Trends and Challenges in Higher Education

Hello, everyone. This is George Suttles, executive director of Common Fund Institute. And I'm Amanda Novello, senior policy and research analyst at Common Fund Institute. And this is Espresso Chats, a podcast by Common Fund Institute where we deliver short, strong shots of governance and leadership insight. We are absolutely thrilled to be joined today by dear friend and partner of the institute, Liz Clark, vice president for policy and research at NACUBO. Thanks so much, Liz, for joining us. Oh, what a pleasure. I'm always happy to join you and your team for conversations with Common Fund. Now Liz, you are famous to us, but for those folks out there listening who don't know you or don't know about NAKUBO, can you tell us briefly about your organization and your role as vice president for policy and research? Absolutely. I am vice president for policy and research at NAKUBO, which is the National Association of College and University Business Officers. We work with the CFOs and vice presidents for finance and administration at colleges and universities across the country. We have more than sixteen hundred college and university members, and we also serve the folks that report up to those CFOs and vice presidents. So those could be tax directors, accounting directors, controllers, treasurers, those folks that are really involved in what I sometimes call the plumbing at colleges and universities. I work with a team that works on the Nakubo Common Fund study of endowments and other research efforts. That includes a study of tuition discounting, a study of student financial services, and other research and polling, as we deem appropriate, to help understand the business and finance of higher education. Also on my team are the folks who educate our members at colleges and universities about data analytics and artificial intelligence. We're doing a lot more professional development on that front these days. And then lastly, I have the team responsible for being translators to our members about what's happening in Washington and vice versa. We try to help policymakers, whether they're on Capitol Hill or regulatory agencies, understand how what they're working on might impact colleges and universities and their students across the country. Awesome. Thanks, Liz. And you mentioned this already, but we're really excited to say that the NACUBO Common Fund Study of Endowments, or as we like to fondly refer to it, the NCSE has been released. It's one of the most comprehensive reports on higher education endowments, and it covers a lot of ground. There are hundreds, if not thousands of data points. So, just briefly, what are two or three takeaways that stand out to you from this year's report? So number one, I like to focus on the actual dollars that were spent by colleges and universities. And to me, it is a real testament to not only the mission of colleges and universities, but to the nuts and bolts of why endowments are run the way they're run. And this year, we show that the institutions participating in the study spent more than thirty three billion dollars that's billion with a B. And those are dollars that support students through financial aid, They support research, which could be anything from a graduate fellowship to helping make sure a fume hood works in a chemistry lab, to the public service programs. We know, for example, the land grant universities where they're running cooperative extension programs. There are even endowments that support four H, which reaches every corner of a state that an institution may be serving. So, to me, that top line spend is so representative of exactly why we have investment offices, why we have folks who support the work of college and university investments across the country and what it means to institutions. So that spend is really representative of the mission, frankly, of colleges and universities. So that's that's one thing that stood out to me. The other that stood out to me is that this year, the study shows that there's a higher percentage of annual operating budgets being supported by endowment spending. And I am really curious about this. On the one hand, it may sound like a positive that some people may say, particularly the critics of colleges and universities will say, my gosh, aren't we glad that colleges and universities are actually spending more and using these endowment dollars to help support their operating budgets? For me, I'm a little concerned, number one, that it represents disinvestment from other supporters of higher education, which could be the federal government, state and local government, and the limits on tuition revenue at colleges and universities. And when we peel back layers of the onion, in fact, sometimes for institutions that are spending their endowment dollars to support a significantly higher percentage of their annual operating budget, it actually could be a sign of poor fiscal health. So, when we look at those numbers, I think we're going to see some differentiation between which institutions are using more of those dollars to fund operating budgets, and we need to take a careful look as to whether the institution made a strategic finance move or they made a move desperation. And I hope that's not the case. But those are those are two of the standout items for me. One, just the excitement of how much money is being spent to support the mission. And two, an area of some curiosity and concern. There's been some disruption in the higher ed sector over the past year, to put it lightly, and, you know, getting at what you were just referring to. But the NCSE covers the fiscal year, so July twenty twenty four to June twenty twenty five. And the look back is helpful for a lot of reasons, but now we're months into twenty twenty six. Are there any persistent issues being faced by NAKUBO's membership that are top of mind but might not be visible in the latest study? So twenty twenty five was an interesting year to put it lightly. In fact, there were times in twenty twenty five where I looked at