Piedmont Is in for Some Very Tough Times
Inside Higher Ed, Liam Knox
Piedmont University provost Daniel Silber resigned abruptly this week to protest proposed budget cuts and faculty layoffs, which he called “morally wrong.”
Piedmont University provost Daniel Silber resigned abruptly on Tuesday in protest of proposed budget cuts and faculty layoffs, which the Board of Trustees was set to vote on this week.
In a highly critical email to colleagues announcing his departure, Silber wrote that the proposed budget cuts—which would be the second round this year—were “morally wrong” and that the budget process “failed to be properly inclusive.” He also argued that notifying faculty that they were being let go after the end of the academic year didn’t give them enough time to find new employment for next semester.
“I refuse to be a party to terminations that are carried out in such an unethical manner,” wrote Silber, who also served as senior vice president for academic affairs. “Now that this draconian measure is being implemented, I have no moral choice but to leave the institution.”
Representatives from the university in Demorest, Ga., declined to comment for this article.
Steve Nimmo, dean of the school of arts and sciences, will take over as vice president for academic affairs on an interim basis. Piedmont has yet to name an acting provost.
Silber’s resignation comes just a month after the Piedmont Faculty Senate issued a vote of no confidence in university president James Mellichamp, in part over “mismanagement” of the school’s finances and a lack of budgetary transparency, according to the faculty resolution. The Board of Trustees dismissed the faculty call for Mellichamp’s resignation, expressing “complete confidence” in the president.
Piedmont cut 8 percent of its faculty in February and has yet to give any of its current faculty contracts for next academic year.
‘Very Surprising,’ but ‘Not Unexpected’
Dale Van Cantfort, a communications professor and the chair of Piedmont’s Faculty Senate, said he was “very surprised” by Silber’s resignation. He’d met with the former provost just 48 hours before his resignation and had no idea he was considering leaving.
But while the abrupt nature of the resignation took him aback, Cantfort said he agreed with many of the frustrations Silber voiced in his email.
After a meeting to discuss the initial round of budget cuts in February, Cantfort said, administrators promised there would be no more faculty reductions. But in April, the Board of Trustees rejected the budget that Mellichamp submitted for the coming academic year. Mellichamp announced that further cuts would have to be made—including 15 additional faculty positions.
“We are approximately two months away from the fall semester,” he said. “Telling a longtime faculty member, ‘You don’t have a job’ and leaving them with no hope of finding one for next year because everybody has already filled their positions, I think that is not morally defensible.”
Cantfort said that through negotiations with senior administrators, he and other faculty members managed to reduce the number of positions to be cut in the proposed budget submitted to the board Thursday from 15 to four. The board has not yet voted on that budget.
Brian Mitchell, a former president of Bucknell University and co-founder of Academic Innovators, a higher education solutions company, said that while provosts often part ways with their institutions over disagreements, the suddenness of Silber’s departure, as well as the grievance-filled email that accompanied it, is extremely rare—and could do even more damage to the institution.
“If you’re trying to protect the institution, you need to ask, what impact does this have, for example, on deposits or enrollment?” Mitchell said. “If I were faculty, I would certainly applaud it, but within the broader context of the world in which we live, it probably didn’t help Piedmont at all to be presented in this way.”
‘Mismanagement’ and Poor Communication
In an email to faculty and staff on June 8, Mellichamp pushed back on the picture Silber painted in his resignation email, pinning the university’s budget shortfall on external circumstances.
“Our budget has been impacted by the pandemic, declines in graduate enrollment, volatility in the stock market, and overall economic uncertainty weighing on prospective students and their families,” he wrote. “Under these conditions, we have had to make difficult decisions as we chart the institution’s path through the pandemic and beyond.”
But Cantfort said Mellichamp’s justifications are only a small part of the story behind Piedmont’s financial troubles, which he said stem from mismanagement by administrators and the board.
“This is not because of the pandemic,” Cantfort said. “The finances of the school have not been handled properly for the past three years. Because of that, we find ourselves in a difficult financial situation, and the administration wants to balance that budget by eliminating faculty positions.”
In their no-confidence resolution, the Piedmont faculty cite unforced budgetary errors and expanded “real estate ventures” as reasons for the budget shortfall.
According to the resolution, Mellichamp and other senior administration knew about the university’s “dire financial situation” for many months before faculty were made aware. Cantfort said this lack of communication is part of the problem that led to both the no-confidence vote and Silber’s resignation, and that the continued uncertainty has led remaining faculty members to consider looking for other work pre-emptively.
“I’ve got a number of faculty members who tell me they are actively searching, because they don’t want to be left in the lurch,” Cantfort said. “It is not good news for the university that we’re in this situation … Every day that this drags on there’s the potential we lose good faculty members.”
Mitchell said the saga at Piedmont—from the initial budget cuts to the vote of no confidence to Silber’s resignation—points to a failure of communication among the Board of Trustees, the senior administration and the faculty.
“The real story here is about shared governance,” Mitchell said. “For a college or university to succeed, there has to be a synergy among the three groups, there has to be transparency and there has to be a willingness to engage in a dialogue that doesn’t turn public and ugly. And it looks like Piedmont failed on all those counts.”
Barbara Gitenstein, senior vice president of the Association of Governing Boards and a former president of the College of New Jersey, said that as the liaison between the Board of Trustees and the university’s internal constituents, senior administrators are responsible for informing stakeholders about financial issues early and having conversations with those whom budget cuts would affect.
“In any situation where you have to share unhappy news, earlier and more open conversations are always better and lead to healthier results,” she said.
‘Tough Times’ Ahead
In his resignation email, Silber offered a prediction for Piedmont’s future. He did not mince words.
“My hope is that there will be a last-minute change to change course, but, regardless, Piedmont University is in for some very tough times,” he wrote.
Cantfort is a little more optimistic, but he says major changes are necessary to make sure Piedmont’s business and educational models are sustainable.
“Piedmont University is a very solid university with instruction and education as our principal mission,” he said. “I believe it will survive this … but we feel changes still need to be made in order for Piedmont to build a better university.”
Mitchell said that as institutions face growing financial hurdles, tensions are likely to increase between faculty and administrators, and provosts will only face more pressure serving as liaison between the two parties. In that case, he said, the sudden nature of Silber’s departure, while uncommon now, may not be for long.
“The tuition revenue model upon which all less well-endowed schools depend is teetering right now, on the brink of collapse,” Mitchell said. “We’re likely to see increased pressure on higher education leadership, and it’s entirely possible that we’ll see more examples of this down the road.”
Student Housing Matters, Alton Irwin
Listen to the podcast episode here.
Higher education has evolved drastically over the last century. These unprecedented times have put the strategic leaders of colleges and universities inside a whirlwind of financial, demographic, and social challenges.
On today’s episode of Student Housing Matters, guest host Alton Irwin sits down with Richard Gaumer and the authors of the new book Leadership Matters: Confronting the Hard Choices Facing Higher Education, W. Joseph King and Brian C. Mitchell. They discuss the importance of accepting strong leadership in order to modernize practice, monetize assets, and focus on core educational strategies.
Dr. Brian C. Mitchell previously served as President and first CEO of Bucknell University and is a past chair of many other colleges, universities, and athletic conferences. Dr. W. Joseph King served as the President of Lyon College and Executive Director of the National Institute for Technology in Liberal Education.
Also joining us on the show today is Richard Gaumer, a highly regarded and distinguished professional whose career is dedicated to internal corporate management and assisting struggling institutions in becoming stronger and more sustainable.
King, Mitchell, and Gaumer are all principals of Academic Innovators, an organization offering solutions to the people, programs, governance, and facilities challenges facing higher education. In addition to Leadership Matters, King and Mitchell also co-authored How to Run a College.
Recommendations from the new book Leadership Matters: Confronting the Hard Choices Facing Higher Education
Higher education struggles, such as higher sticker prices, tuition discounting, and loss of consumer confidence
The difference between strategy and strategic planning
How higher education institutions can make a difference in the communities they reside in
Capabilities and inefficiencies of shared governance in relation to academic endeavors and economic enterprises
What colleges and universities need to do to adapt and thrive in the modern age
King, Mitchell and Gaumer’s hope for the future of higher education
How to Run a College by W. Joseph King and Brian C. Mitchell
Inside Higher Ed, Susan H. Greenberg and Emma Whitford
The authors of a new book on leading higher ed institutions in tough times discuss the trouble with trustees, the challenges of being a provost and why college presidents are like midsize-city mayors.
In their new book, Leadership Matters: Confronting the Hard Choices Facing Higher Education (Johns Hopkins University Press), former college presidents W. Joseph King and Brian C. Mitchell draw on their experience to argue that now more than ever, institutions of higher learning require strategic, forward-thinking leaders to guide them through this period of financial, demographic and social upheaval. Mitchell is a past president of Bucknell University and Washington & Jefferson College. King resigned from Lyon College last year. They spoke with Inside Higher Ed via Zoom. Excerpts from their conversation follow, edited for length and clarity.
Q: The central question of your book is, how do colleges and universities thrive in this rapidly changing world, where what has worked in the past maybe no longer does? In a nutshell, what is your answer?
Joey King: I think the nutshell answer is making shared governance work. The reality of strategic leadership in a shared governance model is you can have the most gifted administration, the most gifted president, in the community. But that doesn’t mean you’re going to be able to make progress if your board and your faculty aren’t dedicated to that process.
Brian Mitchell: Shared governance is something that is unique and idiosyncratic to American higher education. Each of the three legs of the stool—the faculty, the administration and the trustees—have to understand their role, which requires a certain amount of focus. The faculty are the keepers of the flame, the ones who have the greatest responsibility to maintain the sort of bedrock core of academic programming and work. It’s a critical role. The administration … can be brilliant, but if, in fact, you do not have the tools at your disposal, you don’t have the focus and clearly the parameters set in place for understanding what your role is, you’re sort of doomed before you start. The weakest link in shared governance, we think, is the trustee. Trustees really have three responsibilities and only three responsibilities: they’re the stewards of the institution. They have a right and a responsibility to hire, retain, nurture, replace and fire, if necessary, the president. And the third role they have is to approve the budget. If they go in other areas, if what they do is not defined by the strategy that they themselves should work to set, then they’re failing.
King: A major problem with trustees is they don’t understand the operational delineation; they don’t understand their roles as fiduciaries. They undercut leadership; they create angst for the faculty because they make curricular suggestions that really aren’t their purview. And they can do all sorts of other things that are not good. So I think really understanding the true role of trusteeship is something that most institutions don’t do a good job of educating trustees up-front.
Q: Trustees may be the weakest link, but you write that the most challenging role of the three is the provost. Why is that?
Mitchell: The provost is the intermediary between faculty and administrations. They’re the advocates for the faculty and also the people who will have to ration the resources. And that is a very, very difficult and challenging role when what goes on inside the gates is largely determined by faculty and staff reaction to whatever the issue is.
King: I think that most provosts who do their job well understand that they may have to do things that, on the one hand, may make it difficult to return to the faculty; on the other hand, they may need to leave the institution. It just depends on the circumstance. But these jobs are service jobs. The best leaders I know in higher ed make pretty much all their decisions based on their service to the mission.
Q: It makes being a provost sound like a very undesirable job. Why does anyone ever agree to become one?
King: (Laughs) Well, I sure never wanted to be.
Mitchell: I think it can be hugely energizing. You’re taking assistant professors and moving them—it’s a little bit like a craft guild. You’re moving them from apprentice to journeyman to master craftsmen and -women. And so you really get the opportunity to nurture the profession—not only the profession as a whole, but the profession for the individuals who are professing it, if you will. It’s also a place where innovation, which is the sort of implementation of good ideas within the existing system, can occur. Provosts do that. And then the other thing, they make sure that the health of the academic enterprise is good, and that the bedrock on which it’s founded is solid. And if you’re interested in policy, particularly academic policy, that can be tremendously rewarding.
