It’s Not A Small World After All

When he graduated from Yale Law School in 1996, it’s reasonable to assume Hunter Biden foresaw a different life path than the one he’s traveled. He may have gotten off on the wrong foot. Rather than attempting to blaze his own trail, he took a job at MBNA, the credit card giant in the state represented by his father. (For a time, President Biden was referred to as the senator from MBNA.) Then Hunter was appointed to the board of Amtrak and ended up serving as Vice Chairman – probably not a coincidence since his father was also known as Amtrak Joe.

Hunter’s next decade wasn’t smooth railing or sailing. He tried to make money in China and Ukraine. He suffered the loss of his brother and developed a crack addiction. He divorced his wife and began a relationship with his brother’s widow. He stopped paying his taxes. He owned a gun while on drugs. And most damning for Fox News viewers, he lost his laptop.

With the love and support of his family, Hunter now seems to be on the right track. If he’s willing to agree to limited immunity from future prosecution, there’s a path to resolving his current legal issues. He’s taken up painting and – by pricing works at as much as $500K – determined it’s safer to trade on his own ill-gotten celebrity than his father’s career. The one outstanding responsibility from Hunter’s lost decade is a child born to a woman he met at a DC strip club in 2017. Hunter initially denied paternity, but a DNA test proved he is the father of the four-year-old girl. Fortunately, at the end of June, Hunter reached an agreement on long-term child support – an agreement that requires Hunter to provide several paintings to sell for the benefit of his daughter. Which paintings, you might ask? According to the agreement, “the child shall select the paintings, which shall either be sent to the child or sent to a gallery designated by [the mother].”

I have so many questions… Whose idea was it for the child to select the paintings? Is this four-year-old an art prodigy? Does she have a favorite style or color? And how could dozens of news organizations report on the child support agreement without asking? In what world does it make sense to entrust such an important decision to someone so small?

In higher education, millions of Americans have entrusted their futures to colleges nearly as small, at least in relative terms. What do I mean by small? Smaller than an average high school – fewer than 1,000 students. Small like bucolic Paul Smith’s College on Lower St. Regis Lake in the Adirondacks, where I once ran a summer program and which enrolled 593 students last semester. At the start of the pandemic, there were 1,300 small colleges and universities, of which half were private four-years – the intimate liberal arts college with the grassy quad, arguably higher education’s most powerful archetype – 34 public four-years, 80 community colleges, with trade schools making up the rest. But unless small schools get help, within a decade we’ll look back and marvel that hundreds of small colleges once dotted the American landscape.


Before Covid, college closures were on the rise. Between 2017 and 2020, nearly 150 traditional institutions closed or merged. And while over $40 billion in federal emergency relief grants steadied many small ships from 2020-22, this year 12 have already announced closures or mergers, including universities that have closed a small campus (but – reminiscent of the not dead yet scene in Monty Python’s Holy Grail – not including one that won’t hold classes this fall but remains adamant it’s not closed). Philadelphia has been particularly punished. In June, Drexel swallowed Salus University, a school with around 1,000 students. In the spring, Villanova captured Cabrini. Seven different Philadelphia-area schools have closed in the past six years. Last week brought two more closer to teach-outs: West Virginia’s Alderson Broaddus University and my former summer home, Paul Smith’s College.

Small colleges have several debilitating disadvantages in today’s higher education market:

1. No Economies of Scale
Lectures and larger class sizes allow universities to amortize cost of instruction across more students. That’s not possible for small schools, which do their best to flip the script, turning small classes and low faculty-student ratios into a selling point. But diseconomies of small schools go far beyond instruction. Colleges have no choice but to staff departments for admissions, financial aid, registrar, bursar, library, student affairs, career services, facilities, technology, dining, and athletics. Each represents a higher percentage of the overall budget at a small college. Beyond personnel, operating and maintenance costs for facilities are generally fixed – not dependent on the number of enrolled students.

2. Single Revenue Stream
Larger colleges and universities often have graduate and professional schools and are much more likely to generate revenue from research, athletics, and perhaps healthcare (i.e., university-affiliated hospital). In contrast, nearly all schools under 1,000 students are entirely dependent on undergraduate tuition and as Jeff Selingo has noted, coming in even a few enrollments short can wreak havoc on the budget.

3. In Debt
Most small colleges have borrowed millions of dollars to fund shiny new facilities which were supposed to attract students; Paul Smith’s College has over $10M in long-term debt with balloon payments due in five years. When faced with borrowers with structural deficits, creditors often prefer that schools utilize remaining assets to pay debt before closing rather than further depleting assets. For small schools, lenders are typically banks rather than bondholders; according to Chris Good at RBC Capital Markets, one of the leading underwriters of bonds for higher education institutions, many indebted small schools are too small to access public markets and have no choice but to rely on bank debt. Adding insult to injury, because banks are regulated lenders, they have no choice but to seek collateral for repayment, which puts undue pressure on small schools to liquidate real estate.

