Good morning! Grateful, Thankful, and Blessed.
Today on Greatful Moments, we are pleased to share a Guest Poster Q&A with Dan Ye, creator of Open School Ranking, who took the time to answer our questions about college financial stability and the warning signs families should know before committing to a college.
Choosing a college is a major decision. Families consider tuition, scholarships, academics, location, housing, and career opportunities, but there is another question worth asking:
How financially stable is the college itself?
Dan’s responses offer families information to consider when researching a college, including enrollment trends, admission rates, endowment changes, federal financial information, and accreditation concerns.
What Are the Biggest Financial Warning Signs Families Should Look For?
According to Dan Ye, one of the first things families should examine is enrollment.
A college that has lost a quarter or more of its undergraduate students over the past decade may be losing the tuition revenue it depends upon to operate.
Families can check enrollment information for free through the U.S. Department of Education’s College Scorecard.
Another factor to examine is the school’s admission rate.
If a school admitted 60 percent of applicants ten years ago but admits 95 percent today, Dan says that may indicate a weakening applicant pool and a school increasingly accepting nearly everyone who applies.
He also recommends looking at the school’s endowment.
A small endowment isn’t automatically a problem. However, a small endowment that has declined after adjusting for inflation can be a warning sign that a school is using its reserves.
Families can also check whether a college appears on the Department of Education’s Heightened Cash Monitoring list, review its federal financial responsibility score, and see whether its accreditor has placed it on warning or probation.
Much of this information is publicly available, although many families may not think to look for it.
How Can Financial Instability Affect Students Before a School Actually Closes?
According to Dan, students may experience the effects of financial instability well before a closure is announced.
Small majors may be cut first, particularly in languages, arts, and humanities. When full-time faculty members leave, they may not be replaced, and more teaching can shift to adjunct faculty.
Required courses may also be offered less frequently, potentially turning a four-year degree into a five-year degree.
Students can also see reductions in counseling, advising, tutoring, and library hours, while campus buildings may go unrepaired.
Dan points out that when a college eventually closes or merges, students may lose credits during a transfer or find themselves completing their degree somewhere they never originally chose.
The problems for students, he says, can begin years before the closure itself.
Can You Explain the Methodology Behind the Ranking?
The Distressed Colleges Index scores 1,375 four-year U.S. colleges from 0 to 100, with a higher score indicating more signs of financial stress.
Dan explained that the score uses five components:
- Admission rate level — up to 20 points
- Admission rate change since 2015 — up to 20 points
- Undergraduate enrollment change since 2015 — up to 40 points
- Endowment size — up to 10 points
- Endowment change since 2015, adjusted for inflation — up to 10 points
Enrollment receives the greatest weighting because Dan considers declining enrollment the most direct cause of a college’s financial collapse.
There is an important point for families to understand, however.
The index is a screening tool, not a forecast.
It identifies schools that deserve a closer look. It does not mean that a particular school will close.
The federal data can also lag reality by a year or two, and the most recent year available can vary from school to school.
Which Texas Colleges Are Showing Warning Signs?
The original Open School Ranking information shared with Greatful Moments specifically identified University of Houston–Victoria and Southwestern Adventist University as Texas colleges showing signs of financial distress.
The broader lesson for families is not simply to look at a college’s name on a list.
Instead, families can investigate the underlying information for any college they are considering.
Look at enrollment trends. Examine admission rates. Research the endowment. Check federal financial information and accreditation status.
A ranking can be one piece of the research process rather than the entire decision.
What Leads You to Call Some Schools “Walking Zombies”?
Dan uses the term “walking zombies” for schools scoring 75 or higher on the Distressed Colleges Index.
He said that, at the time of his response, 30 of the 1,375 schools fell into that category.
According to Dan, the typical school in that group has lost more than 50 percent of its undergraduates since 2015, admits more than 90 percent of applicants, and has experienced a significant decline in its endowment.
However, he emphasized that “walking zombie” is a warning label, not a verdict.
Some schools may restructure and find a way forward.
The purpose of identifying these indicators is to give families information before they commit years of their lives and potentially substantial student-loan debt to an institution.
What Should Families Do If a College They’re Considering Looks Vulnerable?
Dan’s advice is direct:
“If you are thinking this school might be in financial trouble, don’t go there.”
He believes the higher-education landscape could become significantly more difficult over the next decade and says families have many options when choosing where to pursue a degree.
For families, the larger takeaway is that financial stability can be another factor to investigate before choosing a college.
Parents and students can ask questions about enrollment, admission trends, financial reserves, accreditation, and the institution’s overall financial position before signing loan papers or committing to a school.
A Conversation Worth Having Before College
Choosing a college is about more than finding the right major or falling in love with a campus.
It is also a significant financial decision.
We hope this Guest Poster Q&A with Dan Ye of Open School Ranking gives parents and students another set of questions to consider as they research their options.
Do your homework. Ask questions. And understand the financial health of the school before making a commitment.
We would like to thank Dan Ye and Jennifer London of Elkordy Global for providing this Q&A to Greatful Moments and giving us the opportunity to share this information with our readers.
The views and analysis regarding the Distressed Colleges Index and its terminology belong to Dan Ye/Open School Ranking. Greatful Moments is sharing the information for educational purposes and encourages families to conduct their own research when evaluating colleges.
GreatfulMoments.com
Grateful, Thankful, Blessed.
Thank you,
Glenda, Charlie and David Cates
