A Pandemic Financial Success Story?

Endicott College is in a better financial position now than it was before the pandemic, according to its president. After one of higher education’s most difficult years, marked by enrollment declines, furloughs, layoffs and steep budget cuts, Endicott’s success stands out.

The small private, nonprofit college in Beverly, Mass., recently trumpeted its accomplishments in a press release: its endowment has grown to $119 million, no employees were laid off or furloughed during the pandemic, enrollment hasn’t wavered and the college maintained its study abroad program this academic year.

It’s the first college Jim Hundrieser is aware of that is coming out of the pandemic doing better than it was a year ago. Hundrieser, vice president for consulting and business development at the National Association of College and University Business Officers, has seen other colleges boast about single victories. For example, Florida Southern College, Belmont University and Vanderbilt University did not lay off any employees during the pandemic, he said. But no announcements have been as broad as Endicott’s.

Last spring, experts worried that small private colleges would be especially squeezed by pandemic-related enrollment declines, unforeseen expenses and a volatile stock market. For some, like Becker College, Concordia College in New York, Pine Manor College and Mills College, the pandemic did push leaders to decide to merge or close.

But closure concerns may be overblown, Hundrieser said.

“We talk about all the school closures, but proportionally there haven’t been many,” he said. “People predicted hundreds, but we haven’t seen hundreds. There have been a few.”

Right now, Hundrieser doesn’t see a clear pattern to show which types of private colleges fared better through the past year than others. He pointed to a few prudent financial decisions that likely helped certain institutions, including disciplined budgeting that didn’t result in recurring deficits, setting aside money for cash reserves and maintaining low debt levels.

It's possible that institutions that cater to wealthy, white students -- whose family finances have, on average, fared better during the pandemic than those of students of color or low-income students -- had a leg up through the past year. Experts also suspect that institutions with strong brand power and greater wealth may have continued to grow despite the pandemic.

But as the pandemic winds down, it’s also possible that fears of widespread closures could wane and a few more success stories will emerge.

So how could Endicott -- and another other institutions like it -- do so well during year of exceptional turmoil?

Enrollment and Retention

In fall 2019, Endicott welcomed its largest-ever incoming class with 820 new students. This fall, it added 780 students, and it is projecting an incoming class of 800 for fall 2021.

“Enrollment is strong,” said Steven DiSalvo, president of Endicott. “We’re tracking about 40 heads over our goal, year to date, in terms of deposits. This current year, we started the year over our budgeted goal and we had good retention.”

Endicott has had students on campus since September, and the busy campus helped enormously with admissions, DiSalvo said.

“When we opened the semester in September, we were running tours. And the comment that we were hearing from families is that it was so wonderful to be on a college campus where there is activity, where you see students and you see faculty members,” DiSalvo said. “Many have done self-guided tours at other institutions, and there wasn’t anybody there.”

Endicott was able to reopen in person thanks to a rigorous testing program that required students and employees to be tested once a week, and which allowed the college to keep COVID-19 cases under control.

The college is also earning more tuition revenue per student than some other private colleges, due in part to a low tuition discount rate. A tuition discount rate is the percentage of the tuition sticker price that a college subsidizes with financial aid. Endicott’s discount rate averages 38 percent, which is lower than the 51.2 percent average for all private, nonprofit four-year colleges.

Ripon College in Wisconsin also has reason to celebrate. It has maintained steady enrollment levels through the pandemic. So far this spring, the college received 20 percent more tuition deposits than it did at the same time last year. Ripon is also on track to collect more deposits this year than it has in nearly 50 years. The private nonprofit college currently enrolls 816 students.

Ripon’s president, Zach Messitte, attributes the enrollment growth in part to the fact that many students are looking to attend college closer to home during the pandemic. Ripon enrolls two-thirds of its students from within Wisconsin, and half of the remaining third come from neighboring states, Messitte said.

“In a pandemic, when people are nervous about traveling and going far away from home, people may have actually looked and said, ‘Actually, no, I think I’m going to stay closer to home for the next few years of my education,’” Messitte said. “I think we’ve benefited that way.”

In some ways, Endicott's enrollment stability through the pandemic is unsurprising. Only 16 percent of Endicott students are eligible for the federal Pell Grant, which can be considered a proxy for low-income status. By comparison, about 30 percent of students at all four-year private colleges received Pell Grants during the 2018-19 academic year, the most recent year for which data is available from the National Center for Education Statistics.

The demographics at Endicott may have provided a cushion against pandemic-caused enrollment declines. Endicott's student body is overwhelmingly white -- 82 percent of Endicott students are white, 4 percent are Hispanic or Latino, 2 percent are Asian and 2 percent are Black or African American, according to NCES. White, wealthy and middle-class students were less likely to leave higher education during the pandemic than some of their nonwhite, low-income peers.

White and wealthy Americans were also more likely to maintain financial stability or even grow their finances during the pandemic, according to a March survey from the Pew Research Center. About four in 10 upper-income adults -- defined as adults who earn more than double the median family income according to Pew's American Trends Panel -- say their family's financial situation has improved during the pandemic. One in 10 upper-income adults say their family's financial situation has worsened in the last year. By comparison, only two in 10 lower-income adults -- adults who make less than two-thirds the median family income -- say their family's financial situation has improved during the pandemic, and a third of lower-income adults report that it has worsened.

