Paul L. Caron

Tuesday, July 24, 2012

33% of Colleges Are on 'Unsustainable Financial Path'

Bain CoverBain & Company and Sterling Partners have released a study (The Financially Sustainable University) and accompanying website (Financial Fade) reporting that over 33% of 1,700 public and private nonprofit colleges are on an "unsustainable financial path," with 28% "at risk of slipping into an unsustainable condition."

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"If we had a similarly devastating financial crisis every 5 years, then schools really would be in trouble."

Yeah it isn't like we had a huge crash in 2001-02 and 2007-?.

And debt-to-GDP isn't soaring above 100%.

And it isn't like a revenue starved central government, at entitlement knife-point, won't sooner or later eye those decade/century tax-free-compounded endowments.

Or that there are a huge number of colleges with relatively small endowments.

Or that the whole rattle-trap economy is kept on life-support (barely) by the endless printing of Fed paper supported mainly by the fast receding memory of economic productivity and power.

So, yes, Anon, other than *that* everything is fine.

You are free to put your head back where it was (sand, etc.).

Posted by: cas127 | Jul 24, 2012 10:20:40 AM

I would be interested to know how public colleges are faring versus private colleges. I only saw one graph that separated the two and it only shows the ratios of costs.

Posted by: Anthony | Jul 24, 2012 10:05:58 AM

Bain's analysis is based almost entirely on the hit to endowments that happened after the financial crisis. If we had a similarly devastating financial crisis every 5 years, then schools really would be in trouble.

Any serious financial analysis would distinguish between operating losses and investment losses. But then, Bain isn't serious. They're trying to drum up business for their high education consulting practice by publishing an alarmist report.

Bain is right that schools should be spending less on administrators and more on instructors and research. But they shouldn't need a high priced consultant to tell them that--there are plenty of books that can be purchased used for less than $20 that say the exact same thing.

What does this report tell us? Bain is an unsustainable path as corporate clients have cut back on consulting services, and Bain needs to grow its higher education practice.

Posted by: Anon | Jul 24, 2012 6:59:12 AM