Wednesday, February 25, 2009

Managing cash flow in higher ed and why it will be easier to get in

Reason #1) Colleges will reserve more slots for full-pay students.

Reason #2) Colleges will enroll more students, as the marginal cost of adding students is small compared to overhead when students are added in small numbers.  For instance, Swarthmore is adding 16 students:

Third, the Board of Managers set a target to enroll 16 extra students on campus, increasing the size of the student body from 1390 to 1406 students. This would mean a first-year class of 390 and 27 transfer students. Welsh explained that “our plan is to increase by 34 students in the next four years, so we’re doing half of that next year… it helps with the budget because there aren’t a lot of marginal costs associated with this kind of small increase, and it’s consistent with the college’s history. We’ve always had a gradual increase in enrollment to support a larger curricular program.”(Swarthmore Daily Gazette)
I think you will see this at many schools to help improve cash flow.  This seems smart in bad economic times, especially since endowments loaded with private equity, real asset and venture capital investments are naturally going to be having problems with liquidity.  It's not just a drop in the bucket though - 16 more paying students is about $800,000 in cash per year at Swarthmore's rates.  That's just about enough to cover new Swarthmore President Rebecca Chopp's salary.  

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