The aftermath of the 2008 financial crisis

January 11, 2018 henry_admin 0 Comments
Originally published by IC Chronicle

Part II: Financial Meltdown and Recovery—The 2008 financial crisis devastated the college’s financials. The college’s endowment decreased by one-third—from 237.2 million dollars to 150.8 million dollars over the course of the 2008-09 academic year. The college lost much of its expected tuition revenue since many middle income families couldn’t afford the steep cost of tuition even with the college’s unprecedented discount rate of 36.1 percent.

The discount rate calculates the average amount of school discounts from a student’s tuition. For the 2009-10 academic year, a 36.1 percent discount rate amounts to nearly 70 million dollars the college gives back to students in the form of financial aid.

During the years following the market-meltdown, the college faced declining rates of students who could pay the climbing price of admission. This posed a tremendous challenge to the administration to maintain a competitively low cost of attendance while keeping the college afloat.

Central to the budget was a tension between the cost of admission and discount rate. During the 2012-13 academic year, the college attempted to create an image of “prestige” for itself by raising the total price of tuition and compensating with a high discount rate. The Office of Business and Finance thought families would respond positively to a high cost of attendance and generous scholarships, as the budget narrative from the 2012-13 academic year quoted from a Wall Street Journal article:

“Families may be drawn to a school that charges $40,000 tuition and offers a $10,000 merit scholarship instead of one that simply charges $30,000.”

This proved to be a grave miscalculation. The college lost about 3 million in expected tuition revenue because parents simply refused pay the high “list price”.

The budget for the 2013-12 academic year was pivotal to the college’s current “corporate” identity because the administration discovered its greatest appeal to prospective students: a competitively low cost of attendance. All cost cutting was then justified by the mission of reducing tuition and increasing discounted tuition prices for students and families. Aggressive cost cutting and reallocation to keep the cost low resulted in the college’s lowest tuition increases in the college’s history for the 2016-17 and 2017-18 academic years.

Tom Rochon entered as the college’s 8th president in the spring of 2008, just months before the college would undergo financial trauma. Rochon’s administration was immediately tasked with “strategically re-imagining” the college’s future—to somehow secure the college’s sources of revenue while continuing to deliver quality education to students. These goals were first attempted by in the Integrative Core Curriculum (ICC), originally called “IC squared”, which grew into IC 20/20.

In the beginning, IC 20/20’s rhetoric from the college’s Board of Trustees was one of optimism and gratitude to the campus community for uniting behind the college’s new vision. This was expressed by the Board of Trustees’ constitution which ratified the implementation of the college’s new plan, “IC 20/20: Focusing Our Vision on Student Learning.”

Source: Ithaca College Library Archives


“We expect that with the accomplishment of this vision, Ithaca College will augment its reputation, increase its organizational alignment, sustain operational excellence, and be widely known as the home of a distinctive and valuable model of higher education,” declared the preamble.

The ideal IC 20/20 model was to be the fulfill all the steps for a financially healthy college: administrators in student-centered educational features, IC 20/20 and the ICC deliver a dynamic and integrative learning experience, thereby securing student income. By cultivating a faithful student body, the college would ensure long-term financial security by growing its alumni network.

IC 20/20 became a financial vortex; by investing in efforts to secure student tuition and build its alumni network, the college had less funding to support the academic careers of professors.

And this student-centered model became the college’s mantra—which, combined with keeping tuition increase low, justified broad cost cutting initiatives across the college. All expenses must be evaluated in terms of its contribution of this new reimagined student experience, said Chris Biehn, vice president of institutional advancement. If they didn’t contribute, then their funds must be reallocated to areas of the budget which do support the vision.

“The more we enhance the student experience, the more you have a successful alumni body, the more successful you’ll be as a college but you also do well in the world and that’s what we want,” Biehn said.

Source: Ithaca College Office of Institutional Research

For example, if a certain academic program doesn’t have sufficient students enrolling, whose tuition payments would support hiring a full-time, tenured-track faculty member, the college may fill that position with a contingent faculty member and save hundreds of thousands of dollars on a long-term scale. That money will then support new staffing for the ICC or financial aid.

This is how IC 20/20 became a financial vortex—by investing in efforts to secure student tuition and build its alumni network, the college had less funding to support the academic careers of professors. The college community then revolts against this perceived dehumanization of the academic experience while the college sees devastating drops in student enrollment, forcing the college to cut more costs and invest in student retention leaving them with greater expenses and less net income.

Click here to read Part III: Human Values and Market Values

Originally published by IC Chronicle

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