Q: Are the challenges that higher ed leaders face today—a surge of COVID cases, campus shootings, student suicides, racial unrest—significantly more difficult than what leaders have had to deal with in the past? And if so, what kind of leadership do we need today compared to in the past?
King: Well, Brian and I are pretty clear in our belief that it’s not different than the past. I think it’s helpful to higher ed leadership to understand that this may be a third inflection point, but it’s not an absolutely extraordinary time. When the first inflection point that we talk about happened, you’d lost 750,000 mostly men in the Civil War. So you basically lost an entire generation of college-going students; you had massive yellow fever outbreaks, you had an incredible supply chain meltdown. I mean, some of these things are sounding pretty familiar, aren’t they?
The second inflection point is, of course, the Great Depression. After the crash in ’29, you had institutions as wealthy as Northwestern and the University of Chicago really seriously in merger negotiations. They did not think they’d be able to survive as independent institutions. And probably, if the New Deal hadn’t occurred, they would have merged. And if World War II had not happened, it’s hard to know how many colleges would have closed and merged in the Great Depression. As you can tell by the timing of these events, 50 to 80 years apart, none of the leaders who led through the last inflection are available to higher ed today.
The other thing that we found is that leaders are born during those inflection crises. And I think that’s what’s happening right now. And I also think that’s why there’s so much turnover, and so much leadership change: because institutions are coming to terms with the magnitude of the problems and the magnitude of the change required.
Mitchell: In the book, we suggest that there are three types of leaders that are—as Joey said—born of the environment in which they work. The first is the presider president, the ceremonial mayor; they speak on issues of sex, drugs and rock and roll and also serve as the pater familias of the community. The second is the bull in the china shop. They make great dramatic changes, but they wear their welcome out. The third, which is the group that we think is the group that will likely survive, the group that Joey and I like to think we’re a part of, is the strategist. They sort of—what is the comment attributed to [Wayne] Gretzky?—play to where the puck is going to be. And we think that given the amount of changes that are produced right now, the strategist is best suited to pull the groups that focus on governance together and lay out a plan, if you will, for or how these institutions become sustainable over the mid and the long term.
Q: Institutions are installing interim leaders for longer than they used to—sometimes one to two years, which is pretty significant for a university. Do you see interim presidents as falling into one of those three categories? Or are they something else entirely?
King: I see them as very different. I think longer-term interims can be broken into two categories: one, they are there to calm things down—I guess they are there to be presiders. They’re filling in and letting the institution get back to an equilibrium. Alternatively, there’s really the opposite, which is [that they’re there] to make very difficult changes that you probably couldn’t hire anyone to make … you’re looking for somebody to come in and make changes that are going to effectively end their presidency. So I guess maybe they could be broken down into presiders and change agents. But since they don’t stay long enough to execute a strategy, that would really never happen. The key to both is they’re on their way out one way or another.
Q: You write about empathy being an important quality in a president, and I assume that goes across the board for all three types. Could you talk about what that looks like in a president, how it’s manifest and why it is so important?
Mitchell: Empathy is when the new book comes out from a faculty member and you do your best to get it read and you tell them what you thought of it. Empathy is when somebody’s mother dies and you take a moment to put the call in to let them know that you know and that you wish they and their family the best … The college president isn’t a business leader; it’s more like a midsize-city mayor. It’s somebody who has a ceremonial title, who operates like a 19th-century political ward boss, rationing favors and demonstrating in fact that you are part of the community while trying to manage a medieval craft guild.
King: And it’s also empathy for students. We had two student deaths in 90 days [when I was president] at Lyon. So we had these really emotional memorial services, in which the president largely was the main speaker, certainly the chaplain as well. That’s not just a show. In a small community that lives in a residential environment, effectively surrounded by hedges and gates, it’s a really personal experience. Empathy is a job requirement.
Q: You also talk about the importance of town-gown relations, and of the president’s role in nurturing those. You’ve both been presidents of small rural colleges and had your fair share of rocky relations.
King: You could say that.
Mitchell: (Laughter) Joey should go first here.
Q: How did your experience at Lyon inform your thinking about leadership? [King resigned in August 2021 after he was quoted describing Lyon and another college where he worked as “bubbles of inclusion and diversity surrounded by a sea of angry, disenfranchised populations and a large white-supremacist population.”]
King: I’ll have to be a little hyperbolic, just because I don’t want to get into the details. But I think particularly now, in this heightened political climate where everything is so polarized, every action is considered a political act: Is [Supreme Court Justice Neil] Gorsuch wearing a mask, you know? I think that’s really changed the way this works. You know, there has always been a degree of this. There’s always this very substantial difference between the life of the college and the life of the town or city that it’s in. A lot of times, I’d be asked about how “the business” was going, so to speak, by local business leaders, and it’s hard to describe to them exactly … At one point, when they asked me, I said something like, “You know, there are substantial differences in the way we work as opposed to a normal business.” And one of them challenged me. And I said, “Well, I’m betting that you don’t often put on colorful robes and march around to bagpipe music at your company. Do you do that every few weeks? Because we do.” I think it’s hard in almost any community that’s not familiar with the ins and outs of academe to understand the differences, and to understand that you’re maintaining these residential communities where literally parents have handed over their children to you. You have an absolute responsibility.
Mitchell: When I arrived at Washington & Jefferson, the first meeting I went to was with the county commissioners … and for 48 minutes, they just simply screamed at me. There’s just no other way to put it. When it was over, it seemed that there were a couple of things that I needed to learn quickly. The first is that there are social and cultural conditions that really impact the relationship between colleges, universities and the broader environment beyond the college gates. Second, good strategy should include some definition of how the college is going to move forward in conjunction with the world in which it lives. And then the third thing that I learned is that it’s very, very important to recognize that colleges and universities are academic enterprises and economic engines. So although you can deal with the cultural and social conditions that cause the screaming, you’d also better look at the world around you to understand what role you play in that community. And often in rural areas, except for maybe the school districts or the local hospital, you may be the biggest thing in town, and you want to be careful not to pull your weight around, but to understand what that means.
Q: But even at a small rural college, you’re almost always more progressive, more liberal, more diverse than the surrounding community. So how do you navigate that tension?
King: That’s just a fact of rural America. And I think every college and university in rural America deals with that—including big institutions, like Penn State. It’s just the reality that many local citizens think you’re essentially a communist breeding ground of absolutely anti-American values. This is the tension that we’re under right now, but it’s not entirely unique to this time. It’s always been there … When you’re in the truth business, you can’t be flexible on the truth. And so, in this era of alternative facts and fake news, I think you’re going to get more and more into situations where presidents and faculty and, essentially, rural colleges run up against this. They can either accommodate the political tensions that are inherent in the situation, or they can take a stronger stance. The key, as Brian pointed out, is understanding the motivations underlying it and trying to be as good partner as you can be, while maintaining your faith and fidelity to what the mission of the institution is.
Q: You write that when it comes to transparency on campus, it’s almost impossible to have too much. And I’m wondering, what are the limits of transparency? For instance, what’s your view on the Michigan Board of Regents releasing [fired president] Mark Schlissel’s emails?
King: Our typical view is that protected human resource records, FERPA kind of records, the things that we would normally hold as confidential as an institution, shouldn’t be made public. With regard to the Michigan example, it’s a public institution … I’m sure that when you sign on at the University of Michigan, it points out that it’s the state system and that they can own and control everything. And, yes, I’m sure they had the legal right to do it. But I think that it is communication that, on a private campus, I doubt would ever be shared, even though it might be an argument for transparency.
Mitchell: My reaction to that is that you carry transparency as far as you possibly can, within the bounds of the law and common sense. And then you listen to your legal adviser very carefully. There must have been some reason at Michigan that we don’t understand that caused them to release it. I hope there was, and I hope it was based in something that their legal office has told them. But I can say that [even] if you are fully transparent, there will be times when you’re still not perceived as transparent enough.
At the same time, for example, the board meets three or four times a year, so publish a statement that tells everybody exactly what happened at the board meeting; then there are no surprises. There’s no reason not to be fully transparent, unless it was an executive session and something occurred and people are going to have to understand that. But it’s when you don’t take that extra step, when you don’t say, “Look, there’s shared governance here and the faculty and the administrators and staff, you need to know what happened, here’s what happened …”
Q: When we cover campuses, there’s a lot of frustration from students about how inaccessible the trustees are to them. Do you see the firewall between them and students that’s become sort of systematized as valuable? If so, why? And then do you think that trustees should be doing more to be active members of the college community and be in touch with students more often?
King: I think you should have a structure that puts students and trustees together regularly. Generally, the way that normally works best is that at each board meeting, there’s either a reception or a lunch where students can opt in to spending time with the trustees. And you have to be very clear with the trustees that they have a very substantial role to play—they need to attend, they need to listen and they need to listen a lot more than they speak. But I think you also have to have a pretty deliberate discussion with the students, saying, “Look, here’s what trustees do: they approve institutional changes of a certain magnitude, they hire and fire the president, and they approve the budget. So if you’re talking to them about anything else, it’s not in their purview to make those changes. You should be talking to the administration or the faculty.”
Mitchell: You’ve got to find a way to incorporate and integrate trustees into the life of the university or the college, there’s no question about it. You’ve got to provide a cultural setting and a social setting, and also you have to bring the best of what the students are doing before the trustees. We always brought student performances, events, student discussions, as part of a trustee weekend, so they’d understand and begin to appreciate what students are thinking and feeling and writing about and so on. I don’t favor trustees walking around campus saying, “Tell me what you know, tell me what you think,” because it’s unfocused.
King: I’ve also heard similar complaints from alumni on those exact same lines: “Why don’t we have access to the trustees, or even the administration? Why can’t we voice our concerns?” And the interesting thing about alumni is, it’s a large, very diverse group of people who have four-year windows on an institution that may span 60 to 80 years. And so almost none of them know the institution as it exists at the time that they’re making the comment.
Inside Higher Ed, Emma Whitford
Mark Rosenberg’s resignation from Florida International is the second high-profile presidential departure this month. Boards appear to be taking evidence of inappropriate behavior more seriously, experts say.
Days after the University of Michigan Board of Regents very publicly fired Dr. Mark Schlissel for engaging in an inappropriate relationship with a subordinate via email, Mark Rosenberg resigned as president of Florida International University.
Rosenberg announced his resignation Friday, effective immediately, citing his own health concerns and the deteriorating health of his wife, Rosalie. Two days later, Rosenberg released another statement, writing that he had “caused discomfort for a valued colleague” and, as a result, stepped down.
“I unintentionally created emotional (not physical) entanglement,” Rosenberg wrote in the statement Sunday. “I have apologized. I apologize to you. I take full responsibility and regret my actions.”
Susan Resneck Pierce, a higher education consultant and president emerita of the University of Puget Sound, suspects that Rosenberg’s resignation may have been influenced by Schlissel’s public shaming. The Michigan president was fired after the Board of Regents learned he was having an affair with a subordinate colleague and published 118 pages of messages between them, sent using his university email account.
“The abundance of publicity about and of details surrounding Schlissel’s being let go may have influenced Rosenberg to be proactive,” Pierce wrote in an email.
Rosenberg, who had served as president of Florida International for 13 years, said he disclosed information about the “entanglement” through proper channels. After talking with Dean Colson, the chair of the Board of Trustees, he decided to resign.
Colson also elaborated Sunday on the board’s short response to Rosenberg’s initial resignation announcement.
