November 29, 2016; Reuters

Dowling College has officially closed its doors. Reuters reports, “It suffered from sinking enrollment and defaulted last year on $54 million in debt that was issued through local government agencies.” According to the Wall Street Journal, the private nonprofit in Suffolk County, New York, sought out Chapter 11 bankruptcy last Tuesday. “The 48-year-old school, which served more than 2,400 students, caught the eye of its accreditors last year as its financial position weakened.”

NPQ has reported on how for-profit colleges are closing their doors due to government crackdowns on their mishandling of regulations. Money reminded us quite some time ago that “low graduation and student debt repayment rates ‘further substantiate such closings.’” While Reuters describes Dowling’s case as rare because it was a nonprofit college, Jessica Matsumori, an analyst at S&P Global Ratings, forewarned us when she told Bloomberg, “While such defaults are still relatively rare, we do expect to see an increase in school closures in the next few years.”

Other small nonprofit schools that closed within the past couple of years include Mid-Continent University in Kentucky and Lebanon College in New Hampshire. Meanwhile, NPQ wrote about the more recent closing of Burlington College in Vermont. A Moody’s study indicated that the closure rate “will likely triple by 2017.”

This draws us to the issue of how nonprofit colleges reach such a fate. After all, Reuters notes that others survive by merging with stronger institutions. Yet, the continuous downgrading of traditional small, private colleges sheds further light on the issue. Bloomberg reported in 2014 that “Moody’s, which rates more than 500 public and private nonprofit colleges and universities, downgraded an average of 28 institutions annually in the five years through 2013, more than double the average of 12 in the prior five-year period.” More recently, Bloomberg pointed out:

Dowling’s announcement underscores the financial pressures facing small regional universities, both public and private…tuition and student debt, competition from online programs and poor job prospects for graduates are shrinking schools’ applicant pools.

One considerable problem has been discussed since the 2008 financial crisis: “The pressures facing small, private colleges are part of a larger financial squeeze” attributable to continuing budget cuts. Money warned that “while the elite colleges can keep raising prices and soliciting big donations,” others are left to struggle. Bloomberg reports that smaller private colleges like Dowling face a “death spiral” resulting from sinking tuition revenues and donations. NPQ has offered more recent elaborations on how the overall nonprofit sector should prepare for such spirals to continue.

According to the Wall Street Journal, there was a time when Dowling had the hopes of staying open by strategically partnering. WABC-7 in New York reported on a deal being made with London-based Global University Systems, and another anonymous entity to boost enrollment and “shore up its multimillion-dollar debt.” However, the deal fell through.

Bloomberg notes the former college is looking to sell its sprawling Eastern Long Island campuses. Long Island News 12 reports that residents hope a buyer comes soon—perhaps another university or similar institution that can bring jobs to the area. Meantime, ABC takes note of the most devastating outcome: Dowling’s closing “leaves some 2,500 students scrambling to get transcripts and figure out what they’re going to do next.” The Department of Education released a letter indicating that local colleges are offering their support. Meanwhile, Long Island Newsday confirms that Dowling has successfully partnered with Long Island University and five other local colleges to support the transfer processes of their former students during this complex time.—Noreen Ohlrich