Bloomberg Audio Studios, podcasts, radio news. American higher education is facing a crisis, a few of them really. One of them is economic. Increasingly many colleges and universities are struggling, and some of them have had to shut down. What's causing this, at least in part, is the number of high school graduates in the United States is on the decline.
There's a demographic cliff, as they like to call it. By twenty thirty seven, there will be a ten percent decline in students that go to college.
Francesca Maglione covers personal finance and higher education for Bloomberg, and she says that at the same time that the pool of prospective students is shrinking, colleges are under pressure to offer them more, more perks, more gyms, and other new buildings dorm rooms that are more luxurious. But Francesca says, there's a university that's trying something different.
So in Northeastern, for many decades was known as a commuter school, kind of just filled with local students, really trying to compete against all of the other colleges in Boston, Boston College, bu Harvard.
Of course, in recent years, Northeastern has set its sites beyond Boston, and its administrators have used a playbook that Corporate America has developed and deployed. The new Northeastern is barely recognizable.
It's really transformed over the years to kind of have this big international recognition. They have a lot of international students and they've also grown tremendously, so they really did a complete flip up of what they were before.
As some of Northeastern's competitors struggle, it is growing a lot. A decade ago, the school started buying up and merging with colleges that were foundering.
They had their first campus outside of Boston in twenty eleven. Now they have fourteen campuses and they have three abroad.
In some ways, it's been a success, and other schools have taken note, but Northeastern's transformation has not been seamless. There have been clashes over campus culture and curriculums and protests. Samel's College Samals College shows it's the rare merger that's harmonious when companies are involved, and it turns out the same is true with colleges. I'm David Gerra, and this is the big take from Bloomberg News on today's episode.
Using the private equity playbook in academia, what's worked for Northeastern, what hasn't, and how that university's aspirations could reshape American higher ed colleges and universities in the United States are facing a financial reckoning, and according to Bloomberg's Francesca Magleone, it's coming to a head.
A lot of people don't like to think of colleges as businesses, but they are, and their main clients are students.
Of course, and Francesca says some of those prospective clients are wondering if it's worth it to pay hundreds of thousands of dollars to get an undergraduate education. That's one challenge, but colleges and universities face others, especially smaller schools.
They're competing for students across the nation. Again, the number of students is declining. COVID also was a big hard hitter for colleges. They lost many students and costs went exponentially up, something that for example, Harvard or Princeton doesn't struggle. They have these massive endowments.
Billions of dollars.
Yeah, literally live for forever with these endowments, and that's something that a small school doesn't have, and so a dip and enrollment is a massive hit.
Administrators at Northeastern University, which has been in Boston for more than one hundred years, noticed these trends, and Francesca says they saw an opportunity.
Northeastern has been really strategic at a moment where a higher education is going through tremendous windfalls. So something that they've started to do around twenty nineteen is that they took a look at the landscape and they saw that all of these small private colleges were closing due to dwindling enrollment. And so what they've done is that they are in a very unique position to be acquiring these colleges.
Which is what they've been doing now. M and A is not something that happens a lot in the world of higher education, but Northeastern decided to go all in.
They've decided that at a time when colleges are competing for students, they're just going to make it as easy as possible for people to go to Northeastern no matter where you are in the US and even abroad. So they've bought three colleges so far. Their first acquisition was in twenty nineteen it was a small college in London.
Then their second acquisition was in twenty twenty two, this all women's college in Oakland, California called Mille College, and then they've recently announced their third acquisition in New York. It's like a theater arts school in the Upper east Side.
That would be Marymount Manhattan College. It has around fourteen hundred full time students and it's known for its performing arts program. Of course, there are hundreds of colleges that fit this description across the country. I asked Francesca what does Northeastern look for when it's thinking about an acquisition.
One of the first things would be real estate, Like when you think about their latest merger in Marymount, they just acquired a school in the Upper east Side with three buildings in New York. That's a really hard market to get into in higher education, and all they have to do is kind of smaller liabilities and their assets, and they're good to go with mills. For example, they
had seven hundred million dollars in assets. They had PubL Picassos, they had Diego Riveras, they have an extensive portfolio that they also acquired. So I think that's like a major attraction for these mergers. These schools have these valuable assets that they just can no longer continue to work with, and by acquiring them, you kind of continue their life.
Could you contrast what Northeastern is doing with what I've seen and YU doing, which is to sort of think of itself as a global institution, open up these campuses in Europe and Asia. Be you following a similar model? How is this kind of unique what Northeastern is doing.
NYU hasn't really bought any colleges. Northeastern started buying colleges in twenty nineteen. They're buying struggling businesses quote unquote, and they're kind of flipping them around. And that's also how they're different from what you would think of a traditional college or the most the oldest colleges. It's more like, the bigger we grow, the more students that we can tailor to, the better we'll be off. How proactive have they been They have a team dedicated to this. Leaving
their team is this woman called Mary Ludden. She used to work in healthcare for twenty years. Even that's the first indication that they're behaving like a business. They're hiring people from outside of Higher Education. They have three teams within this merger's desk. The first team is dedicated to finding new colleges or finding new opportunities within the market.