Rosenberg’s statement “provides insight into why the Board did not believe Friday was the appropriate time to celebrate the many accomplishments of FIU” during Rosenberg’s tenure, Colson wrote. “We are deeply saddened and disappointed by the events requiring his resignation.”
Information about which colleague Rosenberg was referring to, as well as the nature of their communications, has not been disclosed. A spokesperson for Florida International declined to comment on Rosenberg’s resignation and pointed Inside Higher Ed to his Sunday statement.
The New York Times reported Sunday that an investigation into Rosenberg’s misconduct began in mid-December after a female employee told a colleague about the former president’s behavior. The woman reportedly provided text messages between herself and Rosenberg to investigators last week, just before Rosenberg resigned.
While the circumstances are different, Rosenberg’s and Schlissel’s departures both illustrate how much more seriously boards are taking inappropriate behavior, experts say.
“In the atmosphere we’re in now, post–Me Too movement, boards are just much more vigilant,” said Kevin Reilly, president emeritus and regent professor at the University of Wisconsin system. “I think they have to act—and act quickly and decisively—in cases of sexual harassment.”
Before the Me Too movement—which brought about a deeper understanding of sexual misconduct and harassment—presidents and boards may have been more likely to ride out an investigation before deciding the fate of the president. Now, if a president knows they’ve acted inappropriately or violated college policy, they may step down before the issue is aired publicly.
“Often enough, people will have the benefit of the institution and their colleagues and everybody in mind when they think about this,” Reilly said. “They know they made a mistake. I think a lot of people would feel like, ‘Well, all right, I just gotta move on now and let the institution move on beyond me.’”
They may also step down to slow or stop an investigation into their behavior, said Ann Olivarius, a Title IX lawyer who represents individuals who have been harassed. (This paragraph has been updated to clarify Olivarius’s title.)
“Sometimes you avoid putting bad news on record” by stepping down before an investigation is complete, Olivarius said.
Olivarius also noted that misconduct allegations and inappropriate behavior can erode the “moral leadership” of a college president. Brian Mitchell, a former president of Bucknell University and co-author of Leadership Matters, echoed her thoughts.
“These are public jobs,” Mitchell said. “People may make mistakes, but they’re not just a job—they are a job that carries with it a public trust.”
In addition to saving face, there are other reasons why a president might choose to resign—or not—before an investigation into their behavior. The financial agreements tied to their departure, for example, may influence how willing they are to step down. Age may also play a role.
“If you were a younger president or chancellor and you at least believe the facts were in dispute—that people were claiming things about you that were unfair, unjust or didn’t happen—you might be much more likely to go through the process” of an investigation, Reilly said.
Olivarius offered one possible solution for curbing sexual misconduct and inappropriate behavior by higher education officials: fines.
“You start to come for people’s pocketbooks, and all of a sudden maybe having sex is not quite as important,” Olivarius said. “They should have to be charged monetary payments for misconduct or for taking advantage of their power in their situation.”
Youtube, Bryan Alexander
Watch the full Youtube video “On Strategic Leadership” here.
What does strategic leadership mean for higher education now?
This week the Forum hosts two veteran leaders and scholars. W. Joseph King and Brian C. Mitchell have served as academic presidents, vice presidents, directors, and more. They have just published Leadership Matters: Confronting the Hard Choices Facing Higher Education (Johns Hopkins University Press). https://jhupbooks.press.jhu.edu/title…
The Future Trends Forum is a weekly discussion event created and hosted by Bryan Alexander. Since 2016 we have addressed the most powerful forces of change in academia. Each week, this video chat brings together practitioners in the field to share their most recent work and experience in education and technology. The intent of the Forum: to advance the discussion around the pressing issues at the crossroads of education and technology. http://forum.futureofeducation.us/ https://bryanalexander.org
Inside Higher Ed, Emma Whitford
For colleges that are already financially strapped, issuing room and board refunds “could be disastrous.”
Students across the country are making hurried plans to move out of their dorm rooms as the number of campus closures over coronavirus concerns skyrocketed past 200 Thursday.
Away from their dorms and dining halls, many students and parents are wondering if and when they’ll be refunded room and board fees.
But for colleges relying on such fees — called auxiliary fees — to support their operating revenue, refunds could be devastating.
“Every residential college and university in America relies on that auxiliary revenue stream. It is baked into the budget,” W. Joseph King, president of Lyon College and co-author of How to Run a College, said in an email. “Significant refunds will cause real problems at many institutions. It will just be worse for those with tighter or deficit budgets.”
Auxiliary services are becoming an increasingly important part of colleges’ operating revenue, especially for private, four-year institutions.
“Most colleges run their own housing. It is usually their biggest source of auxiliary revenue,” King wrote. “Assuming the residence hall is paid for, the net auxiliary revenue can be substantial. Even if it is financed, there is usually a positive revenue stream.”
Smith College, a women’s liberal arts college in Northampton, Mass., with approximately 2,400 students, is requiring all students to move out of on-campus housing by March 20. Smith said it will offer prorated room and board refunds. In fiscal year 2018, Smith collected $40.4 million in residence and dining fees — about 16.5 percent of its total operating revenue. (This paragraph has been updated to include the correct date by which Smith students must move out of on-campus housing.)
Amherst College also announced Tuesday it would refund room and board fees for students who left campus. Room and board revenue made up nearly 9 percent of Amherst’s operating revenue in fiscal 2018.
“Refunds are a sticky business since they are definitely not in the budget. Any significant refunding will create a budget hole,” King said. “It just depends on how it is prorated. Most institutions have policies about refunds (or no refunds) if a student withdraws. Few (if any) have closure policies.”
Private universities are also collecting less net revenue per student from tuition and fees than they used to, according to Craig Goebel, principal at Art & Science Group, a higher education consulting and research firm.
“There’s much steeper discounting going on at private colleges and universities,” he said, noting that the average discount rate for private institutions is 50 percent. If the college is already under financial stress, “this could be disastrous,” Goebel said.
On top of that, added financial stress could impact a college’s credit ratings. A lower credit rating could make it more difficult for colleges to borrow money in the future.
“For some of the schools that have weaker resources or are more pressured, this could create a credit challenge,” said Jessica Wood, a senior director at S&P Global Ratings.
It’s unlikely that colleges will receive insurance payouts for refund-related revenue hits.
“Because colleges are sending students home as a preventative measure, not because of an event that triggers coverage under their property or business interruption policy, these refund claims will likely not be covered,” Bret Murray, who leads higher education strategy at Risk Strategies Company, a national insurance brokerage and risk management firm, said in an email Thursday. “With that said, colleges should still put carriers on notice and keep track of all financial impacts related to COVID-19.”
Colleges with substantial endowments or other significant sources of income, like federal and state grant money or land leases, will not be cut as deeply by refund requests.
Harvard University, one of the first colleges to explicitly require students to leave campus, will offer prorated room and board refunds. Board and lodging fees made up less than 4 percent of Harvard’s operating revenue in fiscal 2018, far surpassed by federal grants, gifts for current use and returns on endowment made available for operations.
A wealth gap may be emerging between colleges that choose to close or cancel in-person classes and those that, so far, will remain open. In Pennsylvania, West Chester University — with an endowment of $40 million — decided to end face-to-face instruction Wednesday, while Mansfield University of Pennsylvania — with a $1 million endowment — did not.
That said, Wood doesn’t believe colleges are making any decisions about closures and remote learning with finances at front of mind.
“While financial considerations are always important, I do think … their decisions are first and foremost being made around their communities’, students’, staff and faculties’ safety,” she said.
Two-year colleges are somewhat shielded from this particular revenue hit. According to the College Board’s 2019 trends in college pricing report, in 2015-16, 96 percent of full-time undergraduate students at public two-year colleges lived off campus or with their parents.
Still, today most colleges are scrambling to scale up their online learning resources and put precautionary plans in place. Few have disclosed whether they will offer room and board refunds to students who leave campus.
Room and board is a sizable chunk of what students pay each semester, and the fees are often excluded from scholarship calculations. The College Board report states that students at a public four-year universities paying in-state tuition spend on average 43 percent of their budgets on room and board fees. For out-of-state students, room and board makes up 27 percent of budgets, and for students at private four-year colleges, 24 percent of budgets are room and board fees.
Requests for room and board rebates aren’t the only way colleges could lose money as a result of the coronavirus. Many have canceled admitted student days and student tours, and closing campus could affect enrollments in the fall. Institutions that rely heavily on endowment payouts could see them dip in a falling market.
The virus will “certainly roil the admission market” just as student deposits and commitments are due, said Brian Mitchell, King’s co-author on How to Run a College and the founder of Brian Mitchell & Associates, a higher education consulting firm, in an email.
“Effectively, the crisis has the potential to create a double whammy — unexpected [costs] and highly unpredictable future revenue at tuition-driven institutions,” he said.
University Business, Karen Kroll
State-of-the-art research facilities, residence halls featuring a range of amenities, and other new campus buildings play a key role in wooing students and faculty to an institution. In fact, capital investments by colleges and universities are at an 11-year high, according to research from Sightlines, a Gordian company and provider of facilities intelligence in higher education.
At the same time, state appropriations for higher ed continue to be unstable, and many private institutions struggle to attract students, particularly those who can pay full tuition.
The leadership challenge: Find a way to balance the need for top-notch facilities without overspending. Here are five financing options colleges are turning to for capital projects.
1. Federal programs
While some federal opportunities exist, so do specific eligibility requirements.
Small, rural colleges, for example, may be able to access financing through the U.S. Department of Agriculture’s Community Facilities Direct Loan & Grant Program, which provides long-term, low-cost loans and limited grant funds for the construction of libraries, athletic centers and other facilities, says Bruce Lammers, administrator of USDA’s Rural Housing Service. It’s available to institutions in communities with populations of up to about 20,000 people.
The program’s current portfolio includes about $1.8 billion in the education sector, across 201 college-related facilities, Lammers says. To be eligible, an institution must be unable to obtain credit elsewhere and must demonstrate significant community financial support.
While some have questioned whether the USDA is making viable loans—after all, the program is available when commercial financing isn’t—Lammers notes that the current delinquency rate is under 2%.
The Department of Education offers a program geared to historically black colleges and universities. It provides low-cost capital through federal loan guarantees on qualified bonds for infrastructure improvements. The total amount of loans and accrued interest is currently capped at $1.1 billion, although Congress can raise that.
2. State-issued bonds and grants
Some state agencies help schools and other nonprofits borrow through state-legislated bonds. For instance, DASNY, the Dormitory Authority of the State of New York, provides a Dormitory Facilities Program, which issues low-cost, tax-exempt bonds supported by student residence hall fees. It also offers equipment leasing and other services.
“It’s a credit enhancement,” says Jason Holsclaw, senior vice president with Stephens Inc., a financial services firm that advises higher ed institutions on capital investments. If a college runs into financial challenges, most investors assume the state will step in. The state’s guarantee may help lower the cost of financing.
Similarly, the Maryland Community College Construction Grant Program helps counties acquire property and design, construct and renovate public and regional community college facilities.
3. Bond issues
Over the past decade or so, some colleges and universities have used bank direct placements, in which bonds are sold directly to a single bondholder, such as a bank. By dealing with one financial institution, rather than a syndicate of lenders, a borrower may gain greater flexibility when it comes to loan covenants, Holsclaw says. However, he cautions, all deals are different.
Another type of bond that’s attracted some interest is the century bond. As its name implies, this bond matures in 100 years. In August 2019, Penn State issued a $300 million century bond at a yield of 3.61%. The proceeds will fund a new research building and renovations to existing infrastructure, according to the university.
Typically, large and well-known institutions that can turn to their state overseers if they run into financial trouble are best able to take advantage of century bonds. “As an investor, you’re betting the university will be there 100 years from now,” Holsclaw says.
