Today’s Small Private Colleges Are Caught in “The Squeeze”
Small tuition-dependent colleges, like PUC, which exist in an increasingly competitive
environment, are caught in a serious squeeze.
- Their ability to generate revenue is capped, as tuition approaches the limit of what
most families can pay. Fact: Full tuition at PUC for the 2006-2007 academic year
is $20,130. For room, board and tuition, the total is $25,917 per year.
- At the same time, demographics are changing, so that fewer students can pay
full tuition costs and more need scholarships. Fact: PUC has students whose
total family income is less than the cost of room, board and tuition at PUC.
Fact: PUC currently discounts its tuition through scholarships by 26%, so that
the net tuition per student is actually less than $15,000.
- Expenses are increasing, and will continue to do so. Fact: The cost of providing PUC
employees with benefits doubled between 1996 and 2006 to $7.3 million per year.
PUC’s Financial Vulnerability
PUC is especially vulnerable to these trends, because it has a smaller endowment and is more
tuition-dependent than many small private colleges.
- The average endowment for good small private colleges is $90,000 per student,
whereas PUC’s endowment currently equates to $10,000 per student.
- At some highly endowed institutions, only one-third of operating revenue comes
from tuition, whereas at PUC (and other tuition-driven schools) tuition and other
student charges account for 83% of operating revenue.
The Solution: The Endowment
PUC is not on the brink of financial catastrophe, but is vulnerable to these long-term trends.
- To reduce its vulnerability, PUC needs to change the way it finances itself by
increasing its endowment and depending less on tuition.
- PUC is land-rich but cash-poor. It can increase its endowment by
transforming some of its non-income producing assets (land) into assets that
will produce ongoing income for the college.
- Fact: Investment income currently accounts for only 0.2% of total operating
income at PUC versus 3.6% at some other small colleges and significantly
more at highly selective institutions.
The Results
The endowment will allow PUC to sustain important community services, rehabilitate or replace
aging facilities, provide new student and faculty housing, create a unique curriculum based on
sustainable living, and maintain its ability to offer competitive academic and staff salaries.
- Income from PUC’s increased endowment will be used primarily to increase
student scholarships and faculty salaries and to improve the college’s physical
plant. Fact: The average age of PUC’s plant is 19.8 years, whereas the average
age at other small colleges is 10.4 years.
- Through development of the Eco-Village, PUC plans to secure its future and
enhance its educational mission.
