Observers of higher-education turnarounds have watched High Point University with no shortage of fascination. Since a business entrepreneur took over as president of the institution, the university has added some fairly radical features to campus life in an attempt to attract students. The most famous of those frills is an ice-cream truck that makes rounds on the campus, but The Chronicle has also reported on valet parking, a concierge desk, a hot tub, a steakhouse, personalized birthday calls from the president, Nido R. Qubein, and other features not often seen in academe.
High Point has tried one common ploy: The university built some $500-million worth of snazzy new stuff, and is planning an additional $1.6-billion in construction, reports the Greensboro News & Record. Buildings certainly play a role in attracting students, ”but might HPU come to regret its rapid-fire growth in the midst of America’s worst economic crisis in generations?” the newspaper asks. High Point has racked up a lot of debt for a small college, the article says:
Both Moody’s and Standard & Poor’s financial-rating agencies sent up caution flags about HPU in the past 18 months, in part concerned about the heavy long-term borrowing that fueled the school’s growth spurt.
“Total debt outstanding was about $167 million as of December 2009, up 109 percent from $80 million in total debt on May 31, 2008 …” S&P analysts said in their report late last year. “Projected maximum annual debt service of $19.1 million—including term-loan payments—equaled an exceptionally high 26.6 percent of fiscal 2009 operating expenses.”
High Point administrators told the newspaper that the rating agencies had “overreacted.” The officials said they have a solid plan to pay down the debt.
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11 Responses to Ratings Agencies Cautious About High Point U.’s Debt Amid Growth
sisgett - November 1, 2010 at 4:07 pm
I don’t know much about High Point University other than it’s most recent federal Composite Financial Index is 2.6 out of a possible 3. Debt load is a substantial factor in this calculation. Institutions with a CFI below 1.5 or considered to have problems and those in the negative are in serious trouble. And weren’t Moody’s and Standard & Poors hoodwinked by the Wall Street banks a couple of years ago? Just sayin’.
sisgett - November 1, 2010 at 4:08 pm
“1.5 are considered”
drangie - November 1, 2010 at 5:05 pm
It’s so sad and distressing to see people commenting on the CHE (the “E” stands for “education”) website who don’t know the difference between “it’s” and “its.” Just sayin’.
cstoneki - November 2, 2010 at 9:52 am
This article is woefully misleading and inaccurate. The transformation at High Point University is not based on “frills” and “ploys.” The most radical shift at High Point University is a focus on the learner and on returning value on the investment of parents and students. I guess respect for students and creating an environment that models values and inspires students to pay generosity and responsibility and joyfulness forward does not make as exciting a story as amplifying risk and implying that the most successful new paradigm in higher education lacks substance. High Point University’s approach is successful because it is based on a deep understanding of how students learn; HPU has simply adapted teaching and living strategies to meet the needs of students. The leadership of High Point University is intelligently reading the current economic climate and strategically moving forward. HPU is a success story that should be celebrated and imitated, not maligned.
dgcarroll - November 2, 2010 at 11:22 am
The article by Scott Carson totally ignores the heart of the transformation at High Point University: the establishment of quality academic experience that prepares students for graduate or professional school, the work world, or a life of service. The university is ranked by US News and World Report at No. 3 among Regional Colleges in the South. Over the past 5 years, more than 100 new faculty members have been hired, adding to an already excellent faculty composed of Phi Beta Kappa scholars, Fulbright recipients, and nationally and internationally known academicians who are recognized experts in their field. With average SAT scores that have risen almost 100 points in the last 5 years, a steadily increasing student retention rate, and an emphasis on experiential learning, it is clear that the High Point University academic program is soaring.
ncadmissions - November 2, 2010 at 1:41 pm
[quote]“I don’t know much about High Point University other than it’s most recent federal Composite Financial Index is 2.6 out of a possible 3. Debt load is a substantial factor in this calculation. Institutions with a CFI below 1.5 or considered to have problems and those in the negative are in serious trouble. And weren’t Moody’s and Standard & Poors hoodwinked by the Wall Street banks a couple of years ago? Just sayin’.” [/quote] sisgett
I’m not saying you are wrong, but according to this NACUBO article (http://www.nacubo.org/Business_Officer_Magazine/Magazine_Archives/April_2009/Diagnosing_Fiscal_Fitness.html), the scale goes from 0 to 10. The article states: “The threshold for financial health and stability is a score of 3, indicating that an institution has sufficient and adequately managed resources to fulfill its mission objectives. Scores should be viewed over a three- to five-year period. An average score of 7 or 8 indicates that resources are flexible enough to permit experimentation with new initiatives. An average score below 0, however, is a concern, suggesting that drastic measures may be necessary to ensure institutional survival.”