4. Public-private partnerships
A public-private partnership (P3)—in which a public institution and a private company collaborate to finance, build and operate projects—tends to be popular for campus housing projects, says Fred Pierce, president and CEO of Pierce Education Properties, an owner of student housing. P3s allow a university to preserve its debt capacity for projects deemed core to its mission, such as building a research facility.
The University of California, Merced is using a P3 to partially finance the Merced 2020 campus expansion. The project will add more than 1 million square feet of academic, research and other buildings and infrastructure. Of the $1.3 billion project total, about $600 million will come from the University of California system, through general revenue and housing bonds; $590.35 million from the developer, Plenary Properties Merced; and $148.13 million from campus funds.
Historically, the UC system would have provided financing through general obligation and lease revenue bonds, says Nathan Brostrom, interim chancellor of UC Merced. However, the system hasn’t issued a general obligation bond since 2006—about a year after the Merced campus officially opened—because of state-level changes. “We had to come up with a different model,” he says.
The financing includes a mix of funds from the university and the developer, so the cost of capital is lower than it would be if only the developer provided financing, as often occurs in P3s, Brostrom says. “The campus has such strong demand for bonds,” so it lowers the cost, he adds.
San Diego State University is using the P3 model to finance its Mission Valley expansion. Initial costs, estimated at $300 million, will be financed through short-term financing and revenue bonds issued by the California State University system, and the site will be developed through P3s. The bonds will be repaid with revenue generated by leases with SDSU’s public-private partners. “We wanted the project to be self-supporting and not rely on state appropriations, tuition or fees,” says Gina Jacobs, associate vice president of Mission Valley development for the university.
When it’s complete, the expansion will allow SDSU to accommodate 15,000 to 20,000 more students. Total cost of site development—including a multiuse stadium, hotel, research space and other facilities—will be about $3 billion.
5. Corporate and individual donors
Even at colleges and universities that can tap banks or other institutions for loans, philanthropy is a key component of capital financing. “When you go to a bank, they’ll ask about the donor base,” says John Lynch, head of the Education Practice Group at SunTrust. They want to know the institution isn’t relying solely on loans to finance its capital projects.
In 2018, Lakeland University in Wisconsin launched the nation’s first bachelor’s degree program in food safety and quality. Johnsonville, a sausage producer, donated $500,000 to help the school establish a lab on campus that replicates those in the industry. Usinger’s, another sausage maker, made a financial contribution as well. SSL Industries, an equipment provider for the food industry, contributed an in-kind donation.
“Without the gift from Johnsonville, the food safety and quality lab may not have happened, and certainly would not have happened this quickly,” says David Gallianetti, director of external relations for Lakeland. “Having a lab that allows students to replicate what they’ll be doing in the workplace on the same machines is an important part of this program.”
Contributions from companies, alumni, foundations, and other groups or individuals to higher ed institutions topped $46 billion in 2018, an increase of 7.2% from a year earlier, according to the “Voluntary Support of Education” survey by CASE, the Council for Advancement and Support of Education. Of that, about $4.75 billion went to property, buildings and equipment, says Fred B. Weiss, chief research and data officer.
While every capital project is different, financial institutions often like to see about two-thirds of the funds come from donors, says Lynch, of SunTrust. About half of that amount, or one-third of the overall amount, typically will be from cash already collected. The other half will be from pledges to be collected over three to five years. Then, the bank will issue long-term debt for about one-third of the total amount, as well as bridge financing that will be retired as the pledges are collected. “You need donors involved early on,” Lynch says. “You can’t just lever up.”
Karen Kroll is a Minneapolis-based writer.
Boston Globe, Neil Swidey
The college admissions scandal dubbed Operation Varsity Blues has served up a powerful cocktail of outrage and schadenfreude. We’ve witnessed unabashed “Aunt Becky” blithely signing autographs outside Boston’s federal courthouse and learned about CEO dads staging photos of their fake-athlete kids as haplessly as Mr. Felicity Huffman’s car salesman character in Fargo attempted fraud with his pencil.
The details exposing the vanity and amorality of the rich and famous who used the so-called side door to get their kids into elite colleges are so delicious that they can mask a darker truth: When it comes to college sports, these grasping parents, entitled offspring, scheming advisers, and corrupt coaches aren’t the only ones who’ve lost their way.
Girls and boys are being saddled with adult-strength pressure to secure their future by delivering on the field or court, leading to the craziness of recruits committing to college teams even before they’ve had a chance to finish middle school. Meanwhile, youth sports have become beset with runaway professionalization, commercialization, and overuse injuries. And an overall sense of panic has taken hold of many parents who spend years chasing the rabbit of college scholarships for their children and become desperate for a return on their investment of so much time and so many resources.
Please don’t misunderstand me. I love college sports. Although my undistinguished athletic career ended when I left high school, my connection to sports never did. In college, two of my closest friends led Tufts’ Division III football team. I wrote a book about the power of high school basketball to help propel boys out of Boston’s toughest neighborhoods and onto college campuses that offered them the promise of a better future. As a student, a journalist, a mentor, a parent, and a fan, I’ve seen sports at their transcendent best.
So I take no joy in reporting that our college sports system is fundamentally broken.
The American higher education system is the only one on the planet that is also intertwined with a professional-in-all-but-name, multibillion-dollar college sports system that can warp academics and sometimes even swallow it whole. We see this on the Division I level, of course, but the problems go all the way down to Division III. And the damage is increasingly leaching into fields far from campus. Remember, the side door through the athletics department, which rich and famous parents allegedly exploited, was available only because our unhealthy emphasis on sports had already distorted the college admissions process.
It’s time that we all ask ourselves: What are we really doing here?
The outsized influence of sports on campus is not a new problem. Robin Lester, in his book on the history of football at the University of Chicago, describes how the Chicago superintendent of schools accused shameless college coaches at Chicago and Michigan of “practically stealing boys out of high school for athletic purposes” before they could even earn their diplomas. When did he level his accusation? Try 1903. Just two years later, Harvard hired its first paid football coach, at almost twice the average salary of a full professor.
Before we get to the abuses in lower-profile, lower-level college sports, let’s start where the insanity began: big-money football and men’s basketball programs. If you haven’t read the 2011 Atlantic piece “The Shame of College Sports,” by Pulitzer Prize-winning civil rights historian Taylor Branch, it’s truly worth your time. Even eight years later, almost all the points in Branch’s indictment of the National Collegiate Athletic Association and its top Division I programs hold up. How pioneering NCAA honcho Walter Byers — he of the toupee and cowboy boots — cagily crafted the term “student-athlete” in the 1950s. How colleges have since used that magical hyphenate as a fig leaf to avoid having to pay athletes in top programs for all the revenue they bring in to university coffers, and to avoid having to pay out workers’ compensation claims when student-athletes get injured “on the job.” And, most of all, how the fiction of amateurism pushed by the NCAA denies many top college athletes a genuine college education and all top college athletes their true economic rights. This fiction reduces them to serfs who are perpetually at risk of punishment for violating the overlord’s regime of arcane, arbitrary rules.
Imagine if Harvard had classified Mark Zuckerberg as a “student-technologist” and demanded ownership of Facebook (total valuation: more than half a trillion dollars) because he created the platform as an undergraduate. Or if UCLA had garnisheed “student-actor” James Franco’s take from starring in Spider-Man 3 (worldwide gross: $890 million) while he was enrolled there.
The only point from Branch’s 2011 argument that doesn’t hold up is his confidence that several lawsuits threatened the NCAA’s Vulcan grip on the college game. During a recent conversation, Branch admits to me that he was overly optimistic. “They’re like the Vatican,” he says. “They’re going to hang onto their lock on the market as long as they can. Reform has got to be imposed on them.”
Branch argues that as the NCAA ferociously protects the billion-dollar-a-year lifeline of March Madness television revenue, it remains fearful that the biggest athletic conferences in college basketball might someday do what their counterparts in college football did years ago: negotiate their own broadcast deals, cutting out the NCAA.
What’s preventing the colleges from doing that?
“That the NCAA will say, ‘We’re not going to enforce your amateur rules.’ What the colleges get from the NCAA,” Branch says, “is the imprimatur to continue on with an economic system that benefits them so much.” (NCAA committees, made up of member colleges, vote on the rules while the NCAA brass oversees enforcement.)
Branch argues that’s why, instead of seriously cracking down on abuses by powerful colleges and their exalted, absurdly compensated coaches, the NCAA spends a lot more energy penalizing individual players when they or their family members violate a rule. Recall those five Ohio State football players who were punished in 2010 for the unthinkable sin of accepting discounted tattoos.
“They can’t deal with the big stuff, so they flex their muscles where it doesn’t matter,” Branch says. “By crushing a kid over a silly thing, they advertise their power.”
Consider, for a minute, just how arbitrary and foolish many of the NCAA rules are.
My favorite example is Shabazz Napier and the bagel-and-cream-cheese rule. Napier is an NBA player, currently with the Brooklyn Nets, who as an undergrad helped lead the University of Connecticut to two national championships. When I got to know Napier, his profile was quite a bit lower — he was a kid from Roxbury playing JV on the Charlestown High basketball team, the focus of my first book. In 2014, in a locker room interview just before he led UConn to its second title, Napier stunned the national sports media by revealing a hidden truth about life as a D-I student-athlete. “There are hungry nights that I go to bed and I’m starving,” the college senior said.
For anyone who assumed a full-ride athletic scholarship meant, you know, a full ride, Napier’s lament didn’t compute. Sure enough, he was speaking the truth. The NCAA forbade colleges from providing anything more than three meals a day to scholarship athletes. On days when the student-athletes’ classes or packed practice schedule prevented them from getting to the dining hall in time, they were out of luck. The NCAA allowed teams to provide a “training table” of limited snacks, such as nuts and bagels. But a bagel could not have cream cheese or peanut butter on it, or it would be considered an illegal fourth meal.
The optics of athletes, who generate billions for the colleges and the NCAA, going to bed hungry could hardly have been worse. After being publicly shamed, did NCAA officials fundamentally rethink their punitive, withholding approach to all their revenue-generating serfs? Of course they didn’t. They simply removed the three-meal cap. Cream cheese for everyone!
(For what it’s worth, the NCAA says the rule change on meals had been going through its legislative process even before Napier’s comments. It also began allowing student-athletes to receive some modest “cost of attendance” stipends for transportation and child care.)
The bottom line, promoter Sonny Vaccaro tells me, is “We’re not talking about student-athletes. We’re talking about athletes.”
Vaccaro ought to know. While working for Nike in 1977, he pioneered the tactic of paying college coaches, who were then lightly compensated, to get their players to wear Nike gear. A decade later, he devised the first “all-school” deal, negotiating with top college officials to get the brand’s logoed gear on all of its teams and stacked high throughout the campus bookstore. “That was the genie in the bottle,” Vaccaro tells me. “Now we owned the school.”
Those all-school deals eventually spread to every big-time college athletic program and attracted every big-name sports apparel company. (In 2016, Under Armour hatched a record all-school deal worth $280 million with UCLA.) All that money sloshing around these high-profile programs helped fill college coffers and make lots of people rich, including coaches, athletic directors, agents, managers— everyone, of course, except the athletes.
Vaccaro would eventually become one of the NCAA’s toughest critics. Irking him most is what he sees as the organization’s cynical effort to hide behind the concepts of “education” and “amateurism” while aggressively protecting a status quo that exploits the laborers. “I’m against the hypocrisy of the system.”
Nothing, he says, exposes the hypocrisy more than the NBA’s “one-and-done” rule. Put in place in 2006, the rule forbids star high school players from following in the footsteps of LeBron James, Kobe Bryant, and Kevin Garnett, who all skipped college and went directly into the NBA. Instead, players are required to wait a full year after high school, typically playing in the NCAA.
