How Colleges Close

"Gradually, then suddenly"

Over the last week, news has circulated that Alliance University, formerly Nyack College, had made the decision to close effective the end of August. After the Middle-States Commission on Higher Education (MHCHE) withdrew their institutional accreditation, making them no longer eligible for Title IV funds, the board of trustees made the difficult decision to close.

Emily Belz in Christianity Today celebrated the uniqueness of Alliance as one of the most diverse Christian Colleges around; “Alliance is also unique among US evangelical schools as one of the most ethnically diverse, with a student population that this year was 34 percent Latino, 30 percent Black, 11 percent international, and 9 percent Asian.” While celebrating its long history of accomplishments, she also notes that there had been financial struggles for years, notching a deficit of $10 million in recent years.

The University had once operated in the community of South Nyack, New York (about half an hour North of New York City). Nyack had operated a branch campus in Manhattan.¹ In 2019, they opted to sell the Nyack campus and shift the entire operation to Manhattan. This would be a bold and innovative step in the best of times (they called it the Miracle in Manhattan). The difficulty of completing the sale of the original property combined with COVID to make this a very precarious move.

While news reports suggest that Alliance was surprised by the decision to remove accreditation, MSCHE had been telegraphing that for some time. Summaries of institutional actions are public record and are listed on the institution’s MSCHE webpage. I spent some time reviewing the Alliance record.

The institution had a MSCHE visit in 2019-2020, with a supplemental report due the following year. That supplemental was to show evidence of sufficient financial strength going forward as well as improving institutional learning assessment. MSCHE placed Alliance on probation in 2022. Their report is clear about the dire circumstances faced by the institution.

To place the institution on probation and note that the institution's accreditation is in jeopardy because of insufficient evidence that the institution is currently in compliance with Standard VI (Planning, Resources, and Institutional Improvement) and Requirement of Affiliation 11. To note that the institution remains accredited while on probation. To note further that federal regulations limit the period during which an institution may be in non-compliance. To request a monitoring report due December 1, 2022, demonstrating evidence that the institution has achieved and can sustain ongoing compliance with Standard VI, including but not limited to evidence of the sufficiency of resources to fulfill the institution's mission and goals and to support its educational purposes and programs (Standard VI and Requirement of Affiliation 11). In addition, to request that the monitoring report document further evidence of (1) enrollment management planning linked to budget development (Standard VI); (2) strategies to address enrollment decline (Standard VI); and (3) updated financial information relating to the institution's Heightened Cash Monitoring (HCM) status (Standard VI).

Standard VI and Requirement 11 both address financial capacity (a link to MSCHE policies is here). Of particular significance is the reference that “federal regulations limit the period during which an institution can be in non-compliance”. To declare Alliance to not only have financial difficulties but to be officially non-compliant² starts the clock with the Department of Education.

The next step was for Alliance to be required to “show cause” as to why accreditation shouldn’t be revoked. That mandates another report and visit. It also provides the institution with a right to a hearing. It was following those steps that MSCHE acted. Alliance was in the process of appealing the action, but I imagine the Board’s decision makes that moot.

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The subtitle of this newsletter is attributed to The Sun Also Rises by Earnest Hemingway. One character, Mike, is asked how he went bankrupt. He replied, “gradually, then suddenly”. This matches my experiences in Christian Universities, even though (thankfully) everywhere I’ve worked is likely still in the “gradually” phase.

I was hired to my first chief academic officer role when the institution had just had a “show-cause” visit. The accrediting body had been long concerned with the level of debt the school held (I always joked that “they had a bad 80s”). We survived the show-cause scare after providing a debt reduction plan.³ A new president managed to sort out the debt problem over the next few years and we got back in the good graces of the accrediting body.

But it was still a small school with fierce competition and insufficient name recognition. During my years there, we went through numerous short-term admissions directors. Every one of them was optimistic about next year’s numbers and every time those numbers came in short.

There were other budgetary challenges. In some years, it was a matter of a budgeting mistake that was discovered in March of the fiscal year. That gap was filled by a “fortuitous estate gift maturing”. Another year an annual fund gap was filled by reliance on a faithful donor (using money that would have wound up in his estate).

One of the CFOs estimated that the real problem was that the school had a significant structural deficit. We wound up counting on not using the contingency funds, deferring maintenance a little longer, and leaving positions unfilled. Having already reduced budgets year over year to deal with the annual crisis, there was no fat anywhere to cut. It felt like every year we were filling the same hole.

These same problems have plagued most of the other institutions I’ve served.⁴ At another small institution, the administrator responsible for admissions confused returning head count for FTE (full-time equivalent). It was a stupid mistake we had to scramble to fix, but the reason for the error was that he was simply trying to make the revenue budget work. It was the lack of a cushion that made the error.

Other institutions like those I served point to the demographic cliff, talk of “headwinds”, and try to mirror steps taken by sister institutions to reduce budgets to fit actual enrollment. Many of these institutions have experienced year over year enrollment declines for as much as a decade.

All the while they try to launch new programs (with scarce resources) hoping it will draw new students. It has some short-term impact but often results in other students opting to go elsewhere. Or the institutions increase their discount rate to entice students to attend. This may increase the enrollment but decreases the financial strength of the university.

All institutions have alumni who treasure their time attending. Others are glad to be finished, having come only because it was close to home or had their sport or because the parents said they had to attend. At some point, the happy stories told by the marketing and admissions folks become hard to maintain. People inside start wondering about the viability of the institution.

The accrediting bodies come into play as they examine the ongoing struggles of the institution. In my experience, those bodies are relatively patient, taking institutional claims in good faith.

Until, of course, that faith is broken. As an HLC evaluator, when I do a comprehensive visit I’m given a full history of correspondence between the accrediting body and the institution. It’s remarkable how often the same concerns are raised over and over again.

As I told the president in that earlier institution, the accrediting body is your partner. Don’t tell them that they don’t have any right to provide correction. Don’t ignore them. The accrediting standards provide guidelines on how institutions take ownership of critical issues. And when the institution doesn’t, the accrediting body will step in.

It will seem like a sudden step when it happens. But it’s been coming gradually for a long time.

1. With the likely closure of King’s College — which also lost MSCHE accreditation — both of the experiments of opening Christian institutions of higher ed will disappear.

2. For the Higher Learning Commission, where I am an evaluator, we have three options in considering how an institution meets accreditation standards: met, met with concern, and not met. Any institution receiving a “not met” automatically puts them on a path toward heightened scrutiny and likely probation and can start the DOE clock.

3. Previous debt retirement plans had been pie in the sky plans that would magically solve the problem. The finance person on the accreditation team saw through that immediately.

4. In my first institution, I was a naive (at first) young professor. They may have had the same issues but I didn’t know about it. Although I do have a memory of the president saying that he was pleased that the auditor had given them a clean audit — I thought it was dangerous (if he was serious) to not know that earlier.