Rebutting the rankings
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. It handed out letter grades to these institutions based upon 10 metrics.
At first glance, my institution, Misericordia University in Pennsylvania, 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.
Forbes gives a top grade in the endowment assets category to Princeton, 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’s $100,000 per student every year without charging tuition at all. Swarthmore College in Pennsylvania, 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. 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.
Giving students what they need
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 higher education is not all about a balance sheet.
Our future teachers, nurses, social workers, entrepreneurs and occupational therapists can attend Misericordia even if they’re not wealthy. We enroll first-generation college students, adult learners and many others with limited financial resources. We will always strive to provide capable students with the resources they need to complete their college degrees.
By Forbes’ standards, institutions should give merit aid to 38 percent or less of its students 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 faculty challenge our students to earn excellent grades in both academics and service to others.
In the case of Forbes’ ranking, though, Misericordia will tout our B- with pride and will celebrate our ability to provide transformational learning experiences to caring, motivated students at a quality university where all are welcome.
Thomas J. Botzman is president of Misericordia University