Who benefits from this rule? If you guessed “everyone except the players,” you’ve clearly been paying attention. The coaches get a steady flow of rent-a-stars to help them keep winning so they can keep collecting their multimillion-dollar salaries and endorsement deals. The NBA gets a free development league/finishing school. The colleges and the NCAA get all that broadcast money, while CBS and ESPN get a permanent pipeline of new stars to build up and tear down breathlessly, ensuring a parallel pipeline of advertising dollars. Meanwhile, the players get to spend the year hoping they don’t get injured or violate some NCAA rule, such as accepting a gift from all the agents and managers and handlers trying to ingratiate themselves with “the next LeBron.” (Boston Celtics star Kyrie Irving, for example, suffered an injury that sidelined him for much of his one-and-done year playing at Duke, where Celtic Jayson Tatum also logged his college year.)
The 2016 documentary One & Done, which follows high school phenom Ben Simmons during his pit-stop year in college, beautifully captures this madness. He can barely walk anywhere on the Louisiana State campus without a student demanding a selfie with him, and his No. 25 jerseys are flying off the racks in the campus bookstore. When he skips too many classes to keep up with his punishing basketball and training schedule, his coach goes through the motions of benching him for a few minutes of one game.
“The NCAA is really [expletive] up,” Simmons tells the camera at one point. “Everybody’s making money . . . and the players get nothing. They say education, but if I’m here for a year, I can’t get much education.”
NCAA officials have long argued that there is no need to pay student-athletes because they already receive valuable compensation. “We provide them with remarkable opportunities to get an education at the finest universities on earth,” NCAA president Mark Emmert told Frontline. This form of compensation, they argue, can be especially transformative for the many student-athletes who come from underprivileged backgrounds.
But the one-and-done rule (which the NBA and its players’ union are considering changing) calls that claim into serious question. These high-revenue-producing student-athletes aren’t getting anything close to an education. They merely have to pass their first semester courses to be eligible to play that year for their college team, before bolting for the NBA draft. At least these marquee athletes eventually get a lucrative payday. The NCAA’s own stats show that less than 2 percent of college athletes go on to play professional sports. (Interestingly, only 2 percent of high school athletes go on to earn any kind of college athletic scholarship, so we’re talking about tiny subsets of tiny subsets.)
The NCAA rightly boasts that college athletes graduate at higher percentages than the general student body, and it points to increasing rates for black athletes in particular over the last two decades. But a University of Southern California study exposes some troubling inequities behind that boast. The analysis focused on the student-athlete graduation rates in the five conferences that dominate Division I sports. Black men represent just about 2 percent of the undergraduates at these colleges but make up more than half of their football and basketball teams. Yet black male athletes’ six-year graduation rate is 55 percent, compared with 60 percent for black male undergrads, and 76 percent for undergrads overall, at these schools.
Even athletes in big-time programs who do graduate often emerge with a less-than-rigorous education. After all, it’s hard to swing a physics and neuroscience double major when you have to devote more than 40 hours a week to your primary “job” on campus — the one attached to your athletic scholarship. Over the years, whistle-blowers at places including the University of Georgia and the University of North Carolina at Chapel Hill have exposed patterns of athletes being tracked into gut — or nonexistent — courses taught by compliant instructors.
Having devoted so much of their lives to their sport, many of these athletes leave college unprepared for much else. The most heartbreaking story in the recent HBO documentary Student Athlete belongs to Shamar Graves. A receiver who graduated from Rutgers, Graves is shown shuttling from one exhausting, dead-end job to another, forever chasing the NFL dream, all while living out of his car.
Keep in mind that the huge money in college sports is basically confined to two sports. Football generated a profit of $1.9 billion in the 2017-18 school year and men’s basketball $341 million, while, for instance, women’s basketball lost $189 million and men’s track $71 million. (Overall, fewer than 1 in 8 Division I college athletic programs takes in more revenue than it spends.) Some reformers have long argued we could clean up the college game simply by paying football and basketball players. The Varsity Blues scandal, however, makes it clear the rot runs much deeper.
Because of what we see during March Madness and college bowl season, when we hear “Division I student-athlete,” many of us probably picture a young man of color. But we now know that the sports implicated in the recent admissions scandal — water polo, squash, tennis, lacrosse, soccer, fencing, sailing — function largely as white-privilege-perpetuation machines.
For all their faults and abuses, at least top college basketball and football programs deliver something important to the entire campus community by bringing in lots of dough and providing compelling entertainment around which to build school spirit. I had never even heard of the water polo team at USC until this scandal broke. I was surprised to learn that the man who coached both the men’s and women’s teams there had produced a string of national titles despite allegedly selling admissions slots to rich kids who didn’t know the first thing about the sport. (Court documents reveal one clueless parent staged and had a designer Photoshop his kid sticking far out of the water, not knowing that water polo players actually swim during matches.) Despite USC’s impressive record of water polo titles, the crowd that turned out to cheer on the women’s team during the national championship against Stanford looked sparser than a regular-season swim meet crowd at Newton North High School.
Forget the photo fakery. Explain to me again the logic of giving even those students who are legitimately good at water polo, squash, or a similarly privileged niche sport a special fast-pass lane into a selective college. If these students are passionate about their sport and excel at it, great. Colleges should consider those achievements in the admissions process, in the same way they give credit to students for being the captain of the debate team or editor of the student newspaper or orchestra concertmaster.
To justify fast-pass admissions for athletes in these niche sports, you’d have to demonstrate that they bring a benefit to the wider campus community that is more meaningful than the debater, the editor, or the violinist. While the evidence is strong that athletes in elite college basketball and football do that — and therefore should be treated differently — it’s much more elusive in most other sports.
And this imbalance is hardly confined to Division I.
* * *
In their book Reclaiming the Game, William Bowen and Sarah Levin provided a revealing and sobering view of the influential role athletics play in college admissions decisions. Interestingly, they didn’t focus their study on powerhouse Division I programs like Alabama, Michigan, and Ohio State. Instead, they zoomed in on many of the most selective institutions in the land: the Division I Ivy League (from Brown to Yale), the Division III New England Small College Athletic Conference, or NESCAC (from Amherst to Williams), the Division III University Athletic Association, or UAA (including Carnegie Mellon and the University of Chicago), and a smattering of other selective colleges from around the country.
What made their study especially valuable was the remarkable access Bowen and Levin were granted to admissions data and processes at each of these elite institutions. The fact that Bowen had been the president of Princeton University no doubt opened a few doors, and it probably helped that both he and Levin had once been college athletes. The result of their study was real data to replace anecdotes, whispers, and conventional wisdom.
Overall, Bowen and Levin found that recruited athletes were as much as four times more likely to be admitted than non-athletes with similar academic credentials. (For instance, male recruited athletes in high-profile sports in the Ivy League had average SAT scores 165 points lower than those of other accepted male students.) They also found that, while in college, recruited athletes tended to underperform academically to a surprising degree. They were substantially more likely to end up in the bottom third of their college class, and the grades they earned were significantly lower than their standardized test scores and high school transcripts would have predicted. Their underperformance persisted even during the offseason or when they were otherwise not playing.
The authors busted other conventional wisdom, such as the belief that athletes are an important source of racial diversity on campus: “Recruited athletes in the schools in our study are in general appreciably less likely than students at large to be from underrepresented minority groups.” Once again, high-profile men’s sports like basketball and football tend to skew people’s perceptions. But the authors found that at all the colleges they studied, in all the lower-profile sports, less than 10 percent of male recruited athletes, and less than 5 percent of female recruited athletes, were minorities. The truth is the fast-pass athlete’s lane into selective colleges disproportionately benefits white students.
Another eye-opening finding was that the percentage of college athletes in the student body was much, much higher at many academically selective Division III colleges than at the big D-I universities most of us think of when we hear “college sports.” At a powerhouse like the University of Michigan, the percentage of students on the roster of an intercollegiate team was under 5 percent, whereas at a small liberal arts college like Maine’s Colby, it was closer to 40 percent. As it turns out, a number of small D-III schools field teams in more sports than their giant D-I counterparts.
On the Duke campus, members of the basketball team are essentially uncompensated celebrity employees who exist on a separate plane while providing a service that is accessible to everyone on campus. In contrast, athletes on a small selective college campus are fellow students whom non-athletes are more likely to encounter regularly but who may seem undeserving of the special benefits they receive. The authors quote several faculty members at one selective college saying the same thing: The “great divide” on campus is the one between athletes and non-athletes.
But why do selective Division III colleges feel the need not simply to offer a wide array of teams, but to aggressively recruit and offer admission preferences to try to ensure that they have winning teams, across the board? I won’t pick on water polo again, so let’s move on to squash. Beyond the benefit to the dozen players on a college squash roster, what measurable value does the overall student body derive from having a winning squash team?
I would argue the answer is close to zero. Yet squash coaches are allowed to submit to the admissions office a list of students they want to add to their squad. No campus employee is doing that kind of advocacy to recruit the next DJ of the college radio station or editor of the college newspaper — organizations that, on most campuses, reach more students and are blissfully free of adult interference.
So why are colleges giving this kind of disproportionate sway to what, in reality, are fairly obscure campus activities? Could it be for fund-raising purposes, with development officials hoping that a winning squash team might prompt a former squash player who is now crushing it as a hedge fund manager to pony up some cash?
It’s something else, says McGreggor Crowley, a former director of selection in the MIT admissions office who now works for the private counseling service IvyWise. “It’s not a revenue question. It’s a cachet question.” These highly selective institutions compare themselves only with other highly selective institutions. If one of their peers has a winning squash program, they want one, too. So they hire coaches who are judged by their athletic director based on how often their squad beats their peer institutions.
College officials regularly tell stressed-out high school students not to feel the need to be perfect. You’ll be fine, they say soothingly. Just be yourself. They should take their own advice. You’ll be fine. Even if your squash team never wins a match. Seriously. You won’t even notice.
The pressure many students feel to obtain athletic scholarships has grown so intense that the fallout has spread to Division III colleges, which don’t even offer them. I attended an information session at another selective D-III school where the admissions officer was careful to remind the audience of parents and prospective students of the policy against athletic scholarships. This prompted a mother to ask, “Then why do I see so many kids posting videos of themselves on social media signing letters and announcing that they just committed to play here?”
The admissions officer let out a long sigh before saying, “It’s a fair question.”
For some time, these signing ceremonies — where students, wearing school gear, theatrically sign the national letter of intent, officially accepting their athletic scholarships — have been standard fare for Division I and Division II athletes. But student-athletes at Division III schools (and non-scholarship D-I athletes) want their time in the limelight, too, even though there is nothing to sign because there is no athletic scholarship being offered. Not a problem. They can now stage a signing ceremony, and the colleges and the NCAA go along with it, even providing tips and the letterhead stationery for the fake signing. Take a minute to absorb how inane that is.
Bowen and Levin published Reclaiming the Game in 2003. Bowen died in 2016, and Levin, who now goes by her married name, Sarah Taubman, and is a fellow at the National Bureau of Economic Research, has shifted her focus. So no one has updated their findings. But most indicators suggest the problems in college athletics have only gotten worse in the last decade and a half. Internal documents at Harvard, which were made public as part of a recent admissions discrimination lawsuit, show that recruited athletes with strong academic rankings were admitted 83 percent of the time, more than five times higher than the 16 percent admit rate for non-athletes with comparable academic rankings.
We shouldn’t overlook all the good that college sports have done: opening doors, building camaraderie and grit, strengthening minds as well as bodies. It’s no accident that, for many alumni, athletics are at the center of their most cherished campus memories. We just need to get some balance back.
