How Christian Colleges Fare Under a Financial Stress Test

Earlier this week, Hechinger Report published an analysis of the economic problems facing many colleges and universities in this country. Readers of this blog know that this isn’t a new topic (here’s a 2014 analysis of financial sustainability), but “with the added pressures of the coronavirus pandemic,” began Sarah Butrymowicz and Pete D’Amato, “the fabric of American higher education has become even more strained….”

Zemsky, et al., The College Stress TestTo measure that strain, they employed a financial stress test developed by Robert Zemsky, Susan Shaman, and Susan Campbell Baldridge, who wanted colleges and universities to take such concerns seriously… without simply giving in to the warnings of “modern-day Cassandras” who gleefully predict “an era of disruptive change yielding a future that is both wasteful and chaotic.” Their analysis suggested that no more than 10% of institutions of higher learning are at serious risk of closing, while 60% face no significant risk of that sort.

Using publicly available data reported to the federal Department of Education, their test uses variables that help gauge financial stress. For private colleges and universities, Hechinger choses to focus its analysis on rate of change in

• First-time enrollment

• Retention

• Average tuition per student

• Ratio of endowment to expenses

So naturally, I wondered how my employer and its peers fared. I found 116 full members and collaborative partners in the Council for Christian Colleges and Universities (CCCU) included in what Hechinger calls its “Financial Fitness Tracker“. How many raised an alert in that analysis?

Zero Warning Signs (38)

About one in three registered no warning signs on any of the four criteria. To my surprise (and, I’ll be honest, relief), that group includes Bethel. While we did just go through yet another round of faculty and staff cuts, our decline in enrollment is trending outside the alert zone. Perhaps more importantly for the long run, Bethel seems to have improved its per-student revenue and (especially) its endowment/expenses ratio in recent years.

One Warning Sign (52)

Almost 45% of those CCCU members/partners had a red flag raised for one of the four criteria, including all four of our CCCU neighbors in Minnesota.

A dozen schools were doing alright by the student-centered measures but were flagged for declining endowment-to-expenses ratio. This is perhaps the fuzziest factor. As Zemsky et al. write in their book, there’s been little study of what’s optimal here, though they cited conventional wisdom among fundraisers that a college’s endowment should be 2-3 times its annual expenses. So even though I wouldn’t have expected, say, Baylor or Samford to show up on this alert, it is possible that their endowments have declined, their expenses have grown, or (most commonly, according to Zemsky) both are true.

Retention was least likely to be the issue among religious institutions that tend to trumpet small faculty-student ratios, spiritual care, and residential community. Without digging further, I suspect that most of the seven on this list cater to students in groups historically facing a greater risk of attrition.

At first glance, it may be surprising that enrollment was about as unlikely (8 schools) to be the single problem. But that’s likely because colleges that generate the lion’s share of their revenue from tuition have increasingly tried to remain competitive by increasing their discount rate, funding their own financial aid to keep their net price of attending much lower than the sticker price. Which is probably why twenty-five of these CCCU members/partners aren’t flagged for declining enrollment, but did generate an alert for declining tuition revenue per student. That group includes traditional sector leaders like Asbury, Gordon, and Houghton, plus Southeastern, the Pentecostal university in Florida that made news earlier this year for cutting 34 faculty positions.

As Zemsky emphasized earlier this year in an interview with Inside Higher Ed, the financial stress test doesn’t take a snapshot, but tracks “downward slopes” over time. Yet higher ed is complicated enough that any individual trend — let alone any single data point — might be explained by particular circumstances that demand more nuanced interpretation. So we should beware of making too much of any one number.

“The best predictor of market risk or stress,” he told IHE, “was a combination” of factors. Overall, over 500 of the 2,600-some schools in the Hechinger analysis were red-flagged in multiple categories. Similarly, about 20% of CCCU full members and collaborative partners showed warning signs in at least two criteria:

Warning Signs in All Four Variables (1)

Faulkner University

Black School of Biblical Studies at Faulkner University in Montgomery, Alabama – Creative Commons (Nmpenguin)

Retention + Average Tuition + Endowment Ratio (3)

Judson College (AL), Multnomah, Point

Enrollment + Retention (1)


Enrollment + Average Tuition (6)

Eastern Nazarene, Friends, Malone, Northwestern (IA), Nyack, Trinity Christian

Retention + Average Tuition (7)

Bluefield, Erskine, Kentucky Christian, MidAmerican Nazarene, Tabor, Trinity International, York (NE)

Retention + Endowment Ratio (4)

Central Christian (KS), East Texas Baptist, Emmanuel College (GA), Missouri Baptist

Average Tuition + Endowment Ratio (4)

Colorado Christian, Messiah, Regent, San Diego Christian

Even knowing that it’s planning to cut $7 million dollars from its budget over the next five years, I’m kind of shocked to see Messiah show up on this list. But I suspect that it’s the schools combining multiple enrollment/tuition warning signs that are in more immediate danger. If a tuition-dependent private college enrolls (or retains) fewer students and garners less revenue for each of them…

Perhaps I should just go back to preparing to teach the students I will be fortunate enough to have in class this fall.