Higher Education

With consumers pushing back against increased tuition, colleges seek new revenue

From selling produce to licensing logos for caskets, schools try to diversify their incomes

Inside one of the greenhouses at Unity College, part of a farm the college uses for instruction but from which it also sells produce to bring in extra money.

THORNDIKE, Maine — The complex of plastic-covered greenhouses just off Route 220 could belong to any rural American roadside farm stand.

Produce is on offer here, both retail and wholesale, along with plants, gardening tools, lawn ornaments, and crafts. Local farmers rent tables in the steamy acre of greenhouse space, where their spring vegetables are just beginning to sprout from seed to be transplanted later when the northern New England weather warms up. There are horticultural workshops — for a fee — and plans for a farmers’ market.

Other than its size and relative orderliness, one thing sets this place apart. It’s the sign over the table where customers settle up. “Make checks payable to Unity College,” it reads.

The liberal-arts college with 750 students and a comparatively small endowment of $14 million is looking for new ways to make money in addition to tuition, including from this farm, about five miles from the campus, which was given as a gift and is also used for teaching and research.

Even that pays off. In a collaboration with the University of Maine and the Chestnut Foundation — which is seeking to revive the American chestnut tree, almost completely killed off by blight — Unity charges its partners rent to use the corner of the greenhouse where they’re growing blight-resistant saplings.

“You can’t function as a school, state or private, thinking there’s an endless supply of money,” said the college’s president, Melik Peter Khoury. “This idea of incrementally increasing tuition to infinity is a fool’s errand. So we started to think about, okay, how do we supplement the revenue for those of us who don’t have a billion-dollar endowment?”

Related: A tough-to-swallow reason college keeps costing more: the price of meal plans

The college’s dining services division caters weddings and funerals and sells ketchup and hot sauce it makes from tomatoes grown on the farm. Summer programs bring in a quarter of a million dollars a year toward the annual $23 million operating budget, during a season the campus would otherwise be empty. The performing arts center rents out space to bands and community theater groups.

“These might not seem groundbreaking ideas, but for a college to bring in new kinds of revenue is an almost completely novel concept,” Khoury said.

Squeezed by budget cuts, an enrollment decline, and consumer resistance to continued increases in tuition, colleges and universities are hunting for new money-making ventures, from farm stores to campus summer camps to licensing deals on everything from T-shirts to — in the case of 48 colleges and universities — caskets and urns.

Some of these ideas, like Unity’s farm store, are home grown. Others are being driven by middlemen who see an opportunity for collaboration.

Students in one of the greenhouses at Unity College, part of a farm the college uses for instruction but from which it also sells produce to bring in extra money.

One startup is selling unfilled seats in courses to non-students, for example, the same way travel websites offer deals on unsold hotel rooms. Another proposes to be a sort of Airbnb for athletic facilities, in which local clubs and teams can rent out campus gyms and fields when they’re not in use by students. The first has agreements so far with a handful of colleges; the second, a deal with one public university to test the concept.

As slow as some are being to take up these ideas, institutions seem to have little choice but to diversify their incomes. No matter how fast tuition keeps going up, they’re giving back more and more of it in the form of discounts. Forty-nine cents of every dollar from tuition goes back out the door as financial aid to lure students, up from 38 cents a decade ago, the National Association of College and University Business Officers reports. That’s in part because enrollment has been declining for five years.

As a result, at nearly half of private colleges tracked by the bond-rating agency Moody’s, revenue increases have failed to keep up with inflation, the company says.

Related: Students, feeling nickel-and-dimed, force new scrutiny of college fees

Meanwhile, colleges’ and universities’ expenses are getting even larger, thanks to looming pension liabilities, long-delayed building maintenance, and other financial commitments.

“Probably the most important issue that all institution face, large and small, is that they no longer can pass on their rising costs to the consumer,” said Rick Beyer, managing principal of AGB Institutional Strategies, part of the Association of Governing Boards of Universities and Colleges, which represents boards of regents and trustees.

Inside one of the greenhouses at Unity College, part of a farm the college uses for instruction but from which it also sells produce to bring in extra money.

“When the market stops growing and costs keep going up, you can either cut your costs or try to raise more revenue,” said Beyer, a former Qualcomm executive and onetime president of Wheeling Jesuit University. “Without continuous growth you won’t be able to reinvest in your people and your programs.”

Yet universities have not entirely embraced the entrepreneurialism needed to do this.