When I catch up with Taubman recently, she sums it up this way: “It seems to me that you could get many of the benefits of widespread participation in college sports on campus, such as teamwork and dedication, while offering a smaller advantage in admissions for student-athletes — or none at all.”
* * *
The gleaming Wellesley Sports Center is a monument to our elevated expectations surrounding youth sports. When it opens this summer, the sprawling 130,000-square-foot facility will feature two NHL-regulation-size ice rinks, two swimming pools, an indoor turf field, a strength and conditioning center, a fitness/dance studio, and a track. Built largely to meet the athletic needs of young people, the complex sits on Route 9, on land previously occupied by the St. James the Great Church. That church opened in 1958, and the Boston Archdiocese sold it to the town of Wellesley for nearly $4 million a half century later.
At a groundbreaking ceremony in 2017, one official struck a reflective tone: “For generations, this 8-acre site and St. James Church served the needs of the Catholic community here in Wellesley and the surrounding towns. For generations to come, this site . . . will serve the recreational and athletic needs of thousands of residents of Wellesley and the surrounding towns.”
That pretty much captures it. For many families, youth sports — and the inexorable chase for college athletic scholarships — is the new religion. During most of the 20th century, many families spent the bulk of their time together outside of the home in church or with their religious community, while sports were something kids largely did on their own. Today, the pursuit of a child’s sports “career” is the consuming family activity, with most weekends and even vacations being consumed by grueling travel-team schedules and out-of-state sports commitments.
I offer that simply as a fact, not a value judgment. After all, the archdiocese had to sell St. James and scores of other parish properties largely as a result of church leaders’ colossal abuse of the trust that families had placed in them.
As college tuitions climb to extortionate levels, lots of low- and middle-income parents push to get their kids recruited based on the belief that an elusive athletic scholarship may be the only way they can afford college. Many affluent parents are looking for a return on all their time and emotional investment. An ever-growing Sports-Industrial Complex has emerged to meet this boundless market need: swank facilities, expensive camps, pricey gear, endless tournaments and showcases, video services, companies that rate and rank the abilities of young athletes around the country, and platoons of specialists — from skills coaches and advisers to sports psychologists and physical therapists and even light therapists. Many of these providers are legitimate professionals, but there are also plenty who seem only too eager to take money from panicked parents.
The panic is everywhere, and it’s causing parents and coaches to lose perspective, says Alison Foley, who left Boston College in December after two decades coaching the women’s soccer team. Take the early recruiting craze. In recent years, although the NCAA required prospective student-athletes to wait until their junior year of high school to make their first official college visits, at most elite women’s soccer college programs, all the recruiting slots were already taken by then. That’s because coaches were using an off-the-books process to secure “verbal commitments” from promising girls as young as seventh grade. Foley says all of this made her increasingly uneasy. I hear similar misgivings about the overall landscape from other coaches, though they’re more reluctant to speak publicly.
As a sign perhaps of how much things have gotten carried away, some of the most interesting and persuasive calls for moderation and reform are now coming from inside the Sports-Industrial Complex itself.
At Edge Performance Systems, located upstairs from the Foxboro Sports Center and its three NHL-regulation-size rinks, the walls are covered with framed jerseys and photos of the likes of Rob Gronkowski and Wes Welker. They and a host of NFL, NHL, and other pro athletes sing the praises of EPS’s strength and conditioning services. Owner Brian McDonough started out a quarter century ago as a middle school phys ed teacher in Boston, but his side work helping get a couple of New England Patriots into better shape soon flourished into a thriving business training elite athletes at every level. Today, he and his team run two facilities where they have trained about 450 athletes in the pros, 3,000 in college, and 10,000 in high school.
When I visit his Foxboro center, one of the muscular high schoolers working out is the son of former Patriots tight end Christian Fauria. Staff members use state-of-the-art equipment and sophisticated technology to track their clients’ movements and performance so they can optimize workouts while avoiding overuse.
McDonough says most of the parents he deals with are terrific, deferential to the expertise of the EPS staff. But when they advise the kids to take breaks from their sport or their training, some parents don’t want to hear it. These parents are so desperate for their kids to get “looks” from Division I scouts that they insist on having them compete in showcase tournaments every weekend. Many of these showcases, McDonough says, are just moneymakers, peddling the fiction that lots of top scouts will be there. In reality, there are way more showcases taking place around the country each weekend than there are college scouts.
Korey Higgins, director of EPS’s youth and high school program, says overuse injuries are the inevitable result of kids spending all that time, all year round, on the ice or the field or the court. Adolescent athletes are suffering repeat stress fractures and other chronic injuries that, until recently, were almost unheard of in school sports. While many parents push their children to specialize in one sport at an early age, to improve their odds of obtaining a college scholarship, Higgins says he and McDonough encourage kids to participate in multiple sports, at least until 15 or 16. Playing different sports works different muscles, helping to avoid overuse injuries. “And it’s healthy not to always be the best player at a sport,” Higgins says. “It gives you humility and keeps the fire in you.”
Overuse is believed to be responsible for nearly half of the several million sports-related injuries suffered by athletes in middle and high schools each year. More alarming are the potential long-term consequences. For example, anterior cruciate ligament (ACL) knee surgeries used to be relatively rare in teenagers, but they are now common, given the rise in year-round competition. A recent study found that around 75 percent of people who underwent ACL surgery developed arthritis within 15 years. Could we someday face an epidemic of 30-year-old arthritics?
* * *
There’s a reason reform has been elusive in college sports. So many powerful interests are invested in maintaining the status quo that it’s almost impossible for one coach or one college to lead the change without suffering major consequences.
“This is a multidimensional chess game,” says Brian Mitchell, the former president of Bucknell University and coauthor of How to Run a College. The extravagant revenue generated by many football and basketball programs has helped create formidable power centers of athletic directors, trustees, and alumni while blurring the true picture that, overall, “athletics has become an unfed beast.”
The governing body that theoretically could effect real, across-the-board change — the NCAA — has, despite its lofty rhetoric, repeatedly proved itself to be not up to the challenge.
The NCAA, says spokeswoman Michelle Hosick, is continually working to improve the student-athlete experience. But she stresses that policy is set not by NCAA executives but rather by the colleges in the organization. “We are a membership organization, and members make the decisions.”
For guidance, I turn to Robert W. Turner II, an assistant professor at the George Washington University School of Medicine and Health Science and author of the book Not for Long. Before that, he was a Division I scholarship athlete and a player in the NFL and other pro football leagues.
Turner says reform needs to start with transparency, eliminating the empty promises about giving athletes at top-tier programs a quality college education. “The universities and the NCAA need to stop lying to people and tell kids and parents the truth,” he says. “We are recruiting you so we can win. It’s a business, a moneymaking enterprise.”
Because of the chasm between money-generating and money-losing college sports programs, reform will need to be multipronged.
Let’s start with those professional-in-all-but-name D-I men’s basketball and football programs. “I believe that colleges have no business being in the business of sports,” Turner says. Yet the financial stakes are already absurdly high, and the big-time programs have invested heavily in the infrastructure needed to keep their teams winning and the dollars flowing. It’s unrealistic to expect them to walk away from all of that, right?
This is where Turner offers an idea that strikes me as ingenious: Have the colleges lease the rights to their brands, their team names, and their stadiums to for-profit professional sports operations that would serve as a feeder to the pros. (In Europe, top professional soccer teams like Manchester United manage their pipeline by running their own youth academies.) What if, instead of the university administration and athletic department at UNC-Chapel Hill overseeing the men’s basketball team there, a for-profit “Tar Heels Club” ran the operation, hiring both coaches and players, who would be compensated at market rates. Similarly, at the University of Alabama, the football operation would be run by a for-profit “Crimson Tide Club.”
A leasing arrangement would allow rabid fans and alumni to continue to root for their beloved team, the university to receive substantial revenue, and the players to receive fair compensation. It would also end the charade that, at some schools, requires players to pretend to be students and administrators and faculty to pretend to provide a rigorous education. For these highest-profile sports programs, this arrangement would also cut out the middleman of the NCAA and all its rules and selective enforcement.
I like Turner’s suggestion, and decide to run it by Taylor Branch, the civil rights historian. Branch (who was recruited by Georgia Tech to play football but opted to attend Chapel Hill on an academic scholarship) also likes the idea, but he suggests an important addition. The universities, in exchange for continuing to benefit from these players, would be required to offer each of them a full college scholarship that they can redeem at any point during their lifetime. The vast majority of the players would presumably enroll when they could benefit from it most: at the conclusion of their playing career. If a student couldn’t meet the school’s admissions requirements, mandated agreements between colleges would allow them to transfer the scholarship to a different one.
OK, but what about all the other, lower-profile Division I sports — the ones like water polo, squash, tennis, soccer, and crew, which were exposed in Varsity Blues for making a mockery of the admissions process? For this category, Turner says, “We have a perfectly good model for how to handle college sports: Division III.”
He argues that getting rid of athletic scholarships, which are currently available only at the Division I and II levels, would defuse the arms race that is distorting youth sports and college admissions. What about students for whom an athletic scholarship could be the difference between a free education and one that will saddle them with debt? Under the Division III model, they would get financial aid based on their need. Colleges might even be able to be a bit more generous if they took the savings from shrinking those bloated athletic budgets and plowed it into financial aid. Besides, families that spend a decade chasing the financial windfall of an athletic scholarship often discover the net gain is much smaller than they imagined, given all they’ve spent on clubs, camps, gear, and travel. And remember that most athletic scholarships are partial.
Still, the Division III approach to sports is not without serious problems, and it needs reforming, too. I’d argue that most selective D-III colleges already have a perfectly good model operating on their campuses. It’s called club sports. These teams attract competitive types who love their sports and honor the founding mantra of college athletics: mens sana in corpore sano — a sound mind in a sound body. Club teams play on the intercollegiate level, and the intensity is considerably higher than for intramurals. The students who fill club rosters tend to arrive on campus with long histories of competing in their sport. That record of participation and passion presumably worked in their favor during the admissions process, but what it didn’t do was give them access to a special fast-pass lane for recruited athletes. In other words, sports played exactly the role it should have in admissions.
To see what an athletics-affirming but recruitment-light culture might look like on a Division III campus, all we need to do is head over to that temple to meritocracy on the Charles: MIT.
In their 2003 book, Bowen and Levin were struck by how much more sensibly MIT balanced athletics and admissions than most other highly selective colleges. While coaches there could submit names of prospective student-athletes to the admissions office, there were no “coach’s slots” and no special lane for athletes. One coach there told the authors she wasn’t sure it was even worth her time to submit names. MIT coaches knew that any successful applicant would have to have the same academic stuff as any non-athlete applicant.
That appears to be how sports continue to be treated at MIT. McGreggor Crowley, the former admissions official, tells me that athlete applicants to MIT go through the same full-committee review process as any other applicant. “The MIT coaches would need to find kids who wanted academics and could deal with not having the certainty of a guaranteed slot.”
One coach at another selective Division III school tells me, “Nobody does it like MIT. If they don’t have a quarterback or a goalie one year, so be it.” Despite refusing to put a thumb on the scale for athlete applicants, MIT has produced a successful sports program that enhances, rather than detracts from, its academic reputation.
Wouldn’t it be great if every college could say the same?
A U.S. Department of Agriculture program has provided $1.7 billion in grants and low-cost loans to struggling rural colleges and universities in the last three years. That raises questions about who closes and who gets to stay open.
Iowa Wesleyan University found itself facing closure in November as a cash crunch left it needing additional money in order to operate for the spring semester.
But soon after the 700-student university in southeast Iowa went public with its peril, it rallied. Leaders determined they had received enough in gifts and newly favorable financing from the U.S. Department of Agriculture to remain open, at least for the short term.
