The response of small private colleges to financial distress in the nineties

Kimberly Maguire Allen, University of Pennsylvania


The 1990s were a challenging time for many small private colleges. There was increased competition for students, higher demand for tuition discounts, and a neverending need for improved technology. Yet there was limited money. While many small colleges faced similar obstacles, each campus had its own culture and unique way of managing financial distress. This research focuses on the institutional plans developed to respond to financial vulnerability, the ramifications of those actions and the role that institutional leadership played in the resolution. The study analyzes four small, private, four-year, co-educational colleges. It contrasts one college that closed during the nineties to three colleges that successfully managed their financial vulnerability. Data collection for this study involved interviews with administrators, faculty, staff and trustees from these colleges, supported by document analysis of the Integrated Postsecondary Education Data System (IPEDS), accrediting agency reports, institutional research, and newspaper articles. Through an exploration of commonalties and individual circumstances, these case studies illustrate that institutional response to financial vulnerability determined future success. These institutions employed various tactics to find stability including downsizing, lowering enrollment standards, and dipping into the endowment to fund operating expenses. They also began to thoughtfully plan for the future by improving marketing, exploring alternative revenue streams and managing debt. Responses to financial pressures were reactive because these institutions had not been planning for the future during the prosperous eighties. By examining four small private colleges through case studies, it is apparent that no single solution leads to financial stability. The answers lie in finding a middle ground between activities that seem at odds with one another. I refer to such exercises as managing dichotomies. At these colleges, seven internal struggles were prominent. The institutional “tug of wars” included: business practices vs. educational administration, market driven vs. faculty driven, increasing selectivity vs. tuition dependency, distinctive niche vs. over-specialization, publicly admitting financial distress vs. hiding financial difficulties, cooperating with other colleges vs. maintaining institutional autonomy, and upholding tradition vs. embarking on a new future. The success of the colleges in managing these dichotomies provides opportunities for comparison by other institutions.

Subject Area

Higher education|School finance|School administration

Recommended Citation

Allen, Kimberly Maguire, "The response of small private colleges to financial distress in the nineties" (1999). Dissertations available from ProQuest. AAI9926090.