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Struggling Schools Should Look to Merge Much Earlier, Say Experts

As colleges struggle to cope with declining enrollment as the influx of federal COVID-19 money dries up, a wave of closures is widely expected. Already this year, at least six campuses are expected to shutter, including Finlandia University, Cazenovia College, and, after an announcement last week, Iowa Wesleyan University. But experts believe that some institutions could be saved if their leaders were more open to a different option: merging with other schools before their circumstances grow desperate.

Dr. Ricardo Azziz, a research professor at the State University of New York, AlbanyDr. Ricardo Azziz, a research professor at the State University of New York, Albany“Very often, ‘merger’ has been a word that we could not utter,” said Dr. Ricardo Azziz, a research professor at the State University of New York, Albany, who has advised schools on mergers. “People didn’t even want to discuss it. And the problem is, when you don’t discuss it, you’re totally unprepared when you need to consider it.”

Azziz believes that small, struggling universities need to start considering merging while they’re still relatively healthy.

“A lot of institutions are coming to us well after they’ve run out of political, financial, and enrollment capital. That’s a real problem, because your ability to find a partner that is suitable is very limited,” he said. “Smaller schools should start looking for partners sooner, when they still have something to offer, when they can still negotiate from a position of relative strength.”

There are several reasons that schools that may be in trouble don’t look to merge, said Azziz and Dr. Guilbert C. Hentschke, Stoops Dean and Cooper Chair Emeritus at the University of Southern California Rossier School of Education.

One reason is structural: that presidents and boards typically don’t look beyond the current budget year.

Another reason is psychological: college leaders have pride.

“When I think of merger, I associate merger with failure,” said Hentschke. “I think, ‘I’m smart enough to manage my institution through this.’”

An additional factor is the expectations that surround the leaders of schools.

“Many individuals that lead higher education have been hired primarily to preserve the status quo, be the cheerleader, and ensure that things continue as they were,” said Azziz. “When you are hired under those premises, spoken or not, it’s going to be really hard for you to face the potential existential options that mergers bring to the table.”

Dr. Guilbert C. Hentschke, Stoops Dean and Cooper Chair Emeritus at the University of Southern California Rossier School of EducationDr. Guilbert C. Hentschke, Stoops Dean and Cooper Chair Emeritus at the University of Southern California Rossier School of EducationThere are ways for schools to know that they should potentially consider a merger, even if they’re still somewhat healthy, according to Hentschke. A college may be discounting a large portion of its tuition revenue, or running budget deficits several years in a row, or carrying a high amount of debt relative to its assets. Low retention and completion rates may also be a bad sign. Though one of these factors alone may not be enough to indicate a severe problem ahead, several of them together might mean that a merger would be a good option.

Struggling schools with leaders who look to merge early in response to these indicators experience big benefits, said Azziz and Hentschke.

“If you do it right, there’s a rejuvenation,” said Azziz. “All of a sudden, you see lots of new opportunities. You’ll have a cadre of new disciplines that all you to think through interdisciplinary programs and research.”

Students also avoid an interruption in their education that can become permanent. According to a recent report from the State Higher Education Executive Officers Association and the National Student Clearinghouse Research Center, more than 60% of the students at campuses that close drop out. The impacts are especially strong for minoritized students, who are more likely to attend a school that closes and less likely to return to school afterwards.

Students get the benefit of the increased resources of the newly merged institution, said Azziz, and also wind up performing better academically.

“Other students in the environment are now doing better, so [a school’s original] students are able to rise to the occasion,” he said.

Hentschke cites the merger of Presidio Graduate School with the University of Redlands, which will take effect this summer, as an example of an institution doing the right thing for its students and itself.

“[Presidio] realized they had about a two-year run rate before they were going to have some serious financial problems, [so] they looked for a partner,” said Hentschke.

Presidio was still an attractive target for a transaction, with minimal liabilities and a strong student base. According to Hentschke, three institutions pursued Presidio aggressively, allowing it to find the best match.

“Had they not put themselves out there, they would have been a candidate for closure within two years,” he said.

However, there’s one group of schools that may not be looking to merge anytime soon: HBCUs. Although many HBCUs are struggling financially, the product of chronic underfunding, no mergers are on the horizon, according to Dr. Walter M. Kimbrough, interim executive director of the Black Men’s Research Institute at Morehouse College, and former president of Philander Smith College and Dillard University.

“I think in the climate today, people are finding that they like they can still thrive as standalone institutions,” he said. “Even schools that are struggling are trying to figure out, ‘how do we make this work?’”

Kimbrough pointed out that although many HBCUs have merged since the early 1900s, there have not been many recently. He said there aren’t many HBCUs in very close proximity anymore, and that many of them are associated with different religious denominations, making mergers difficult.

HBCU mergers may not be necessary, according to Kimbrough and Dr. Marybeth Gasman, executive director of the Center for Minority Serving Institutions at Rutgers University and Samuel DeWitt Proctor endowed chair in education. They agreed that HBCUs have been remarkably resilient throughout history.

Gasman also pointed out that calls for HBCUs to merge are frequent, but rarely come from within the HBCU community itself.

“They come from state governments, policy people, pundits. Some of them are critics of HBCUs,” she said. “It tends to be other people wanting them to merge because they think that there’s not enough room for all of them, they think that HBCUs might be weak.”

Gasman doesn't oppose HBCU mergers, per se, if the HBCUs themselves are the motivating forces, but she doesn’t believe that mergers are a viable wide-spread fix.

“I don’t think that it’s the answer to strengthening them overall,” she said.

As for PWIs, Hentschke thinks that several factors may make it more likely for struggling small schools to pursue mergers before it’s too late. He pointed out that more and mergers are happening, raising awareness, and that more and more presidents and board members have experience with mergers from the business world. He noted that activity from regulatory agencies and increased stress-testing of college finances are making schools more cognizant. And he said that an increasing number of institutions are being contacted by other schools looking to merge with them, which, even if a college rejects the overture, can lead to the pursuit of a merger with someone else.

But Azziz believes that the psychology of college presidents and boards may be difficult to overcome.

“I think that many school leaders will continue to view things in the short term, hoping that the future somehow changes and that their school won’t be severely impacted,” he said. “Hope is a great thing to have, but it’s not a plan. You have to plan on what the facts are on the ground.”

Jon Edelman can be reached at [email protected]

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