College students are no different from the companies that one day will hire them in looking for their own best return on investment, which is why the American Institute for Economic Research (AIER) this fall released its 2012 AIER College Destinations Index (CDI), which examined a dozen factors in evaluating the 227 U.S. metropolitan statistical areas (MSAs) with student populations of 15,000 or more.
Among the factors measured were degree attainment, cost of living, creative-class representation, arts and leisure, and area unemployment, entrepreneurial activity, earning potential and brain gain/drain statistics. Overall, the report found that the recession knocked larger metros out of the top 10 since the last report two years ago. “Between then and now, the economy changed,” says Stephen Adams, president of AIER. Counter-intuitively, larger metro areas that rely on diverse economies have suffered more in the Index ratings, whereas smaller towns where colleges play a larger role have remained more stable.
However, some institutional anchors have better purchase than others.
A July report from Bain & Co. and global education institution investor Sterling Partners found that an increasing number of colleges and universities — now up to approximately one-third — are on financially unsustainable paths, with university debt on average increasing annually at 12 percent per year, even as tuitions reach the stratosphere (see chart).
“Higher education in the United States is facing a liquidity crisis of disruptive proportions,” said Jeff Denneen, Bain partner and head of the firm’s higher education practice in North America, “and it is imperative that universities become much more focused on creating value from their core. Who will pay $40,000 per year to go to a school that is completely undistinguished in any dimension?”
Routes to creating value may be found in part by freeing capital in non-core assets, said the authors, including better management of real estate, physical assets and intellectual property. U.S. colleges and universities, they found, collectively have more than $250 billion worth of real estate assets on their balance sheets.