Both the gifts and the loan modifications were necessary for the university’s survival, said its president, Steven E. Titus. Could Iowa Wesleyan have announced in November that it was staying open if it hadn’t secured changes to its outstanding loans? Titus’s answer was simple.
The university was able to extend the time frame on an existing USDA loan from 35 to 40 years. It deferred some interest and principal payments, and it changed its collateral requirements.
Collectively, those moves save Iowa Wesleyan hundreds of thousands of dollars annually and free up a sum of about $3 million that can now be used in a pinch, Titus said. Those are substantial amounts for a university the size of Iowa Wesleyan.
“We’re a $23 million-a-year enterprise,” Titus said. “We’re a very small institution from that standpoint, so yeah, when you start talking about $80,000, $100,000 at places like ours, that is really significant.”
What, exactly, was Iowa Wesleyan doing with a USDA loan in the first place? Colleges and universities receive funding from a variety of sources, including the federal government, for any number of research initiatives and other projects. When it comes to sources from which they can borrow, though, the Department of Agriculture isn’t necessarily the first place that comes to mind.
Nonetheless, one USDA program seems to surface again and again when small colleges are under intense stress. It has become an important source of cheap capital on favorable terms to colleges and universities in rural areas that have struggled to increase enrollment and revenue in the face of demographic changes and other pressures bearing down on higher education.
The program, the USDA Rural Development Community Facilities Direct Loan program, was authorized in the Rural Development Act of 1972. The law allows the federal agency to directly lend money to several types of “community facilities” deemed essential, such as those for health care, public safety and higher education.
Lending under the program has grown in recent years. Colleges frequently use it to build dormitories or renovate buildings, often with an eye toward using their new facilities to bring in more students or additional revenue. Institutions have also found ways to use the program to refinance existing debts — sometimes when they are finding it difficult to pay those debts or to meet requirements put in place by bondholders.
Consequently, some in the financial industry are taking notice of the federal lending to colleges and universities. Skeptics privately wonder whether the USDA is functioning as a lender of last resort. The agency has, after all, stepped in to lend to small institutions that can’t secure financing elsewhere and that otherwise would be unlikely to survive.
Such an argument is politically fraught. Yes, a hard-line free-marketer’s view would be hostile to the idea of the government bailing out failing colleges and universities with cheap capital. And some small colleges that are closing and leaving holes in their communities are not rural. On the other hand, champions of small colleges and rural America can point out that the campuses receiving funding are often among the largest employers in their regions, making them critical pillars of small communities that deserve support.
Paradoxically, a small campus representing a major chunk of a region’s economy may not have access to enough capital. Local banks don’t always have the cash on hand to meet their lending needs. National lenders sometimes hesitate to provide financing on favorable terms to far-flung areas.
Yet such small colleges still feel they must make major investments in order to remain viable into the future. Their aged buildings will fall apart without work. They need at least some gleaming new facilities to be able to compete for students.
Many of the leaders who have used the USDA financing admit it may not conform to the mandates of a free market. But they say it gives rural colleges a chance.
Under that line of thinking, public financing looks less like a handout and more like a tool to help rural communities that have few other anchor institutions.
“We’re talking about how we preserve a local economy and regional sustainability,” Titus said. “Even though we’re a small institution, we’re in our 176th year. So historically, culturally, this institution is a convener and provides a lot of cultural and educational opportunities in the region. It also contributes to the human and social capital.”
Underpinning all of those discussions are questions that have long roiled higher education and economic development in the United States. Who gets to decide when a struggling institution deserves to close because it made the wrong bets or serves a market that has evaporated? And at what point does lending to those institutions flip from giving them a puncher’s chance to throwing good money after bad?
Buying Buildings, Freeing Cash
In November 2017, U.S. Senator Jerry Moran, a Kansas Republican, announced that a small college in his state, Bethany College, had received a $21.2 million loan under the USDA Community Facilities Direct Loan Program.
In addition to quoting leaders at Bethany, the announcement included a statement from a congressman, Roger Marshall. In that way, it was like many other announcements local leaders and politicians make to promote their successes bringing home federal funding.
USDA direct loans to colleges are regularly highlighted in such announcements. Bethany College in Kansas isn’t even the only Bethany College to receive a USDA loan recently. Bethany College in West Virginia announced its own USDA loans this year.
None of that changes the fact that the 2017 announcement was critically important to Bethany College in Kansas. The $21.2 million loan allowed Bethany to purchase a residence hall that it had been leasing from a for-profit company. It also refinanced long-term, high-interest debt with conditions that were much more favorable to the college.
Bethany had been paying what amounted to a 12 percent interest rate on the dormitory and between 6 percent and 8 percent interest rates on different sets of bonds, said the college’s president, Will Jones. Now, it is paying a 3.25 percent interest rate over 30 years, and it did not have to pay any principal early in the loan.
All told, the deal saved Bethany about $600,000 per year. It was a critical boost for a college that had recently been on probation with its accreditor because of concerns about its finances and operational processes.
Although Bethany had its probation lifted a few months before, the college’s balance sheet wasn’t particularly strong when the loan was announced.
“Being able to do this really was a godsend for Bethany,” Jones said.
Those changes gave the college the resources it needed to invest in a crafts program that teaches students about the arts and Swedish culture in the college’s home of Lindsborg, Kans. It helped Bethany further build upon its Swedish roots by planning a “Swedes to Sweden” service-learning trip in which the college will cover students’ costs.
The new loan also enabled the college to repay $2.7 million it had borrowed from its endowment, said its chief financial officer, Vincent Weber. And it came without some of the strictest requirements that are often written into other forms of borrowing, like requirements that the college meet certain equity ratios.
Securing the loan wasn’t easy. It took 18 months, according to Weber. Local community members had to write letters of support, the college had to provide financial projections for the next five years with and without the USDA loan, political representatives had to sponsor the application, and the college had to explain why the loan would be good for the surrounding area.
“It really does take a lot of cooperation with the local community,” Weber said.
Local banks probably would have had the capacity to refinance Bethany’s loans, Jones said. Only they might not have wanted to, given the college’s recent stint on probation.
“The issue for Bethany was, I’m not sure anyone would have wanted to take on the risk,” Jones said.
In other cases, local banks have clearly been willing to lend money to rural colleges, but they would have been hard-pressed to come up with the money quickly. Emory & Henry College in southwest Virginia secured $51 million in financing through USDA Rural Development in 2016 — $46 million in a direct loan and $5 million in a loan through a local bank that the USDA guaranteed.
The college turned to USDA financing after two national banks, Bank of America and BB&T, called its loans. Emory & Henry had been paying on time, but the national banks weren’t interested in working with it further, said the college’s president, Jake B. Schrum.
“One day, they just got in touch with our chief financial officer and basically said, ‘We’re calling your loans,’” Schrum said. “They thought our ratios were not as healthy as they wanted them to be.”
That left Emory & Henry seeking to refinance between $35 million and $39 million in long-term debt. The college tried local banks first, but no single bank was large enough to meet its lending needs. Bankers looked into putting together a consortium that would allow Emory & Henry to refinance, but then the college discovered it could refinance with the USDA.
Doing so required the college to be developing a new project, Schrum said. It had been considering building an eight-residence-hall, 206-bed project that included six apartment-style townhomes and a community center. The architectural plans had even been drawn up.
Emory & Henry did the deal with the USDA, securing a total of $51 million in direct and guaranteed USDA lending. The college’s interest rate is 2.375 percent, and it is fixed over 40 years.
“After the loan, we actually had a lower payment than we had before,” Schrum said. “We had a number of older housing units on campus, so it really upgraded the facilities for housing.”
While many of the colleges and universities receiving direct loans under the Community Facilities program have used the money to construct new buildings, invest in existing facilities or buy buildings that they didn’t own, such action doesn’t always take place. A review of numerous colleges receiving loans in recent years shows other arrangements.
Alderson Broaddus University in West Virginia used a $27.7 million loan to shore up its financial indicators in a complex transaction that involved the university’s endowment corporation. The endowment corporation used the loan to acquire parts of the university’s campus, which are being leased back to the university.
“The USDA loan will allow for the reallocation of additional resources to cover operating expenses at AB,” according to the university’s official announcement of the deal. “The immediate effect on the financial position will also result in improved numbers in the university’s Composite Financial Index (CFI), a key indicator used by the Higher Learning Commission in determining financial viability.”
Alderson Broaddus is far from the only institution to use a USDA loan to facilitate such a sale-leaseback agreement with an affiliated entity. It’s the strategy Iowa Wesleyan used when it first secured its USDA financing — $21.4 million in direct lending and a $5 million guaranteed loan — in 2016. A review of Community Facilities loans made in 2018 shows it to be a relatively common part of loan transactions. Often, the transactions also include plans to purchase new facilities, build them or buy land a college didn’t previously own — but not always.
Large Sums Lent
The Community Facilities program has infused more than $1.7 billion into colleges and universities in the last three fiscal years through direct loans, guaranteed loans and grants. USDA figures do not break down the totals, but a review of grants and loans made in the 2018 fiscal year indicates loans are likely a large component of the total. Loans tended to be counted in the millions or tens of millions of dollars, while grants were often in the hundreds of thousands of dollars.
Loan and grant funding totaled $396.7 million in the 2016 federal fiscal year, $984.9 million in 2017 and $326.9 million in 2018.
Federal lending to higher education has caught the attention of bond ratings agencies. In March, Moody’s Investors Service issued a paper looking at the Community Facilities program and the Historically Black College and University Capital Financing Program. The programs support institutions’ near-term financial viability, according to Moody’s.
“For the colleges that are able to obtain that financing — and not all qualify — it is a bit of a release valve,” said Susan Fitzgerald, associate managing director at the ratings agency. “They are able to obtain lower-cost capital financing than they could in the public market. Some may not even have cost-effective financing alternatives.”
The Community Facilities program is estimated to have $3.5 billion in direct loans in 2018, according to Fitzgerald. That number isn’t just loans to colleges and universities. It includes other types of institutions that qualify for the financing. Still, it shows how large the program has become. In 2014, the program totaled about $1 billion.
Even so, the loans represent a relatively small slice of the total borrowing by colleges and universities. Public and community college debt more than doubled from $73 billion to $151 billion over a decade, according to “The financialization of U.S. higher education,” a paper published in the journal Socio-Economic Review in 2016. Debt for private colleges totaled $95 billion in 2012, it found.
Wealthy institutions were more likely to borrow for many different purposes, including instruction and research, the paper found. They tended to borrow in order to maximize their financial revenues — they paid less interest on their debts than they earned on their endowment assets, making it cheaper to borrow for projects than it would be to pay for them out of pocket. Private institutions that were not as wealthy increasingly borrowed in order to invest in in auxiliary and student services, including student amenities like dormitories, cafeterias and athletics and recreation centers. That likely indicated the less wealthy institutions used debt in order to maximize their commercial revenues in a bid to attract students who are willing to pay higher tuition and fees.
The USDA Community Facilities program doesn’t just provide financing to private institutions. It has financed public institutions as well.
Concerns and Criticisms
The USDA loans are not without their drawbacks — or their critics.
After Bethany College in Kansas announced its loan, a self-described conservative wrote a letter to the editor in a local newspaper arguing that the government was giving away tax money that could be better spent elsewhere.
“Due to extremely low commodity prices, many farmers could much better utilize U.S.D.A. loan money than a private, for-profit college,” the letter said.
Bethany leaders pointed out that the letter writer incorrectly identified the college as for-profit and seemed to equate the loan with a grant. Bethany is in fact a nonprofit affiliated with the Evangelical Lutheran Church in America, and its leaders say they intend to fully pay back the money they borrowed.
Bethany’s president, Jones, acknowledges people may have objections to the government providing loans.
