The Death Spiral

Nearly five years ago I wrote about the dim prospects for Iowa Wesleyan University (formerly College). The school had just announced that it would eliminate half of its academic majors and terminate more than forty percent of its faculty members.

Earlier this month, Iowa Wesleyan’s president announced that it was in danger of shutting down. The university’s trustees decided on November 15 to keep the university operating until at least December 2019. My guess is that their decision just delays the inevitable. According to Iowa Wesleyan’s IRS filings, it suffered from negative net revenue — a deficit — for five of six fiscal years from 2011 to 2016. Operating expenses per full-time equivalent undergraduate increased by more than fifty percent during the same period. Supposedly the university needs $4.6 million in additional revenue to stay open until the end of 2019.

Iowa Wesleyan faces the same problem that many other similarly-sized private colleges and universities face: declining demand coupled with increased operating costs. For many small-enrollment, tuition-dependent higher education institutions, the future is financially unsustainable. 

I’ll be writing more about how to interpret the relationship between a school’s enrollment and operating expenses in the coming months, both here and, possibly, at Inside Higher Ed.

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