Moodys downgrades Earlham for second time in two years - should I be concerned why or why not?

Moodys downgraded Earlham College ratings for the second time in two years from A1 to Baa1 with a “negative” outlook indicated.–PR_293574

My D is admitted for fall '15 and is seriously considering attending. Earlham’s finances concern me. This budgetary climate may force Earlham to increase tuition, increase enrollments beyond facility capabilities, cut budgets/staff/services which could lead to fewer courses, higher class enrollments, fewer faculty hired, etc. And I’m concerned about the long-term prospects for the survival of a small mid-western LAC not located in a “desirable” urban center. Any thoughts?

I have a daughter in a similar situation. I am surprised because the endowment per student is pretty good (over 300,000 though I don’t know off-hand what the date of that number is). I was more concerned about another college she was admitted to with 1/10the endowment. When asked at an admitted student open house about it, that school (Wittenberg) basically said, “We’ve made cuts during the past few years and we should be fine now”. We should ask Earlham about it.

Thanks MomofM. I was hoping some current Earlham students/families could provide some perspective. Looks like tuition has increased in steady increments for the last few years. What’s happening with class enrollments and number of courses offered? Are faculty being hired? Programs cut?And while this may be unrelated to my original question I’m wondering about internships? I’m sure there are a few in Richmond but how does securing internships work for students right now - are students “on their own”? And is there a long term plan to address the changing higher education landscape? I’m sure Earlham won’t go out of business in the next four years, but what about long term? I’m hesitant to send D to a school if her diploma will be “unknown” or somehow questionable in the future. Has administration addressed these concerns with other students/families and what was the message? Not that I wouldn’t believe or trust what the college has to say about this. I’d just like to know what the reality is on the ground. We can’t afford a campus visit so it is hard to know first hand.

You can’t visit but you can call (I would do that over email so that responses aren’t perfectly crafted). My husband is taking my daughter to Earlham for an overnight visit in April so I’m giving him the job of asking these types of questions. In terms of internships, did you receive a letter from the college president recently (we received ours yesterday)? It seemed to suggest that Earlham was actually stepping up their internship program (I don’t have the letter here with me though to look at). Whats confusing to me is that the endowment actually looks healthy relative to similar size LACs and per student so it would be interesting to see how the administration understands the Moody’s downgrade. I looked for the recent information that you’re referring to online but only came upon the downgrade of 2 years ago.

Will do - yes I will call. And you are correct! I misspoke - Moodys downgraded Earlham twice in the last three years not twice in the last two years. Still feels like a trend to me.

Just an FYI - Forbes gives Earlham an A as a 'financial grade" as of 2014.

Though Forbes also gave Sweet Briar College a financial grade of A, so whether one should really trust those ratings…

(Edited to fix a typo.)

any updates regarding this issue?

Another, possibly related concern is the low 4-year graduation rate. Earlham’s is 59% when comparable schools are in the 70s. Not sure what is up with that. In fact, their 6-year grad rate is 71%, still lower than others’ 4 year rate. But the freshman retention rate (another important indicator of student satisfaction) is 85%…just fine. Any thoughts?

I didn’t call admissions because daughter decided not to attend. Unfortunately, Indiana politics have turned her off to to attending college in this state. She was already leery because of the same sex marriage ban the state fought hard to keep in place when it was overturned last year. The so called Religious Freedom bill was the last straw - my daughter made her mind up that Indiana was not the place where she wanted to spend four years of her life. I tried to convince her the goal was to attend Earlham College - not to live in Indiana, and that Earlham is an inclusive, welcoming community. She would have none of it. So, Earlham is off her list. I’m sorry about this. I thought Earlham could be a good fit for her. But it is her decision.

Wow. That’s impressive. My kid had the same reaction but I’ve insisted we wait until the admitted student event. At that time, I will get to ask some questions and we both will learn more about the campus atmosphere and reaction to the rightward shift of the state.