“It is a different mindset for people who have become accustomed to getting money and just spending it,” said Jennifer deHart, chief sustainability officer at Unity.

“While on the surface you would think they care about increasing revenue, they’ve been built to maintain their current system,” said Sergio Marrero, cofounder and CEO of Caila, which sells those unused seats in classrooms.

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Fifteen percent of slots in university courses go unfilled, or two million per year, said Marrero, who developed his company while simultaneously attending Harvard’s JFK School of Government and business school and calculated this statistic by surveying universities and colleges and factoring in the collective decline in enrollment.

Colleges “are all ears and then they send it to the next person, who’s the head of enrollment or admissions. What they’re responsible for is the number of full-time students entering programs,” Marrero said. “They’re not built to sell individual courses. It should make sense, but institutions aren’t built to do it.”

He compares this to the music industry’s self-defeating sluggishness in understanding that consumers preferred to buy one song and not an album.

By being slow to innovate, universities “are following the pattern of other industries that get disrupted,” said Marrero, who likens his idea — which won a $10,000 award sponsored by Accenture from the Harvard Technology and Entrepreneurship Center — to an iTunes for higher education. “It’s not about one genre or another, but the ability to mix whatever learning style, whatever songs you like. That’s what people want.”

Among other things that people want are new kinds of educations, which are also cutting into colleges’ traditional market. These include hugely popular, fast-paced, and high-priced software coding academies known as boot camps that provide certifications giving students entrée into coding jobs.

“The amount of money people pay for that — why don’t [conventional] institutions deliver it?” asked Beyer.

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A few finally are. Rutgers University launched a 24-week boot camp in the fall for which it charges $9,500. Northeastern University, which has an entire Office of New Ventures to develop novel ways of making money, also has a fast-track coding boot camp, which costs $7,995 for two months.

Other institutions also take advantage of their existing expertise in this way, figuring out ways to bring in more income from their principal missions of teaching and research.

Beacon College, which serves students with learning disabilities, charges $12,000 per student for a four-week program teaching English and other skills to learning-disabled young people from Saudi Arabia at its campus in Florida; the college just also signed a contract with the United Arab Emirates under which it will be paid to train teachers there

Researchers at Johns Hopkins University developed a ratings system they equate to a Consumer Reports for parents seeking childcare and education programs; begun in Maryland, the system is being sold to other states and countries, which will pay the university for technical and even marketing support provided by Johns Hopkins employees.

Approaches such as this one capitalize on universities’ other asset: credibility, said Chris Swanson, senior director of quality early care and education at Johns Hopkins, who envisions the same approach also working for ratings of assisted-living centers and nursing homes.

“Many states are more favorable to working with us than if we became an out-and-out vendor,” Swanson said “We’re still a nonprofit, mission-driven, with the reputation that the name Johns Hopkins affords. So we aren’t just ‘selling’ our product and services to other states, we are partnering with them toward achieving their goals.”

Still, many other universities, especially larger ones, have been slow to do these kinds of things.

Inside one of the greenhouses at Unity College, part of a farm the college uses for instruction but from which it also sells produce to bring in extra money.

Related: Colleges are pushed to stand behind what they sell with money-back guarantees

“They don’t have to,” said Marvin Loiseau, dean of recruitment at the Benjamin Franklin Institute of Technology, which has just 500 undergraduates and a $3 million endowment — as much as Harvard earns from its $35.7 billion endowment every day and a half — and is one of the few schools to have so far teamed up with Caila to sell unsold seats in courses; it also rents out its Boston campus for weddings and corporate events.

“They have those billion-dollar endowments that small schools like us don’t have, and we do have to think outside the box to provide for our operating expenses,” Loiseau said.

So will everyone, eventually, Beyer said.

“The market is contracting,” he said. Higher education “is swimming against the tide. There’s going to be really some hard falls in the industry.”

There already have been. Seventy-one universities and colleges closed between 2010 and 2014, the most recent period for which the figures are available from the U.S. Department of Education, and 149 in the decade before that. Another 538 are on a list of schools that are under heightened government oversight because of financial issues.

Colleges like those are quicker to return his calls, Marrero said.

“There are some I talk to and I can tell I’ve caught them right [when they’re in trouble], and they say, ‘Sure, we can work with you. When? Tomorrow?’”

From others, he said, he hears a different answer.

“I wish you contacted us last year,” they tell him. “We’re closing.”

This story was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Read more about higher education.

Unlike most of our stories, this piece is an exclusive collaboration and may not be republished.

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