With talk of mergers and acquisitions swirling around the sector, Michigan's small independent colleges are forging more partnerships to weather the storm of a shrinking market made worse by the pandemic.
The impact of COVID-19 and the downward trend of enrollment predating the pandemic has hurt higher education across the state and the country. But for independent schools, which rely on tuition as their main source of income and lack the safety net of state aid, the situation is particularly dire.
"For some of our schools, 10 more students is the difference between being in the red and the black," Robert LeFevre, president of Michigan Independent Colleges & Universities, told Crain's in a recent interview. "You have a shrinking market. We do have less and less high school graduates every year."
The competition for those students has become so fierce that it has compelled some institutions "to do one thing higher education has never done. And that is, work together," said Jeffrey Docking, president of Adrian College.
Docking, who took the helm of the 160-year-old liberal arts college in 2005, decided a couple of years ago to upend the business model. In 2019, Adrian launched Rize, an initiative allowing students to take online classes from partnering institutions around the country, expanding the availability of different programs not offered on campus. While not without critics, the program has grown exponentially and become a major reason for stable enrollment, Docking said.
"What I truly believe is that the business model for higher education in the U.S. is hopelessly broken," he said. "Small, private colleges are first in line to start closing. These schools have one choice in my opinion: innovate or die."
The mentality is much the same at Albion College, a liberal arts school around the same age and size as Adrian, targeting the same shrinking pool of prospective students.
Albion is rolling out a new program that guarantees eligible high school graduates admittance into the school and into Western Michigan University's Homer Stryker M.D. School of Medicine after their undergraduate studies, Albion announced this week.
Albion President Mat Johnson said it's the start of a new way of doing business that emphasizes collaboration over mere competition. The school has signed similar agreements with Michigan universities for nursing and engineering programs and is in talks with other medical schools. Johnson withheld specifics on those deals.
"We need to be able to convey to students and parents that we have well-worn pathways to success," Johnson told Crain's. "We hope that by the end of the year, we will have many of these partnerships."
Adrian and Albion have the advantage of being relatively close to large metro areas in the southern part of the state and have strengthened recruiting efforts in Chicago and other Midwest cities.
Attracting students has been one of the biggest struggles for Finlandia University, the only private college in the Upper Peninsula. Enrollment at the Lutheran university in Hancock was 405 students this fall, down 18 from the year before and more than 130 from a peak in 2015, according to data provided by the school. Finlandia recently announced a new articulation agreement with Northern Michigan University that provides a "clear pathway for students interested in pursuing a Master's of Social Work degree," according to a news release.
"All we've ever wanted to do is try to figure out a way to be helpful, and we'll continue to have discussions with them about possible partnerships and so forth," NMU President Fritz Erickson told Crain's. "You know, schools in the U.P. try to help each other out whenever possible."
Finlandia President Philip Johnson declined to be interviewed but said in an emailed statement, "Collaborations with NMU and other campuses have been very helpful on the programmatic side as we work through this pandemic and attempt to provide additional resources and opportunities to our students."
Partnerships among colleges in Michigan have stopped short of M&As, LaFevre said, but those deals are picking up across the industry. In the past year, there's been at least half a dozen closures or consolidations — Wesley College in Delaware, MacMurray College and Robert Morris University in Illinois, Concordia University's campus in Portland and Urbana University in Ohio.
The closure of Marygrove College in Detroit in 2019 was the most recent in Michigan. The last significant merger locally happened just down the block from Marygrove 30 years ago when the University of Detroit merged with Mercy College.
"Mergers are definitely on the table for schools that are struggling," Docking said.
Gov. Gretchen Whitmer has prioritized building a pathway to college education for Michigan residents. She has proposed a large funding increase for free community college programs and an increase in aid to universities.
"There is a price tag that stands in the way," Whitmer told Crain's last week. "We're going to eliminate that barrier."
For many private colleges, the price barrier is increasingly difficult to navigate. At Adrian, the annual cost of attendance has ballooned to $49,529. At the same time, its discount rate has crept up to 60 percent, Docking said. So even though 2020 fall enrollment grew by nearly 50 students to 1,865, revenue remained flat at $50 million.
In response to the financial strain from the pandemic, the college made budget cuts, laid off or furloughed 75 employees, and raised more than $1 million in scholarships, Docking said. The college has also made several draws against its endowment in the past few years, exceeding its spending rule by $2.5 million. It aims to pay back the money to the fund in full by the end of the year.
At Albion, where the annual cost of attendance is $62,970, administrators are facing similar financial issues. Fall enrollment was up about 40 students from last year to 1,492. While that equated to increased revenue, the college has also had to dole out more money for tuition discounts and recruiting. To ease pandemic-related financial losses, such as room and board refunds, the college tapped a $7.5 million gift — one of its largest ever — made this summer.
"The financial damage has been significant," Albion's Johnson said. "We have been fortunate to have a few generous donors."
Adrian's addition of a new e-sports management program this spring, among other new courses, didn't sit well with some students and faculty, especially those who received pink slips when the school moved to cut the history, theater, philosophy and religion programs last year.
The decision, made quietly, was reversed after outcry from students and the faculty, many of whom have demanded Docking's removal as president. Docking sent a letter to the campus community in September saying that the layoffs had been rescinded.
"… We will look for other ways to manage the budget in the year ahead," he said in the letter.
Lowering the cost of college and guaranteeing well-paying jobs after graduation is crucial for sustainability, Docking told Crain's. That's been the goal of Rize, which began with 19 schools pooling together a few programs. It has grown to more than 90 member schools and 20 majors ranging from supply chain management to computer science. Other Michigan-based member schools are Olivet College and Rochester University.
Adrian students who enroll in a major through the program still take 90 percent or more of their classes on campus, pay Adrian tuition rates and receive their degree from Adrian without transfer credits. The upside for students is more availability of in-demand majors while still getting the on-campus experience. Just a few students took part in the program when it first launched. This semester, there are 124 students taking a class through Rize.
The benefit for Adrian is being able to greatly expand its product offering without the typical upfront expenses, which normally include investing hundreds of thousands of dollars in new faculty and facilities. The administrative cost to be part of the consortium is $350 per class, Docking said.
"We've incubated this idea that we can bring down the cost … spin the dial the opposite way," he said. "It's brought vitality to the campus."
At Albion, the joint admissions program with WMed kicks off this fall. The first cohort is limited to just five students, but Johnson said he expects the program will be "tremendously popular" and scaled up each semester.
The goal is "reinventing premedical education" to be "highly successful for students of different backgrounds," Johnson said, arguing that the marriage of a liberal arts education with training for high-demand fields results in a fulfilling career.
"We know that students who start with a liberal arts background often become the most innovative and lauded doctors because they have the problem-solving skills that only come from a liberal arts education," he said.
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