President Lee Ellis. Then he adds: "No. We can't afford sweaters. We'll issue a memo telling people to wear sweaters."

Like private industry, the private colleges also complain about the costs of compliance with Government regulations, which affect hiring, facilities for the handicapped, and other areas. The Library of Congress recently counted 439 federal statutory agencies with some jurisdiction over higher education.

Says Vanderbilt's Heard: "Fifteen years ago we did not have a lawyer on the staff. Now we have three full-time attorneys and a heavy outside legal bill." Notre Dame's president, the Rev. Theodore M. Hesburgh, adds: "Every time the Federal Government comes up with a bright idea for a new regulation it helps run our costs up through the ceiling." Hesburgh, a former chairman of the U.S. Commission on Civil Rights, joins many of his peers in criticizing the federal push toward minority faculty hiring: "There are so few that we end up bidding against each other to recruit them. It would be far more sensible to start out by trying to increase the pool of minorities and women qualified for these jobs." Chicago's Johnson frets that Congress's move to defer mandatory retirement age to 70, beginning in 1982, will prevent Chicago from hiring 100 new assistant professors during the following five years. Says he: "It's going to turn every school into more of a geriatric ward, and that is not good for higher education."

Others agree that the financial pinch threatens the quality of college faculty. Current national studies show that faculty-student ratios have remained fairly constant at 15 to 1 in private colleges, but Harvard's Bok fears that continuing cutbacks in new faculty job openings will have a disastrous long-term effect. Says he: "We are threatened with the loss of a whole generation of able faculty members."

As the present decade of fiscal woe began, most college leaders were wrapped in a hazy optimism. Enrollments were soaring, new buildings sprouted everywhere, and Ph.D.s were produced by the carload. As a result, the shocks of the '70s hit the schools like a scale8 earthquake. Says University of Chicago Sociologist Edward Shils: "We went mad over higher education. Giving every teen-ager an opportunity to go to college became a mark of American grandeur in the world. It was a silly delusion." Northwestern's Ellis puts it more simply: "We let ourselves get fat." Sound management principles were ignored. Argues Sumner G. Rahr, a fund-raising consultant: "The businessmen on college boards didn't apply tough financial standards at board meetings. They figured, 'Oh, the nuns will come through again,' or 'Old Mr. Chips will bail us out.' "

Now, after almost a decade of trimming fat--mowing the lawn less often, deferring painting and plastering, scrapping expansion plans, reducing support staff--private colleges face the prospect of still deeper cuts. Notes Notre Dame's Hesburgh: "The situation is all the more dangerous because it is a slow-burning crisis that could gradually erode the financial health of many institutions before the country wakes up to the problem."

At Ohio's Oberlin, for example, officials have already slashed $1.2 million from yearly administrative budgets. In their cost-cutting zeal, they have even inserted small plastic discs in shower heads to conserve water. What if the school still fails to reach financial equilibrium? Says President Emil Danenberg: "If we have to make any further cuts, we will eliminate an entire academic department rather than continue trimming away. We have decided it is more important to preserve quality than quantity."

If departments, and even entire colleges, begin to drop like apricots, many will be scooped up by public schools, especially the small community colleges. These too overexpanded recklessly during the 1960s, but, at least until now, they have been protected by ever-increasing public subsidies. Competition from new branches of the University of Maine, for example, led to the closing early last year of Ricker College in Houlton, Me. In Dallas, the well-regarded night-school classes of Southern Methodist University once accounted for 35% of S.M.U.'s enrollment; with seven new community colleges in the area, that part-time enrollment now accounts for only 13% of the total.

In the scramble to stay afloat, some private colleges are looking to newly liberalized federal student aid programs. Federal tuition grants, which students can use at either public or private colleges, are available to families with incomes as high as $25,000, up from $15,000 in past years. Through these and other grant programs, public funds already represent 35% of private-college revenues; given Washington's current tight-fisted mood, the percentage is not likely to increase by much. That suits some educators, who believe public support is already so high that it threatens the independence and experimental freedom of private colleges.

For schools that lack large endowments and openhanded alums, the main alternative is aggressive sale of their wares to new groups of students. New York's 21,500-student Pace University, which has flourished to the point of gobbling up the campus of defunct Briarcliff in Westchester County, specializes in courses and classroom hours tailored to the need of working adults. With a similar adult-education program, the National University of San Diego, where the average age of students is 30, has grown in seven years to a 15-acre downtown campus and an enrollment of 3,400. At a well-promoted $60 per credit point, New York's Mercy College has rented space for adult education in a busy Yonkers shopping center; Mercy also has a branch 1,300 miles away in Miami's "Little Havana," where bilingual courses are taught. Says a school spokesman: "We build approaches to possible courses as one would market a product."

Others look to enrollment of foreign students, especially oil-rich Middle Easterners, to supplement their student body. Fully 17% of the students at predominantly black Huston-Tillotson in Austin, Texas, are Iranian. The late arrival and slow tuition payment of an expected 150 new foreigners triggered the bankruptcy last month at Vermont's Windham.

There are those who see the private-college crunch as a blessing in disguise. Says the Rev. Paul Reinert, chancellor of St. Louis University: "Private education should grow a little leaner." Perhaps it should. But then too, the public system has overbuilt and overborrowed as well. If the private schools suffer most as the fiscal crisis deepens, that will be a consequence no one intended. The nation's large--and often excellent--public system was designed, after all, to supplement the private colleges, not to supplant them.

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