My oldest has Earlham on her shortlist (we’re planning to visit this summer—when you live in Alaska, academic-year visits just aren’t going to be a thing), and so I look forward to hearing your report, @Joan2021‌. She’s also worried by the intense rightward lean of the state in relation to things like sexual identity and equality, but Earlham has a good history on such things (they provided education for Japanese internees during WWII!), and if that continues today she figures it might well be a good place to go to fight the good fight.

Colleges and universities are often liberal islands in the middle of conservative states (see also Michigan and Wisconsin). I don’t feel that Earlham is responsible for the Indiana mess. And luckily, they are the first exit off the interstate driving from Ohio so one could stay over in Ohio and eat there when visiting if one wanted.

I think it is probably fair to say that Indiana is not now more right - leaning than it used to be. I implied that but it probably is not true. Some are just thinking of 'clever" ways to push back against trends, like the trend towards gay marriage. But it is a fairly conservative state and Richmond is conservative. And I would bet that Earlham remains the tolerant, positive force it always has been.

A lot to respond to here. I am a parent of a current students, and an alum. In terms of bond ratings: The school is doing a lot of investment in both facilities and curriculum. They are investing their way out of a difficult environment. You could say this is the perfect time (low borrowing costs, low building costs), or you could say why invest in a school that provides excellent education when the world wants job training. I believe they have other bond rating agencies which have given them an improved rating but I don’t see that in the news, so perhaps I was mistaken. As for internships and undergraduate research, the school is doing quite a bit to promote that. They have a lot of paid internships and funds set aside to provide grants, and are working on providing quite a bit of funding to support unpaid internships as well. Here are some of my daughters’ opportunities: Funded summer science research in Japan, Funded summer science research in Indiana, and Tanzania and a paid summer museum internship. One daughter withdrew her application for a funded summer internship in China because she thought it would be too much with her foreign study being the next semester. It is a school that is investing in quality education. 10 years from now they will have added some here, and cut some there, but will still be around providing a quality education. As for Indiana, well - the state government isn’t helping them attract students are they? Sigh. But Earlham is clearly an open and accepting environment, and actually has excellent relations with the town. This has changed over the past 20 years, but my children have something to learn from living in Indiana, and Indiana has something to learn by having my children (and Earlham) being there. I would never have expected Richmond to embrace the school the way that it has, but the school has reached out and the town has responded quite positively. It is sad to see students not consider a school that makes such a difference in their community, but I understand where it comes from.

so trying to make that final decision. Hearing rumors of impending layoffs and who knows if more. Wondering if anyone else has heard this? It’s the same issue as the debt downgrade, which is related to a decline in net tuition revenue for several years. Any input?

I just re-read my post…do NOT mean to worry people. This really is the same issue that has been on this thread. Just heard a mention today that concerned me.

Made a couple of calls yesterday, got concerns resolved, and we paid the deposit for Earlham late last night. Onward and upward!!!

Excellent! We’ve just scheduled our visit there this summer. (Pretty far in advance, but the travel plans are tricky given where we’re coming from.) If you’re willing, @Joan2021, can you let us know how your concerns got resolved/what put your mind at ease?

In case somebody comes by and sees this thread, we visited Earlham and got a pretty solid response from one of the school’s administrators on this. In a nutshell, the main counterweight to seeing the Moody’s downgrades as a problem is that S&P has kept Earlham’s bond rating at an A. Earlham’s administration believes that the Moody’s downgrades are largely a result of Earlham’s strategic decisions to keep admissions requirements high even if it meant entering classes are kept a bit on the smaller side for a few years. Since Moody’s ratings are weighted toward being based on income, this resulted in a hit from their algorithm; S&P, however, takes more of a balance-sheet approach, and Earlham has remained strong on that side, even as they’ve been building new facilities in anticipation of being able to make relatively small but meaningful (~15%) increases in enrollment over the next few years (which should, in turn, help with the Moody’s ratings going forward).