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If administrators can identify warning signs early, it is hoped that they will be able to take informed and beneficial action to save their institution.
INTRODUCTION
SINCE THE ECONOMIC DOWNTURN OF 2008, many higher education institutions have been struggling with financial pressures. The recent fight over the closure of Sweet Briar College was a strong warning message as to the seriousness of this problem. Despite having an $84 million endowment, this small Virginia girls' school cited "insurmountable" financial problems when announcing it would close at the end of the 2014-15 school year (Biemiller 2015b). A state court later ruled that Sweet Briar would remain open, at least for one more year, thanks greatly to the work of its alumnae (Stolberg 2015). The story of Sweet Briar is still unfolding, but the point remains that even reputable schools that have been operating for decades can struggle with finances. If administrators can identify warning signs early, it is hoped that they will be able to take informed and beneficial action to save their institution.
Some blame an "education bubble" for many institutions' financial difficulties in the wake of the 2008 recession and say that the changes schools have made, like lowering admissions standards or increasing tuition discounts, are not sustainable in the long run (Koon 2009). Schifrin (2013) agrees that schools are getting desperate for students and that continually raising discounts on tuition creates a downward spiral. Trying to increase enrollment and graduation rates often inadvertently leads to lower academic standards (Mulvenon and Robinson 2014).
One way that colleges can lessen their struggles is by merging. In March 2015, Union Graduate College and Clarkson University announced a merger despite claims of good financial health and a 200-mile separation. Schools that complement each other can increase efficiency and profitability by merging (Carlson 2015). The stage may be set for mergers to become more common, both to save failing schools and rapidly grow successful ones (Jaschik 2008).
Lessons may be learned from schools that narrowly avoided closure. Small Austin College invested in academics, demonstrated by the installation of a $1 million telescope, in the wake of the 2008 recession. Administrators said they had few costs that had not already been cut, and investing in infrastructure to attract...