The second team is dedicated to integrating the colleges once they've been acquired, and the third team is responsible of kind of making everything flow once the college is fully acquired by Northeastern.
And this mergers and acquisition team has been pretty successful. Francesca says that almost fifty schools have expressed interest in working with them, and other colleges and universities are looking at what Northeastern has done, what it's doing, wondering if this model could work for them.
I guess Northeastern is unique because they're kind of taking this private equity approach. I don't know if they'll love the private equity analogy. I don't think they will, but it is at the highest levels kind of what they're doing. They're taking these struggling businesses and making them stay alive.
But none of this is happening without controversy. There have been growing pain, especially for students. We'll get into that after the break. There are advantages to what Northeastern University has done. How fast it's expanded and how big it's grown. But Bloomberg's Francesca Maglione says some of that has come at a cost. Each college has its own culture, its own way of doing things, and that changes when one school merges with another, or when a college or university buys another one.
This is one of the pain points for a Northeastern. It's one of the growing pains when they had this Mills merger in twenty twenty two.
Mills College, this was the school with the Picassos and the riveras located in Oakland. It had been losing students for years and finally Mills announced plans to close its doors.
And then Northeastern jumped in and said, wait, no, you don't have to close. We'll save you. And then they started sending students that had applied to Northeastern to attend a semester at Mills. So this at the beginning the transition is kind of rough because you have students that chose to go to Mills before it turned into Northeastern, and then students that chose to go to Northeastern, and
so there's a bit of a clash there. At the beginning, there were protests apparently alumni and made these shirts that said F you and you. I spoke to a student that was one of the first students that came from Northeastern to study at Mills, and she said that it was really uncomfortable like that. She just felt like the Mile students really did not want the Northeastern students to go there. The Mill students are students that you wanted
to go to college to change the world. There was a very social justice focused program, and then you have these Northeastern students that are coming in with a completely different perspective.
There were these cultural clashes, but there was also backlash when Northeastern changed the college's curriculum.
Something that also a lot of students were guts bothered about was that when merger completed, students that were still there had to take additional prerecs or things like that that were under Northeasterns requirements. And I think that all of the class that they had taken at Mills were then considered as like transfer credits to their new institution.
Meanwhile, as Northeastern's profile has grown, so has enrollment. It's up fifteen percent since twenty nineteen, but a bigger student body has also put pressure on Northeastern to expand to accommodate all those new students.
I think that students feel the growth. Boston at the end of the day is a city. They're limited by the fact that they're in the city and not in the middle of nowhere where they can continue to grow of forever. And so students mention, you know, being shouldered to shoulder walking through campus during rush hour, being three people sleeping in a dorm. Students have even been put in hotels at points, So I think students really feel that strain. Like the library, there's never an open seat
at the library. I think that they feel this out of much great ater scale.
According to Francesca, Northeastern says it's working hard to learn from these missteps.
That's something that they're trying to do better with this Marymount merger. For example, they announced this merger, they haven't sensed students. They said that they're hoping to send students in twenty twenty five, kind of in a way, giving the school some time to get ready for their arrival.
As Northeastern grows, as it adds more real estate and students and brings in more tuition dollars, as a result, there's this question of whether other schools will follow in the university's footsteps. What's your sense of how other schools are looking what Northeastern is doing. Do they see this as a model that they can replicate. Do they worry that they've missed the curve that Northeastern is pioneered something here that maybe they'd like to do, but now they feel too far behind.
I think it depends on the school that you are. We spoke to this private equity investor that has donated to Northeastern and he said, you know, if Sam Walton would have done just that one Walmart, it would have probably been a great Walmart, but it wouldn't be Walmart.
My last question is, so where does this end. They have entered into all these mergers, all these deals. What's the goal for Northeastern long term?
They're interested in growing, you know, they want to continue growing.
They world domination, world domination.
They they have heard from almost fifty schools that are interested in working with them. They right now I think, are focused on, you know, implementing this latest campus that they've acquired. But since twenty nineteen, they've acquired three schools. That's a massive undertaking. Acquiring a school is really complicated, So I think that they're really interested in continuing to do this, and they will teut their application numbers, and you know, there's demand for this kind of education and
they have that room to continue to grow. Are we going to see this massive consolidation of all these smaller schools kind of falling under these more known brands. I don't know if that's going to be the case, but I think that a lot of people that look at this market and study this market think that's some sort of model related to what Northeastern is doing is probably going to be the way forward for.
This is the big take from Bloomberg News. I'm David Gora. This episode was produced by Adriana Tapia. It was edited by Stacy Vanick Smith, Craig Giamona, and Brian Chapatta. It was fact checked by Jessica bec It was mixed by Blake Maples. Our senior producer is Naomi Shaven, who helped edit this episode. Our senior editor is Elizabeth Ponso. Our executive producer is The Cold Beamster Boor. Sage Bauman is Bloomberg's head of Podcasts. If you liked this episode, make
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