By Thomas J. Botzman, Ph.D.
President, Misericordia University
Forbes Magazine loves lists. The publication features an inventory of the world’s billionaires and measures the wealth of the richest families. It ranks the top 100 wealth managers and offers tips on wealth building, among other interesting topics.
It is also in the business of ranking our nation’s colleges and universities. In its ninth annual supplement, “America’s Top Colleges 2016,’’ Forbes graded private institutions of higher education based on their financial well-being (www.forbes.com). It handed out letter grades to these institutions based upon 10 metrics.
At first glance, Misericordia University received a solid, but uninspiring B- from Forbes.
After reviewing the criteria, though, it appears our letter grade represents who we aspire to be as it fits our long-held mission of serving first-generation students and others in need. In its effort to rank and grade, Forbes makes some reasonable assumptions and a few that do not meet the test of what I believe to be essential to the mission, vision, and values of most private universities.
Universities are designed to operate over long periods of time, requiring a mix of short-term and long-term financing. One technique to guarantee the long-term financial health of institutions is the use of endowment funds, which institutions hold in perpetuity and spend from the interest earned.
In the special report, Forbes gives a top grade in the endowment assets category to Princeton University, which has amassed a staggering $2.5 million per student. If Princeton spends its endowment earnings – which we will assume to be about 4 percent annually – that results in $100,000 per student. In this scenario, Princeton could spend $100,000 on every student each and every year without charging tuition at all. Swarthmore College, another excellent institution with considerable wealth and assets, also receives praise from Forbes for having reserves that could cover all expenses for 13 years.
Forbes uses a baseline of $45,000 per student, per year in order to receive the top grade in this criterion. At Misericordia, our tuition is about two-thirds of that amount, so we would need to raise tuition dramatically to match that level of spending – an action we are not prepared to make.
Misericordia offers a solid education that leads to successful lives and careers. Frankly, unlike Ivy League institutions, we are primarily designed and driven to serve those without many resources to attend college. We work diligently to assure that we have enough reserves to cover an emergency (think Hurricane Katrina) that would prohibit our normal operations for one semester. Rather than building an enormous reserve, we return the resources we receive from students and families to support outstanding faculty, and quality academic and residential facilities. We can, of course, dream of having enough resources to fund everything we could ever want to do and still have enough to build reserves, but that is not who we are or who we will be.
There is one metric, however, that bothers me more than the others: Forbes gives a better grade to institutions that limit financial aid – especially merit-based financial aid – to prospective students. Less discounting will strengthen a balance sheet, but private higher education – much like our public counterparts – is not all about a balance sheet.
I am proud to say that our future teachers, nurses, social workers, entrepreneurs, and occupational therapists can attend Misericordia even if they are not wealthy. We enroll first-generation college students, adult learners, and many others who do not have every financial resource available to them. We will always strive to provide capable students with the resources they need – and have earned – to complete their college degrees.
By Forbes’ standards, institutions should give merit aid to 38 percent or less of its students in order to receive the top letter grade. At Misericordia, we provide aid to about 98 percent of our students. About 800 of our undergraduate students receive federal and state aid based on their family’s financial ability to pay. Without financial aid, they would likely not be able to attend college.
Our outstanding faculty colleagues will always challenge our students to earn excellent grades in both academics and service to others. Of course, I also encourage them to strive for an A grade at all times.
In the case of Forbes’ ranking, though, Misericordia will not only tout our B- with pride and enthusiasm, but we will also continue to celebrate our ability to provide transformational learning experiences to caring, motivated students at a quality university where all are welcome.