A small private college in Virginia has closed; could this mean anything for your school?

Saint Paul’s College, founded in 1888, will close this month following a failed attempted merger with another institution.

Moody’s Investors Service commented on the closure. “The pending closure is credit negative for a small subset of the higher-education sector with similar attributes to Saint Paul’s and other closed colleges: very small, private colleges with a high reliance on student charges, indistinct market positions, and limited donor support,” Moody’s analysts said. “We anticipate more closures for these types of colleges given the current pressures on all higher-education revenue sources and increased accreditation scrutiny.”

In 2012, consulting firm Bain & Company found that a third of nearly 1,700 public and private nonprofit colleges were on an “unsustainable financial path” and that an additional 28 percent were “at risk of slipping into an unsustainable condition.”

Eva Bogaty, a member of the Moody’s higher-education and not-for-profit team, cautions that schools need to find more efficiencies, and that some should consider mergers and sharing services. 

She also mentioned faculty members. “The elephant in the room is obviously faculty and the shared-governance structure,” Ms. Bogaty said. “How do you deal with that? There is no way that you can operate in the environment that we are in without a major shift in that shared governance.”

Image by Andrew Miller