Opinion: Iowa colleges could learn from an official Iowa Wesleyan postmortem
On May 31 of this year, one of Iowa’s oldest universities closed in the face of “financial challenges.” The abrupt end to Iowa Wesleyan University’s 181-year history as a dominant educational and cultural institution in its community leaves us with many unanswered questions. But answering these questions may prove invaluable for similarly situated private colleges in the state.
And for the small communities that consider these colleges their economic backbone, the answers could make all the difference. The state government can play a role in uncovering such answers, and I propose that it do so through a postmortem examination of Iowa Wesleyan University’s closure.
The postmortem, or autopsy, that I propose is not some dirt-digging exercise intended to add insult to Wesleyan’s injury. Rather, a neutral and thoughtful examination of how Wesleyan met its demise would generate a final report and findings that could be utilized by other colleges and universities.
A well-researched report may not be able to pinpoint a specific “cause of death,” but it should be able to uncover significant contributing factors that led to Wesleyan’s untimely end. For example, when studying distressed organizations, we often talk about two types of distress: economic distress and financial distress. Some organizations simply cannot succeed in the marketplace. Their competitors provide better services at lower costs, and consequently, the organizations are in trouble. This kind of trouble is called economic distress. An organization, however, may be in trouble simply because it cannot bring in enough revenue to pay its debts. It may face this trouble despite being competitive in the marketplace and otherwise “profitable” with a different capital structure. This kind of trouble is called financial distress.
A postmortem report would allow us to know whether Wesleyan was facing economic distress or financial distress (or some combination of the two). For example, the lessons learned from a school closing due to a nationwide drop in applications and an overly aggressive tuition discount rate are very different than the lessons learned from a school that took on onerous debt to fund operations. While a feasibility analysis for Wesleyan was performed prior to its closure, this analysis only shows Wesleyan’s top line financial problems, and not how or why these problems arose.
Regardless of what the postmortem report reveals, small colleges in small communities around the state will be able to learn from its findings. Of the 35 private colleges in Iowa, 21 saw a decline in enrollment from 2011 to 2019. A Wesleyan postmortem could be vital to many of these small colleges in Iowa, where “half the state’s private nonprofit colleges have seen annual tuition revenue shrink over the last decade,” as the Register reported. Some schools may catch themselves going down a similar path while there is still time to change course, while other schools may be able to reassure themselves — and more importantly, donors — that they are not falling prey to the same pitfalls.
Not only would other private colleges and universities in Iowa benefit from this information, but a postmortem report could provide thoughtful recommendations for the General Assembly to protect students from future closures. Though postsecondary education is already a highly regulated industry that could, in many respects, benefit from less state-imposed requirements, the implementation of more fulsome consumer protection measures may make sense.
The Wesleyan students are undoubtedly one of the hardest hit groups in this story, and certain requirements on Wesleyan may have helped their situation. For example, the Iowa Administrative Code currently exempts dozens of the state’s largest and most well-known private colleges from a requirement that closing schools send the state information prior to closing, including, amongst other things, student transition plans. Perhaps lifting this exemption or requiring a “living will” for schools exhibiting the most severe distress would result in a more orderly winddown in the event of closure.
Any potential consumer protection for students would need to be thoughtful about avoiding any self-fulfilling prophecy problems (e.g. a college’s initial financial distress is broadcast to the world, scaring off potential students and donors, and thus creating more financial distress). On the other hand, the state of Iowa has an interest in avoiding a situation where unsuspecting students are investing tens of thousands of dollars in their education without all relevant information. A postmortem report could provide the General Assembly with information that would help strike this balance; we could construct a solution that prepares struggling schools for the worst, while avoiding situations where “nobody really saw it coming.” The state does not need to tell colleges how to run their institutions — nor should it. But implementing certain procedures may prepare colleges for a more orderly winddown in the event the worst comes to pass.
Studying what happened at Wesleyan may seem like an incredibly niche and parochial issue. Estimates suggest, however, that Wesleyan contributed more than $55 million in economic impact to southeast Iowa each year. Surveying other small private colleges in Iowa, it is not hard to imagine how large the collective economic impact can be — not to mention the tens of thousands of students enrolled in these institutions every year. The fact of the matter is that another closure of a small Iowa college could have a massive impact on thousands of students and an entire community.
The dissemination of knowledge is the true mark of any institution of learning, and the lessons learned over the past 181-years at Iowa Wesleyan University are too many to count. A fitting end to such a storied history would be to teach one final lesson. This final report would provide valuable information for the future of higher education in Iowa and allow a proud institution to make one final contribution to our state.
Joe Schomberg is an assistant professor of law at Drake University Law School.
This article originally appeared on Des Moines Register: Opinion: Iowa colleges could learn from Iowa Wesleyan postmortem
