Why a College With a $94 Million Endowment Still Had to Close

March 9th 2015

Laura Donovan

It's been almost a week since private women's liberal arts institution, Sweet Briar College announced its intent to shut down due to "insurmountable financial challenges," which some find odd given the school's $94 million endowment.

As the 114-year-old college promised to assist students and staff members with the transition, businessman Mark Cuban warned that this is a very bad sign for colleges all over:

Cuban, who owns the Dallas Mavericks, Landmark Theaters, and Magnolia Pictures, told Business Insider that other schools will experience the same unfortunate fate given increasing tuition fees and numbers of students who simply can't pay off student debt, "As this little college saw, there will be other students that get their heart set on one college, and it won't be there when they graduate."

As noted by BI, Cuban purchased a couple years ago and posts live updates on current U.S. student loan debt, which is more than $1.3 trillion at present. Cuban added that the perks of higher education just aren't going to make up for the debt students bear. Meanwhile, because any student can borrow money for any school, universities are essentially getting free money, leaving them with no incentive to rein in costs and deliver a good product to students.

As higher education writer and analyst Kevin Carey recently said in an interview with ATTN:, the current costs of higher education are inexcusable, and colleges have made no effort to bring them down. "I think there’s no reason that an undergraduate education should have to be god-awful expensive," Carey said. "You can provide a world-class education with all the research that’s available right now for much less than $20-, $30-, $60,000 a year or more." Carey thinks that higher education institutions, for example, have not optimally utilized technology to make college cheaper.

Technology, of course, isn't the only solution to the problem of student debt. Speaking to CNBC last fall, Cuban said putting a limit to the amount of money a person can borrow each year could ultimately make universities lower costs:

The demise of private schools 

As noted by Cuban, loan debt doesn't just affect college kids who will never be able to pay off their education, but it also means that schools will attract fewer students. Sweet Briar President James F. Jones Jr. said in a statement that dwindling interest in private liberal arts institutions was a factor in the college's closure, "[Sweet Briar came to] the unfortunate conclusion that there are two key realities that we could not change: the declining number of students choosing to attend small, rural, private liberal arts colleges and even fewer young women willing to consider a single-sex education, and the increase in the tuition discount rate that we have to extend to enroll each new class is financially unsustainable."

As long as student debt and tuition rates climb, it's likely that more private schools will face an unfortunate dilemma like Sweet Briar's. In 2009, Maine private school Husson University, for example, experienced a 17 percent decline in freshman enrollment from 2008, prompting Vice President of Enrollment Management Jonathan Henry to tell the Wall Street Journal, "I think it's fair to say 30% of these private schools won't exist in a decade. A lot of these schools will have to learn to live with less."

As New America's director of the Education Policy Program, Carey admits to constantly thinking about education, but he's also passionate about reform because of his young child. At the current rate of tuition increases, it'll cost him a fortune to send his offspring to college. "My daughter is four-and-a-half now, so if current trends continue, by the time she turns eighteen it’ll cost probably $120,000 in today’s dollars to send her to a public university and well over $200,000 to go to a private university," Carey told ATTN:. "That’s a lot of money. People are trying to save but they’re also trying to save for retirement, and the job market hasn’t been kind to a lot of people over the last ten years. So these trends can’t continue, both mathematically and morally."

Cuban did the math on drops in enrollment: A loss of 1,000 students could result in a $40 million annual for a college.

Ultimately, public education might just be the way to go for those who can't get into highly ranked private institutions with powerful name recognition and worldwide acclaim. As Carey said to ATTN:, "If you can get into Harvard, you should probably go. What you don’t want to do is pay Harvard tuition for some place that isn’t Harvard, but wants to be. There are a lot of places out there, particularly the private colleges and universities that will charge $50,000 or $60,000, where you don’t have the brand recognition or the same access to professors."