It would appear that even by this measure, HPU is taking on significant financial risk.
That being said, I wouldn’t bet against Nido…
twotonine2000 - November 2, 2010 at 1:52 pm
Although amenities make for fun reading, education is paramount at High Point University. The “snazzy new stuff” includes state-of-the-art teaching technology in every classroom. New academic buildings have been built and ALL academic buildings have been renovated. The budget prioritizes teaching and research. For example, the university is in the process of creating a center for teaching excellence.
The curriculum of each major throughout the university has recently been upgraded. The university has significantly increased its number of full-time faculty. For example, the business school has just hired seven faculty members and will likely hire several more next year.
Internship, study abroad, and other experiential learning opportunities have increased exponentially. Students can compete for new venture start-up funds through the Center for Entrepreneurship and Innovation. Students can invest real money through the Investment Club using sophisticated finance software in the trading room.
Yes, High Point University has an intense focus on providing a great experience for its students both inside and outside the classroom. Yes, High Point University is respectful of its students and focuses on the whole student. High Point University should not have to apologize for executing a successful strategy. This approach has driven the growth of enrollment and has resulted in a financially strong institution. I say financially strong because debt must be viewed in relation to other variables such as revenue.
ncadmissions - November 2, 2010 at 3:18 pm
[quote] I say financially strong because debt must be viewed in relation to other variables such as revenue.[/quote]
I compared HPU’s 2007 revenue and debt increase with that of Campbell University in 2007
HPU had $77.5 million in revenue and increased loan debt by roughly $34 million
Campbell had $131 million in revenue and increased loan debt by roughly $18.5 million
I looked at 6 to 10 private colleges in NC, and couldn’t find another that had anywhere near the loan debt that HPU carried at the end of 2007 (and it has more than doubled since then).
It’s hard to argue with the fact that an institution which devotes almost 27% of its operating budget to debt service has exposed itself to significant financial risk.
I still say HPU can pull it off – that place is AMAZING – but the financial analysts at Moody’s and S&P are paid to assess financial risk, not determine if HPU’s ice cream truck has any educational value.
sisgett - November 3, 2010 at 10:10 am
ncadmissions: My figures are based on a Chronicle article of August 11, 2010, entitled “Hundreds of Colleges Fail to Make the Grade on Financial Responsibility,” referring to DOE’s composite scores, which only go up to 3. To wit,
“Notes: All private colleges that award federal student aid must participate in the Department of Education’s financial-responsibility test, which is based on information from their audited financial statements. The department develops a composite score on a scale of 3.0 to minus 1.0, based on financial ratios that measure factors such as net worth, operating losses, and the relationship of assets to liabilities. Institutions with scores of 1.5 to 3 pass.”
My source is the DOE document entitled “Composite Scores for Private Non-Profit and Proprietary Schools with Fiscal Years (FYs) Ending Between 7/1/2008 and 6/30/2009 Grouped by: State, School Name Data Source: eZ-Audit,” the most recent available. It’s a spreadsheet anyone can download.
The CFI referred to in the NACUBO article is a different animal and is indeed based on a 10 point scale. On this scale, debt can actually have positive effect. I have no idea what HPU’s index is on this scale.
drangie: Yeah, I missed the “it’s-its” typo. Sorry.
ncadmissions - November 3, 2010 at 1:45 pm
sisgett – According to the same data sheet, Louisburg College and Livingstone College scored a 3.0. To borrow your term, just sayin’ :)
http://federalstudentaid.ed.gov/datacenter/compositescores.html
ncadmissions - November 3, 2010 at 2:08 pm
I think what is being missed here is that S&P and Moody’s are simply analyzing ratios which are widely recognized as indicators of financial stability. There is no denying the fact that HPU is HIGHLY leveraged. What is (perhaps) scary is that HPU is embarking upon a building cycle which calls for and additional $1.6 billion in construction. If HPU has leveraged 1/3 of the current (approx) $500 million construction (167/500 = .334), just think of how much debt they could accrue with these additional projects. S&P and Moody’s will blow a gasket!