The Pew survey also showed that financial stability during the pandemic varies somewhat by race. Two-thirds of Black Americans and 59 percent of Hispanic Americans said in March that their finances are in fair or poor shape, compared with 40 percent of white Americans who said the same.

That said, Endicott’s low-income students still returned to the college through the pandemic, DiSalvo said. When the college refunded $9.2 million in prorated room and board fees last spring, it gave students and families three options: they could opt for a direct refund, apply the money to future room and board expenses, or donate it to the Wings fund. The Wings fund is intended to provide additional financial aid to students facing economic hardship during the pandemic. The college raised more than $250,000 for the fund.

“We did not have to reach into operating expenses to help those students. These were families helping each other bridge the gap to allow students that extra semester or two of additional financial aid,” DiSalvo said. “We’re able to retain those students at all levels, particularly at lower income levels, at the same rate we did before.”

Diverse Revenue Streams

The anchor of Endicott’s financial security, particularly at the beginning of the pandemic, was its auxiliary revenue. The college makes up about 18 percent of its budget with income from auxiliary services. Its picturesque campus on the coast is a popular spot for events, especially weddings -- Endicott hosted 127 of them the year before the pandemic.

Even after COVID-19 forced a temporary ban on large gatherings, Endicott had enough cash from prior events that it could cover additional, unforeseen expenses.

“We had enough excess cash on hand to absorb some of the unexpected expenses that came about, like the refunding of room and board,” DiSalvo said.

In all, Endicott spent about $5 million on COVID-19-prevention-related expenses, including personal protective equipment, signage, additional personnel and testing. Regular COVID-19 testing was by far the largest expense, requiring $2 million.

Like most colleges, Endicott did a bit of belt-tightening at the outset of the pandemic. College officials slimmed down travel expenses, and staff and administrators did not receive a cost of living adjustment, although faculty members did.

Leftover auxiliary revenue and federal assistance from the CARES Act stimulus package helped the college get through the academic year without furloughing or laying off any employees.

Endicott’s financial buffer, funded by auxiliary revenue, is exactly why colleges should seek to diversify their revenue streams, NACUBO’s Hundrieser said.

“It’s a great case study on how to figure out how to maximize your facilities and how do you push yourself to think about alternative revenue streams,” Hundrieser said. “This is another reminder of the fragile business models that exist today, and that institutions need to be thinking holistically about how to diversify their revenues and be less tuition dependent.”

The college also managed to keep study abroad operating this academic year by negotiating postponed start dates with its partners abroad. More than 70 students participated in the college's study abroad programs in Madrid; Florence, Italy; and Cork, Ireland. Endicott is expecting between 130 and 140 students to go abroad next fall.

Federal Aid

Endicott received $2 million in federal relief through the CARES Act, and half of that was passed through to students as direct financial assistance as required by law. The college is expecting to get another $5 million or $6 million, some of which will also go directly to students.

Hundrieser warned against using a few colleges’ success stories as evidence that the federal aid distribution was botched or that it was unnecessary.

“I do think some will make that leap -- ‘Oh, see, we gave them all this free money and they didn’t need it.’ I think there’s always some who are looking for the negative angle,” Hundrieser said.

But many more colleges have needed the relief to stay afloat.

“I’ve talked to a whole lot of schools who have said the exact opposite,” Hundrieser said. “That ‘Without this aid and support, we would not know what we’d do, or the layoffs would have been so massive.’”

Endowment

Ripon announced last week that its endowment has grown to over $100 million for the first time. Just over a decade ago, the endowment was only $35 million.

A lot of the growth was funded through a five-year giving campaign, which began before Messitte, Ripon's president, arrived at the college.

“People thought they were nuts,” Messitte said. “Coming out of the Great Recession, people aren’t going to have money; people are going to be very nervous about making contributions to their alma mater. But they persevered.”

In total, Ripon raised $67 million through the campaign, $17 million more than it had anticipated.

Endicott also saw its endowment grow this year amid market volatility. Prior to the pandemic, the Endicott endowment totaled about $100 million, and it dipped to $87 million when the market crashed last spring. Now the endowment sits at $120 million.

Endicott never spent the principal of its endowment to cover unexpected expenses.

“We got the full effect of the market rebound because the principal was kept intact,” said DiSalvo, Endicott's president.

In a recent conversation with a large bank, DiSalvo said he was told that of the 52 higher education institutions the bank worked with, only two -- Endicott and one other -- did not dig into their endowment to pay for COVID-19-related expenses.

For years, the private higher education market has trended toward a landscape in which wealthy, successful institutions continue to grow and smaller, less resourced institutions struggle to continue to fundraise and attract students, said Susan Shaffer, vice president of the higher education practice at Moody's Investors Service.

“The ones that have greater wealth, and a stronger brand and reputation, do well and continue to do well, because they’re building on the strengths that they already have,” Shaffer said. “There are others that are small, with not as much wealth, not as much brand recognition and probably a really regional draw. They perhaps have not, over time, evolved as much as they could have in terms of meeting what students and parents and families want from college.”

The pandemic likely widened this gap, but it also presented an opportunity for the market to shift to benefit colleges that hadn't been as successful before the pandemic, she said.

“The problems were there, and it certainly exacerbated problems,” Shaffer said. “The flip side of that is it could also spur change. Higher education is not typically an area that changes super quickly, and guess what? It did.”