what was going on and said to myself, wow, this is bonkers. Or I've looked back on twenty twenty five and categorized it as a very spicy year. But given all of the changes that were happening at the federal level, the level of uncertainty as to where certain federal policies were going, whether it related to spending for research or changes in grants administration or where the federal government might go when it came to support for student aid. When I look back at twenty twenty five and see some of that disruption, I also see the challenges that were carried forward from prior years, and that disruption layered on top of some challenges that colleges were already facing. So, number one, I think we have seen enrollment challenges, particularly for small private institutions and regional public colleges and universities. Large public universities, particularly in the South, seem to have been going strong with enrollment. Others have seen shaky enrollment. We've also seen concerns about the fact that the class of twenty twenty five of high school graduates is probably the last class for which we will have seen recent growth. From here on out, we expect to see declining numbers of college graduates. And so enrollment decline is a real concern for colleges and universities. And so, I do want to just, know, say that there have been some recent challenges in the higher education space, but what happened in twenty twenty five from the beginning to the end of the calendar year, but significantly also in that first half of the year which impacts those FY twenty five results. It's a mixed bag both of what's happened politically and at the federal level and those longstanding challenges and pressures that colleges and universities have been facing. Thanks Liz. Since the podcast is about governance and leadership insight and we like to give listeners takeaways, Are there any best practices or anecdotes of success or maybe even maybe less so about success, but about nimbleness and adaptability given the times that we're in that you've seen from Nakubo members regarding how higher ed leaders are effectively navigating these issues, both persistent and emergent? For institutions finding the most success in a tumultuous environment, what I'm observing is that those that stay true and clear eyed on their mission are those that are finding the most success in navigating the challenges in front of them. For all higher education institutions, that means staying dedicated to the education mission of their institution. For many, it also means education and research, and for others, it means education, research, and public service. And as we talk to, say, public entities or critics who are challenging the value of a degree or the value of higher education, when you take the time to talk about what education provides, what research delivers for our nation, people start to see and understand what it is that colleges and universities are doing. For critics of the cost of higher education, when you take the time to explain that, for example, colleges and universities have to buy eggs too, They have to buy steel and that they are impacted by inflationary pressures. They start to understand and think about the fact that you have to pay the people that take out the trash. You have to find a way to heat and cool buildings. You have to find a way to salt sidewalks. And all of that includes expenses that help serve the mission because students and researchers need to get to lecture halls and laboratories. So if we take on the criticisms and the challenges and really stay focused on what it takes to deliver the mission, that's where I see the real leadership emerging. I think it's a really important topic and something that we do see come up in the studies. Liz mentioned the impact of all of these factors on how much spending is coming out of the endowment. And I think that's a huge factor is that HEPI, the index that tracks the expense structure of higher ed has been tracking higher than CPI. So when we see that expenses are going up for higher ed institutions, we do see more need for spending coming out of the endowment and from other sources that, as Liz also mentioned, is not necessarily coming out of enrollment right now. So I think all of these pressures put together, including inflation, are kind of putting together the picture that we're seeing now. The HEPE study and the HEPE framework really are so helpful in telling the story about the cost of delivering higher education. I like to point out to people that public K-twelve education isn't free, that taxpayers are spending somewhere between fifteen thousand and twenty five thousand dollars per pupil per year for public K-twelve education. Somebody is paying for that, even if the student or their family aren't paying a tuition dollar. And when I share that, it helps people understand that there are expenses that need to be met and inflationary pressures that add to that. And so I urge you to try it. I have even had conversations where I've tried to help people understand, yes, students and families are facing difficult challenges when it comes to meeting rising tuition costs, but colleges and universities as well have costs. I've had people say to me, oh, I never thought of that. I never thought about what a college or university has to expend to deliver an education to my student. Liz, I just want to reflect on a couple of things and then sort of give you the floor for our final question because time flies when you're having fun. Persistent versus emerging challenges, I think that's a frame, especially in higher ed, that's helpful for all of us to hold, right? There were issues and challenges that higher ed was facing and we were all facing together as a community. And then there are these emergent challenges you mentioned, twenty twenty five being a spicy year. And we may have had some sense that there was gonna be turbulence coming out of the public policy environment, but I don't know if anyone could have imagined it was going to be sort of quite so spicy as you said. And