When Covid-19 first tore through the nation, hundreds of college presidents sent students home, looked across their empty campuses and wondered how they were going to pay their bills.
Northeastern University President Joseph Aon saw an opportunity. On May 15, 2020, he called six senior managers to his office. “Colleges and universities will be challenged,” he told his cabinet, he recalls. “This may be the time to start looking at mergers and partnerships.”
Over the next few weeks, Northeastern created a specialized M&A team to assess the value and vet the balance sheets of dozens of flailing colleges in the U.S. and abroad. His directive came to fruition on June 30 when Boston-based Northeastern absorbed Mills College, a 170-year-old women’s school on a 135-acre campus not far from Silicon Valley.
In exchange for the land, worth perhaps $1 billion, the school’s roughly $191 million endowment and an art collection that includes works by Diego Rivera and Winslow Homer, Northeastern is absorbing $21 million in Mills’s liabilities, putting $30 million toward an institute designed to continue the school’s feminist scholarship—and keeping open a college that planned to close.
Enrollment declines accompanied these shifts. From 19.6 million students enrolled in spring 2011, the number fell to 17.5 million in spring 2019. The pandemic sped the decline, and the number was down to 16.2 million by this spring, according to the National Student Clearinghouse.
The steepest declines are at for-profit schools, community colleges and less-prestigious private colleges. Lower demand has pushed some to hand out more scholarships and grants. In the 2021-22 academic year, students paid just 45.5% of the sticker price on average, the lowest ever, according to the National Association of College and University Business Officers.
Some schools have dealt with falling revenue by offering fewer classes and services—leading to still more enrollment challenges. The term applied to schools engaged in such a death spiral? Zombie colleges.
“These are schools that are under-preparing and under-serving their students,” said Ricardo Aziz, who coined the term. They “have excess capacity and are resistant to considering consolidation.” Dr. Aziz was president of Georgia Health Sciences University in 2012 when he oversaw a merger with Augusta State University.
The U.S. government gave $76 billion in aid to colleges and universities to shore up their balance sheets as Covid-19 swept the country. That money delayed some hard decisions, says Robert Zesty, a professor of higher education at the University of Pennsylvania. He predicts that 500 four-year colleges and universities will close in the near term.
“This is an industry that is almost totally unprepared for this,” Dr. Zemsky said. “There’s a lot of pain ahead for a lot of small colleges.”
Northeastern University was built a century ago on a work-study model. Today, its students intern at one of 3,100 companies during their education. That forces professors to adjust their curricula repeatedly to meet the needs of industry.
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