4. Employability Deficit
Back when small schools stood a chance, there were lots of reasons students enrolled in college. Today, there’s one overwhelmingly dominant reason: landing a good job. This is for two reasons: (1) an obvious need to seek a return on eye-watering annual cost of attendance; and (2) cautionary tales from older relatives and friends who graduated into underemployment and face unsustainable student loan debt. For small colleges, attracting the attention of big brand-name employers may be an impossible task. If national employers have time to focus attention on campus recruitment, they’re going to recruit from highly selective schools, and then large universities. Employers simply have better things to do than spend time at a small college that – in a good year – might provide a handful of attractive candidates. And despite the promise of Handshake (i.e., every company recruiting from every college) and the possibility of remote work, prospective students know it. Employability’s order of operations is: (1) highly selective colleges; (2) big schools in urban centers (i.e., where good jobs are); (3) tie between big schools elsewhere and small urban schools; and (4) small schools in the hinterland – into which most of the 1,300 fall. Against this challenge, there’s only so much marketing and admissions can accomplish by spinning the dials. The result is a discount rate well over 60% for the smallest schools.


Back in 2011, the late Harvard Business School professor Clayton Christensen famously predicted that half of all colleges would be out of business in a decade. He was as wrong as Hunter Biden in a DC strip club. We now know colleges do not go gentle into that good night. For publics, states have taken action to merge small regional universities. In Pennsylvania, Chancellor Dan Greenstein is combining six of PASSHE’s 14 institutions into two. Texas Tech absorbed Midwestern State and the UT System is doing the same with Stephen Austin State. The University of Georgia System has already consolidated from 35 to 26. As for private colleges, they have the benefit of devoted alumni, like those who brought Sweet Briar and Hampshire back to life. Several states have begun providing funding to small private colleges: Delaware supported Wesley College pre-absorption by Delaware State; before its governor began running for the Republican nomination, Florida funded three of its private HBCUs; and last month, as a result of Birmingham-Southern’s struggles, Alabama established the Distressed Institutions of Higher Learning Revolving Loan Program.

The problem for small schools is that things are going to get worse. As half the population appears to have fallen out of love with the idea of college and as American higher education begins to fall off a demographic cliff, there’s no reason to believe small colleges won’t be hardest hit.

To change their trajectory, small colleges must be able to make a persuasive case that they offer something larger schools don’t. That something can’t be small classes or personal attention; we know that isn’t enough. It’s also unlikely to be employability out of the gate; that hill is too steep. But it could be a unique program, structure, or educational approach. St. John’s College – the Great Books school – just completed a $326M capital campaign for an institution with fewer than 1,000 students across its two campuses. Olin College of Engineering, the only engineering program truly built around learning-by-doing, enrolls fewer than 400 undergraduates. Which small college might be interested in becoming an institute of climate change studies or of bolstering democracy and resisting authoritarianism? In some cases employability could follow suit e.g., college of cybersecurity or AI. Or it could be a unique pricing model like CU Coventry’s no-frills, assembly-line-style approach. As the President of South Korea stated last month, universities that fail to innovate will be shut down. He might as well be talking about small U.S. colleges.

To facilitate differentiation or specialization, accreditors need to be more flexible. Back around the time Hunter Biden was breaking bad, I was involved in an effort to save a small Nebraska college. The plan was to reorient the college to international studies and start new programs rotating cohorts around the world: a global college. But its accreditor rejected the plan because it strayed too far from the school’s stated mission. As a result, the college closed. Thirteen years later, the only plan for the campus is to turn several abandoned dorms into apartments for youth who have aged out of foster care.

If accreditors care about saving small colleges, they should not only allow differentiation, they should encourage it – even if it requires a change in mission. If a new plan appears more likely to lead to long-term viability and remains in the ambit of American postsecondary education, it should be approved. And if that means different accreditation standards for our smallest schools, so be it; that’s not too high a price to pay to save institutions that are often the lifeblood of their small communities.

Even if accreditors recognize this exigency, short of a $500M donation like 800-student McPherson College announced this week, they’ll need to buy time to find and execute on a feasible niche. Faced with creditor demands, struggling companies and organizations resort to (or at least threaten) bankruptcy as a path to restructuring. But thanks to a 1992 amendment to the Higher Act linking bankruptcy with the loss of federal financial aid, it’s not a tool small colleges can wield. So additional help is required from the federal government: either decoupling bankruptcy from Title IV eligibility (at least for publics and not-for-profits) or providing a safe harbor for small schools. Because the Department of Education is already up to its eyeballs in progressive initiatives, the most likely path starts with a bipartisan bill in Congress.

It was once a small world for American higher education. But small colleges now face an existential threat warranting unprecedented action from accreditors and the federal government. Without help, the next decade for small schools is likely to be as bad as Hunter Biden’s last one.