Why Colleges Are Borrowing Billions
Higher-education institutions are overspending on renovations and new facilities that they hope will boost enrollment, but experts say this plan could lead to financial crisis.
by Jon Marcus, The Atlantic, October 10, 2017 (excerpts)
When the number of students at Hawaii Pacific University started to fall at an alarming rate, the university embarked on an ambitious plan to get students back.
Among other things, it spent $54 million to buy Honolulu’s iconic Aloha Tower and convert it into an anchor for its downtown campus by adding dorm rooms, community spaces, a fitness center, and venues for concerts and lectures.
To pay for this and other projects, Hawaii Pacific borrowed. A lot. By 2015, the most recent year for which the figure is available, it owed $75.3 million in municipal bond liabilities, plus $10 million in mortgage and other debts, federal tax records show.
But student numbers didn’t rebound. Instead, they continued to contract, from a peak of 8,339 in 2010 to 4,081 last fall, according to government data.
Now, like many other colleges and universities, Hawaii Pacific has fewer tuition-paying students to help it pay off a large amount of red ink.
While public attention has been focused on runaway student loan amounts, colleges and universities themselves are also borrowing heavily — often in the hope of shoring up enrollments, but in many cases leaving them financially weaker, analysts say….
At Hawaii Pacific, for example, federal data show that since 2013-14 tuition and fees paid by the shrinking number of students have increased more than twice as fast as the national average. (The university’s chief financial officer, Bruce Edwards, said in a written statement that its enrollment and financial challenges are “a familiar trend” in higher education, its borrowing was “to ensure that HPU becomes an even stronger university,” and enrollment is beginning to rebound.)…
Borrowing to build new facilities they thought would attract more students has been a particularly bad decision for small, less selective, private nonprofit colleges, according to the higher education facilities consulting firm Sightlines.Like Hawaii Pacific, many have merely ended up with more debt and fewer students to pay for it, Sightlines concluded.
read … The Atlantic
Star-Adv Oct 12, 2017: Despite debt, HPU ‘financially sound’