I am an economics major. I believe in the power of incentives and rational expectations. For example, when I applied to live off-campus for my senior year, there were strong incentives: the ability to live with a large group of my friends, the opportunity to gain experience having a landlord, paying rent, distributing house duties and the option to live outside the reach of campus safety (or so I thought).
Accompanied by these strong incentives was a rational expectation to be released. Since people base expectations on past experiences, and since students trying to live in the house I applied to had been released every year in the recent past, I expected this trend to continue. Luckily for me it did.
Unluckily, for the class of 2018 they experienced the equivalent of Oct. 15, 2008, the day with a daily return on the S&P 500 of -9.03 percent, the day Lehman Brothers went bankrupt, the day that rational expectations collapsed. That is to say, some 45 percent of off-campus applications for the class of 2018 were denied.
While comparing the crash of 2008 to the disappointment of rising seniors may seem overly dramatic, from a student’s perspective, it is a fair analogy. Like the day Lehman Brothers went bankrupt, Feb 8, 2017, was a signal that systems are failing. I have written in the past about students’ desires and needs. My appeals yielded precisely zero action from the administration.
The student handbook, for example, remains riddled with errors, including the errors I so nicely pointed out in a previous article. Despite this lack of encouragement, I will attempt to appeal directly to the administrators. Like any business, Union aims to maximize its revenue.
According to FY2016 financials, student tuition and fees account for nearly 70 percent of Union’s gross revenue. Thus, when Union looks to increase revenue, it turns first to its students as its largest revenue stream. The tactic to keep as many students as possible on campus is from this perspective, logical. Fees for room and board are roughly $12,600 for the 2016-2017 academic year. Keeping an additional 100 students on campus raises annual revenue by approximately $1.3 million.
Union’s revenues are, however, not a concern – Union’s current revenues of roughly $158 million more than cover Union’s $129 million of expenses. The real concern is Union’s endowment. Union’s total wealth in FY2016 is around $550 million. The wealth of such peer institutions, however, as Hamilton, Bucknell and Colby is much higher: $883 million, $817 million and $925 million, respectively. Union clearly faces a more serious challenge in this respect than covering its annual expenses. If Union wants to catch up with its peers, two things are necessary: first, a positive return on the endowment, and second, a larger investment base. The second is made possible through gifts to the college.
Which brings me to a crucial argument: disgruntled, disappointed students graduate and become disgruntled, disappointed alumni and alumnae. From my experience, cold-calling alumni for College Relations, I can assure you that disgruntled, disappointed alums donate on average $0 to Union’s annual fund. And we all know that Union cannot afford lower alumni-giving rates.
Dissatisfied alums not only give at lower rates, thus yielding a smaller investment base and a smaller endowment, but they can also cause problems for future student attraction. Union boasts that every year more and more students apply for admission. This is true: total applications have increased 16.4 percent since academic year 2011-2012. Matriculation, however, or the percentage of students who come to Union once accepted, has decreased.
In academic year 2015-2016 only 24.7 percent of students who were accepted to Union decided to attend Union. This data suggests that the 75 percent of accepted students who did not accept their offers did not consider Union a first choice. But as we know, to attract the best students, to move up in the rankings, Union needs to be the first choice of more students.
Creating more disappointed students and dissatisfied alumni will hardly be the best way to increase matriculation. The power of Union’s alumni network as a recruiting tool should not be underestimated.
Many high school students will never have heard of Union until their neighbor tells them about how great their experience was at Union, or an aunt shares stories about her term abroad experience or an alum tells them about what an amazing experience it was to live off-campus. Word of mouth is everything. The connections we foster with alumni are crucial for justifying Union’s price tag. If fewer students enroll, and matriculation falls even lower, then revenues will fall, and there will indeed be a serious problem in terms of covering expenses. Union’s administration faces two possible routes.
I call route one the “Let Lehman Fail” option. This option entails continuing to increase annual revenues by approximately 0.8 percent annually by forcing an additional 100 students to live on campus, thus creating disgruntled, displeased students, who tell prospective students that they do not enjoy Union, and angry alumni who are unwilling to contribute to the school, potentially shrinking our already weak endowment, and lowering matriculation further.
Alternatively, the administration can choose route two, which I call “The Bailout.” This option includes letting students who wish to live off-campus do so, which makes them feel as though this institution is not a business driven solely by the bottom line, but rather is a place where students are valued members of the community whose voices are heard and whose needs and desires are considered. This helps create happy students and happy alumni who want to contribute to the school, fortify the alumni network, and strengthen Union’s reputation. So, administrators, the choice is yours.