One of my goals at Bacon’s Rebellion is to divine how colleges and universities function as business enterprises. What are the key drivers of revenues and costs? How well are they performing? Is their position in the marketplace improving or losing ground? This is not easy, as higher-ed institutions do not present their data in ways that lend it to outside analysis.
In pursuit of a keener understanding, I have been dabbling in a State Council of Higher Education for Virginia (SCHEV) database that tracks the number of applications, admissions, and enrollments for Virginia’s public universities.
These are critical metrics for assessing an institution’s health. It is a positive sign when the number of students applying for admission increases, a bad sign when applications drop. It is a sign of exclusivity — the ability to pick and choose students — when an institution accepts a low percentage of applicants and rejects a high percentage. Conversely, it is a sign of desperation when an institution accepts all comers. Finally, it is useful to track how students who, once admitted, decide to enroll and how many choose to attend a different institution.
The chart above shows admission data for Virginia’s flagship institution, the University of Virginia. As can be readily seen, the number of applications has surged — up 105% over the eleven years between the 2005-06 school year (when SCHEV data begins) and the 2016-17 year. Part of that increase reflects the fact that students are applying to more colleges than in the past. But in UVa’s case, the deluge in applications also reflect an increasing interest in the school. For all the controversies UVa has endured in recent years, it outperformed other public colleges by a wide margin. The average increase in applications for Virginia’s other fourteen public four-year institutions was 29%.
With skyrocketing applications, UVa could afford to be selective. In a sign of increasing selectivity, the university’s acceptance rate declined from 37.7% to 30.4%. That performance was all the more impressive compared to other Virginia institutions. Every other four-year college and university became less selective over the same 11-year period, some more so than others, as can be seen in the charts below. (A downward sloping lines indicates increasing selectivity.)
Speaking generally, Virginia’s most selective institutions tended to hold their own over the decade when measured by this indicator, while the least selective institutions lost ground, as seen by the upward sloping lines.
That brings us to a third metric, the “yield rate,” or the percentage of students granted admission who decide to enroll. Generally speaking, a higher yield rate indicates that an institution is in greater demand. A lower yield rate suggests that more students are saying, thanks, but no thanks.
As seen in the charts below, yields declined almost universally through the eleven-year period — VMI was the sole institution to buck the downward trend. (I deleted Norfolk State from this series because it was an outlier that rendered meaningless results.) The negative yield-rate trend likely reflects an increasing proclivity of students to apply to more colleges and nail down more acceptances in order to increase their choices, so declining percentages are not necessarily a reason for alarm. That said, the decline was downright precipitous for some institutions. Particularly alarming: Only one in five students accepted to the University of Mary Washington and Virginia State University wound up enrolling.
Admission, acceptance and yield trend-lines are especially worth watching for institutions that have increased tuition aggressively. There is widespread evidence that families are showing increased resistance to the high cost of attendance, particularly among institutions that lack a prestigious reputation. Some institutions have priced themselves out of the market.
For example, Mary Washington University could be running into price resistance.
Mary Wash’s yield rate is low — slightly fewer than 20% of accepted students choose to enroll. Even though applications have increased in recent years, the university has had to accept a higher percentage of applicants in order to maintain its enrollment goal. That means Mary Wash has been dipping deeper into the applicant pool and showing less selectivity. As long as it can increase the number of applications — through more aggressive marketing, perhaps — the Fredericksburg university can maintain its enrollment numbers. But the trends are worrisome.
The SCHEV data allows us to drill a little deeper, viewing the trend lines for both in-state and out-of-state students. Applications and enrollment have held up for in-state students, but enrollment has stumbled badly for out-of-state. That’s critical because out-of-staters pay a $14,600 tuition premium to attend (not including adjustments for financial aid). Out-of-state enrollment, which stood at 323 in 2005-06, fell by two-thirds to 102 in 2016-17. While Mary Wash accepted 86.7% of out-of-state applicants, a mere 9.9% of those accepted chose to enroll — down from 25% eleven years before. Given the out-of-state tuition premium, the out-of-state enrollment decline represents a loss of $3.2 million in tuition revenue.
That revelation sent me running to the most recent Mary Wash annual report: In fiscal 2015, the university lost $39.5 million in its net position (equivalent to net equity), and in 2016 saw a rebound of only $4.1 million. With $168.6 million in noncurrent liabilities (long-term debt) and $358 million in assets, the school is, in business parlance, fairly highly leveraged. Hopefully, more recent enrollment and financial trends have been more positive. But if I served on the Board of Visitors, I’d be asking a lot of questions.
University board members are unlikely to ever see this data from their college and university presidents. They would be well advised to acquaint themselves with it on their own initiative.