“I definitely could see that there are likely to be folks out there who have a problem with the USDA making this type of loan,” Jones said. “I personally think it’s a great investment on the part of the federal government to invest in local, rural communities that often do struggle to find financing.”
Any comparisons between the USDA lending to colleges and federal lending to HBCUs could also prompt other worries: about the likelihood that the loans will be paid back and about whether the lending is being done in the most effective way possible.
Some HBCUs have had difficulty accessing the HBCU Capital Financing Program, and others have struggled to pay their loans under it. Two HBCUs recently defaulted on loans under the program, and 29 percent of loan payments were delinquent in 2017, according to a June 2018 report from the Government Accountability Office. Eight private institutions received deferments under the program earlier this year.
Further, the Department of Education in 2018 forgave hurricane-relief loans made to four HBCUs that were made after Hurricanes Katrina and Rita. The forgiveness came under a budget bill that cleared more than $300 million in loans made to the institutions.
Comparisons between HBCUs and other types of institutions are fraught and imperfect. HBCUs have long faced challenges borrowing, raising money and enrolling students who can afford to pay to attend college. Their needs are clear. HBCUs responding to a GAO survey said 46 percent of their building space needs repair or replacement, on average.
Many predominantly white institutions arguably have advantages that would make them more likely to be able to repay loans. Still, those same advantages could make predominantly white institutions more likely to be able to access nongovernmental sources of capital.
Setting that discussion aside, USDA statistics indicate its Community Facilities loan portfolio is performing well. Payment delinquencies are less than 2 percent across the direct and guaranteed programs, according to the agency.
That figure is for the entire portfolio, not just higher ed. It only addresses payments, not nonmonetary defaults that would take place when debt covenants are breached.
Some still wonder whether the government is set up to operate as a lender.
“From the government’s point of view, what is the appropriate risk-adjusted interest rate to charge?” asks Marc Joffe, senior policy analyst at the Reason Foundation, a libertarian think tank. “If you actually want to be a loan program and not a subsidy program, you have to charge enough interest to make sure you’re covering your defaults.”
The USDA program could play an important role by sustaining colleges and universities in areas where they are needed, said Charlie Eaton, an assistant professor of sociology at the University of California, Merced, who was the lead author on “The financialization of U.S. higher education,” the paper published in the journal Socio-Economic Review.
“At some level, it can be a good thing we provide capital to colleges and universities via the federal government rather than bond markets, because the federal government can make decisions about borrowing based on social need and where investments will serve a social good,” Eaton said. “Bond markets are going to be making lending decisions based on what’s likely to generate the highest rate of return.”
In other words, some colleges and universities might want to make the decision to build a dormitory based on factors other than whether it will make enough money to satisfy lenders. They might want to build dormitory — or other facility — because it is needed.
All of this comes at a time when various levels of government have pulled back on investing in higher education. College borrowing increased in recent years because federal and state governments have provided less capital for the construction of facilities, Eaton said.
When historically available sources of cheap capital dry up, institutions will turn to other sources, like the public bond markets, or a USDA program.
“The question is, does the USDA really have structures in place to make sure that it’s making its loans where there’s a social need, and where it’s not going to lead to risk or wasteful investments by the colleges doing the borrowing?” Eaton asked.
The answer to that question isn’t entirely clear. If, theoretically, a college with dated dormitories builds a new facility, then raises room and board rates in order to improve its budget outlook, is it taking action that the community needs? Or is it taking action that it needs? When are those two needs at odds, and whose job is it to evaluate them?
Those well versed in the way the USDA program works describe some decision making for smaller projects centered in local offices and a majority of final decisions being made in Washington. The agency, experts say, looks at many factors to gauge creditworthiness and eligibility. Factors include the regional impact a loan can have.
“In a lot of these smaller towns, the colleges are either the top one or two or three employer in the area,” said Rick Gaumer, who was chief financial officer at Emory & Henry when it borrowed from the USDA and is now a consultant at Academic Innovators, where his work includes helping colleges secure USDA financing.
In Gaumer’s experience, institutions pursuing funding are seeking to improve, become more relevant to students and grow. The Community Facilities program also adopts a “defensive strategy” at times, attempting to prevent entities from failing and hurting a region.
The agency doesn’t always step in to prevent an institution from closing. St. Gregory’s University, which was Oklahoma’s only Roman Catholic University, decided to close in 2017 after the USDA turned down an application for a loan that college leaders said it needed to survive.
Colleges have also turned to the USDA when other sources of financing have soured on them. Bard College in upstate New York had its debt rating downgraded in 2016 amid concerns about cash and borrowing from its endowment. A year later, it was publicly discussing USDA financing.
“Bard did make an application for a loan, but it did not make it out of the New York State office because it was thought that the level of debt was too great for the college,” said the college’s chief financial officer, Jim Brudvig, in an email. “We have not withdrawn that application yet pending the submission of a new application.”
The new application calls for a smaller loan and a larger equity contribution from the college, Brudvig added. Bard is aiming to finish the application by April.
Clearly, some cases will be easier than others. Emory & Henry didn’t need USDA financing to survive, said its president, Schrum. It could have applied about half of its $80 million endowment in a pinch. Such an emergency plan would have raised numerous other issues, but it meant the college wasn’t facing closure.
It is important to note that Emory & Henry did its deal with the USDA at a time when rural Virginia colleges were suffering, Schrum said. Virginia Intermont College had just closed its doors in 2014. Sweet Briar College had attempted to shut down in 2015 before its alumnae put a stop to that plan.
“Those things were happening in the local area, and I think some of these national banks are very risk averse and are not used to taking chances — certainly on institutions that are far away from their headquarters,” Schrum said. “We can tell them that we have a $70 million to $75 million economic impact on this area, but that doesn’t make as much sense to them, or they don’t care as much, as it does to First Bank & Trust, which is just down the street from us.”
For a more complicated case, think back also to Iowa Wesleyan’s situation. The university this year managed to refinance a USDA loan it initially received in 2016. It only received those 2016 loans after going into forbearance on two sets of bonds. It went into forbearance because it was out of compliance with bond covenants, according to a 2016 consultant’s report.
Iowa Wesleyan never skipped a scheduled principal or interest payment, said its president, Titus. When it first received the USDA funding in 2016, it had an improvement plan in place that included rapid growth in online programs. It hired an online program management company to assist.
Eight months after signing its USDA loans, the OPM went out of business.
“That was a major blow to our turnaround strategy,” Titus said. “That was about a $2 million revenue hit for us at a very fragile time.”
Who is to say whether Iowa Wesleyan was a victim of circumstance or a university that should have had enough time outrun its problems?
Gaumer described a worldview in which struggling institutions should be left to close — although he wasn’t speaking specifically about Iowa Wesleyan’s case. The wolf, he said, is chasing you. Maybe the slower institutions should be caught and eliminated.
That comes with costs, too.
“But you work for higher education,” he said. “The small school has to survive. Not everyone can go to the big state university. There is a place for smaller schools in our society, and I think that society has been well served.”
eCampusNews, Rick Gaumer
Investment in Wi-Fi -enabled technologies has university reaping significant results in recruitment, enrollment and retention.
At Emory & Henry (E&H), technology is not only transforming our campus into one of the most digitally-connected environments, it is also laying the groundwork for education of the future—thanks to Wi-Fi.
With our recent technology initiatives—including triple-digit speed Wi-Fi—we have built a strong foundation for our vision of the campus of the future; including the ability to realize our strategic vision where “blended learning” is a reality, where learning is accessible, personal and affordable to diverse groups of students. This is learning that our students can fully leverage for bigger success pre- and post-graduation.
Why is Blended Learning the Future?
Our 2013-2020 strategic plan set in motion a deep planning and implementation overhaul of our technology to help enhance teaching, learning, research and the overall campus experience. Our vision is to create a blended, digital-in-person experience for students. They will learn wherever and whenever they like. If they need a deeper dive into areas where they need help, they will venture onto campus. And they’ll do all this seamlessly.
We believe this “blended learning experience”—one which combines online and offline—will be the new learning process to engage students.
Online students want more of an in-person experience and in-person students want more of an online experience. We are seeing this trend not only in higher education, but globally. A recent white paper from higher education managed service technology provider Apogee reports that “massive online-only companies like Amazon are venturing into the brick and mortar space through the acquisition of firms like Whole Foods. In time, our consumer experience will be blended–a seamless oscillation between online and in-person.”
One clear takeaway is this: technology is playing an increasingly mission-critical role that will make or break universities as they strive to find better ways to educate future generations and empower their campuses for the future.
How to Prepare for the Campus of the Future
There is a great deal of uncertainty about the technology that will be needed on any given campus in the future. How many devices will need to be networked? How much bandwidth will need to be purchased? What data storage and usage policies, including around security, will need to be developed? What processes for managing a more expansive network will need to be defined?
The best way to be ready for this worldwide phenomenon is to start planning and preparing as thoroughly as possible…now. First steps include:
- Invest in the foundational components already present today–internet and Wi-Fi
- Create a predictable funding model for innovation
- Have a network scalable enough to handle the fast pace of technology innovation
Delivering our Vision for the Campus of the Future through Wi-Fi
The promise of technology is that things can get done better, faster and cheaper. But to make that happen, collaboration needs to happen among all the different groups of decision makers on campus. Technology cannot be siloed. It is not a technology issue that can simply be handed to the CIO to solve.
At Emory & Henry, decision making involved IT, finance, housing and business. We looked at our technology dollars very closely. We realized how challenging it was to meet our goals: exceed student demand for seamless wireless performance, innovate within a sustainable financial model, and refocus our IT efforts on other strategic initiatives.
To better meet these challenges, we decided to partner with Apogee, to set-up and manage the new network. Partnering also gave us the opportunity to make this large capital expenditure on a recurring basis, rather than a “one and done” initiative—a nice option when installing new technology that requires a large capital infusion.
Our investment in cutting edge-Wi-Fi, offering speeds of up to triple digits per device, now provides a reliable and scalable network with on-site, 24/7 support to more than 1,200 students and 300 staff of our 180-year-old college. This high-speed Wi-Fi network, deployed campus-wide in academic, administrative and all 20 residences, is foundational to our vision to create a blended learning experience.
In addition to Wi-Fi, Apogee also provides IPTV services, managed social media, a digital signage solution, and a Campus Life Channel – creating a complete suite of benefits to further drive student satisfaction, engagement and our strategic goals.
Staying Ahead of the Technology Game
Of course, it’s all well and good that our new technology infrastructure will support today’s challenges, but will it be ready to take on whatever lies ahead?
Future-proofing our campus was a key priority in our technology overhaul planning. And so, creating a predictable funding model for innovation was a critical parameter for us to achieve our vision of the campus of the future. With managed services, we now have a scalable strategic infrastructure able to handle the fast pace of technology innovation, 24/7 support, ongoing reporting/analytics and upgrades.
As technology continues to evolve to higher, more advanced attributes, we’re assured that we won’t be stale or fall behind.
In addition to laying the foundation for our vision of the future, we’re reaping significant results from our new technology: recruitment has ratcheted up, more students stay on campus on weekends to do homework, and student complaints about Wi-Fi has decreased significantly—hard-core gamers and data-heavy researchers included. This direct impact on enrollment and retention alone has made this investment both strategic and cost-effective.
Add to that, this comprehensive service is backed by an around-the-clock Texas-based support center, where students and faculty can reach support via phone, chat, text and email.
Higher education has a distinguished past and an intriguing future. With great challenges and great opportunities looming, many institutions are at critical junctures.
What’s your vision for the future? Is your technology framework laying the foundation for a new learning experience, a connected campus, empowered educators, informed administrators, and students who have the tools they need for success in a new digital world? If not, it’s time to start planning.