so how do we sort of, from a leadership and governance standpoint, hold the complexity of both types of challenges, right? Ones that we've been trying to wrap our arms around for many, many years and the ones that are causing disruption that we couldn't have quite scenario planned for because we might have not ever experienced anything like this as an ecosystem or a community. And so we'll just continue to partner together to power through in that regard and continue to provide resources for college and university leadership. The other thing you mentioned was about the NCSC, about the NACUBO Common Fund Study of Endowments. I do think it will be really, really important, especially for us this year to look at indicators and markers and really do a deep dive and see, is this a sign of ecosystem health or is this a red flag or a flashing red light? And so excited to partner with you and your team at NACUBO to do that because I do think on its face, could look at some data points and be like, oh, this is positive. And then when you really, you know, peek behind the curtain, you're like, oh no, actually this was an indicator of something that we need of distress or something we needed to keep our eye on. So I'm looking forward to our team working with your team and others to really delve deeper into the data points for NCSE and do some critical analysis and see if we can offer some thought leadership in that regard. So I'm excited there. But we always like to lean into hope and strategy. So I outlined some sobering context as well as some more work that we all have to do together, but I do want to leave with this. What is exciting right now about your role or what you're seeing across NAKUBO membership that's giving you some hope or that's giving you something to hold onto? So the first thing I'd say George is just to remember that hope is not a strategy. So they go hand in hand, seeing the positive and crafting a strategy. So I think that many people have only slowly come to terms with that we're not preaching to the choir anymore when it comes to higher education. There are a lot of folks, even still in the sector, who don't understand why other people, quote unquote, don't just don't get it. Why don't they get what's so great about higher education? You have to put the hard work in. You have to take the time to help people understand what's happening. And what's positive, what's been great to see through twenty twenty five and now into twenty twenty six, is that that hard work is happening. We have seen court challenges that are really taking on anti research efforts that are winning and helping the research enterprise across the nation. We have seen other challenges or questions to policies and activities that may be diminishing the notion that colleges and universities are all about opportunity. And I've seen a lot of institutions take that on. But we also see that in some of the numbers that are out there. It's really unfortunate because the news headlines really like to lead with the negative. They'll talk about the plane that's crashing, and they don't do as much reporting on all of the planes that landed and the successful logistics and hard work that went into that. But when we look at the fundamentals, in twenty twenty six and twenty twenty seven enrollment was up at colleges and universities. Enrollment was up overall. Not only that, international undergraduate enrollment was up. Now, we saw a steep decline in international graduate enrollment, and that's a real problem for the graduate university enterprise and the research enterprise in particular. But we still see international students wanting to come to the United States for their undergraduate education. FAFSA applications are up. That's the application that helps connect students and families to federal student aid. That means that even after the debacle we had with that form a couple of years ago, students and families are still looking to that federal partnership with colleges and universities to help them access programs like the Pell Grant, work study, and more to help them afford a college education. It's an indicator that there's some faith, not only in the system, but in the value of a degree as well. Also, we had a record long government shutdown in the fall, but what did we not see? We didn't see any systemic failures. We saw some challenges with some individual institutions and some cases where there were some real problems that needed to be worked out, but there was not a systemic failure in getting student aid to students during that time period. We have seen a new investment. The One Big Beautiful Bill Act included a new Pell Grant program called Workforce Pell that is going to help a new population of students, those more aligned with the technical and trade programs, certificate programs, able to access federal support for their higher education. And we have lastly seen a lot of bad ideas in Washington hit the cutting room floor. If we look back into the early months of twenty twenty five, there were a lot of proposals coming out of Washington for the One Big Beautiful Bill Act that could have done a lot of harm to colleges and universities, and they were not included in the final bill. So there's a lot of good news out there and there's a lot of evidence that students and families still believe in higher education and that there's a lot to be said for that partnership with colleges and universities and the federal government. Amazing. Thank you so much, Liz. Liz, thanks so much for coming on the show. We really appreciate it. It's always a pleasure to be in conversation and partnership with you. Thank you for joining us. Amanda, George, happy to talk to you anytime. Thanks for having me and and thanks for bringing Nakubo into the conversation. Absolutely. For you all out there, if you like this conversation and wanna hear more from leaders in this field, visit w w w dot common fund dot org forward slash espresso chats to view the full playlist and subscribe on your preferred podcast platform. See you next episode. Bye.