When Iowa Wesleyan University announced in March that it would close, its biggest creditor was a federal government agency that had loaned it $26 million and then — in an attempt to help the university survive — softened the terms and extended the repayment period.
It wasn’t the Education Department that made the loan, or the Treasury or Interior departments, or any of the many government departments that support academic research.
It was the Agriculture Department.
The USDA has been loaning tens of millions of dollars to rural colleges and universities, some of which couldn’t get financing from conventional lenders or fell under intense financial scrutiny from the Education Department thanks to their precarious budgets.
This support underscores how important — and how vulnerable — local schools are to rural communities.
“Beyond the educational prospects, these institutions support small businesses who depend on the student and faculty population, and they make their communities a more attractive place to live,” said Agriculture Secretary Tom Vilsack, a former governor of Iowa who started his political career as mayor of Mount Pleasant, the city that’s home to Iowa Wesleyan, and whose wife was on its board of trustees. “They generate opportunity.”
The decline of rural higher education is also widening one of America’s biggest equity challenges. Many private colleges the USDA is propping up are in what would otherwise be higher education “deserts.” Already, 13 million Americans live in places, mostly in the Midwest and Great Plains, where the nearest university is beyond a reasonable commute away, the American Council on Education reports.
Fewer people in rural areas have bachelor’s degrees — 21 percent, compared with 35 percent of those in urban places — a disparity that has nearly tripled since 1970, according to the Federal Reserve. Incomes also diverge widely. Household earnings are 20 to 25 percent lower in rural places than in urban ones. And rural Americans with a bachelor’s degree earn 44 percent more, on average, than those with high school diplomas. Having a university nearby not only raises household income, research at the University of Illinois Urbana-Champaign has found; it increases high school graduation rates, encourages local college-going and boosts employment and other things that contribute to local economies.
At least a dozen private, nonprofit universities and colleges in rural areas or that serve rural students have closed or announced their closings in the last three years, including Chatfield College in Ohio; MacMurray College in Illinois; Nebraska Christian College; Marlboro College in Vermont; Holy Family College in Wisconsin; Judson College in Alabama; Ohio Valley University in West Virginia; Lincoln College in Illinois; Marymount California University; Cazenovia College in New York; Finlandia University in Michigan; and Presentation College in South Dakota.
But the Iowa Wesleyan rescue is also raising questions about risking taxpayer money to delay the seemingly inevitable closings of many of these institutions.
Rural universities, already few and far between, are cutting majors
The USDA loaned Iowa Wesleyan $26.4 million in 2016, more than the university’s annual operating budget. After struggles in 2018, the agency extended the period of the loan by five years; in December, it lowered the school’s monthly interest payments from $24,060 to $7,500 and offered an additional $2 million line of credit.
By then, Iowa Wesleyan’s own auditors had voiced “substantial doubt about its ability to continue as a going concern.” So bad was the university’s balance sheet that, after reviewing it, the state of Iowa turned down the school’s request for $12 million in American Rescue Plan money. The 181-year-old institution’s fate was sealed.
American taxpayers’ collateral for the USDA’s loan to Iowa Wesleyan, on which the university still owes $26.3 million, is the soon-to-be-abandoned 60-acre campus, which is valued at $19.1 million, including buildings and equipment.
If the experience of at least one other closed rural institution is an indication, it could be hard to find a buyer. After Green Mountain College in rural Vermont shut down in 2019, its 155-acre campus went up for sale for $20 million; the campus eventually sold at auction for $4.5 million to a whiskey distiller whose wife reopened one of the buildings as a private elementary school.
Rural colleges have another role that’s harder to quantify: simply making higher education available to rural students, who, research shows, prefer to stay close to home. The already low proportion of rural high school graduates who go directly to college — 56 percent, compared with 62 percent of their suburban counterparts — has declined substantially in just the last three years, according to the National Student Clearinghouse.
Private, nonprofit colleges and universities “are often the only options over a very long distance,” said Andrew Koricich, executive director of the Appalachian State University-based Alliance for Research on Regional Colleges, which has created a map of universities and colleges that serve rural students and communities.
It wasn’t the Education Department that made the loan, or the Treasury or Interior departments, or any of the many government departments that support academic research.
It was the Agriculture Department.
The USDA has been loaning tens of millions of dollars to rural colleges and universities, some of which couldn’t get financing from conventional lenders or fell under intense financial scrutiny from the Education Department thanks to their precarious budgets.
This support underscores how important — and how vulnerable — local schools are to rural communities.
“Beyond the educational prospects, these institutions support small businesses who depend on the student and faculty population, and they make their communities a more attractive place to live,” said Agriculture Secretary Tom Vilsack, a former governor of Iowa who started his political career as mayor of Mount Pleasant, the city that’s home to Iowa Wesleyan, and whose wife was on its board of trustees. “They generate opportunity.”
The decline of rural higher education is also widening one of America’s biggest equity challenges. Many private colleges the USDA is propping up are in what would otherwise be higher education “deserts.” Already, 13 million Americans live in places, mostly in the Midwest and Great Plains, where the nearest university is beyond a reasonable commute away, the American Council on Education reports.
Fewer people in rural areas have bachelor’s degrees — 21 percent, compared with 35 percent of those in urban places — a disparity that has nearly tripled since 1970, according to the Federal Reserve. Incomes also diverge widely. Household earnings are 20 to 25 percent lower in rural places than in urban ones. And rural Americans with a bachelor’s degree earn 44 percent more, on average, than those with high school diplomas. Having a university nearby not only raises household income, research at the University of Illinois Urbana-Champaign has found; it increases high school graduation rates, encourages local college-going and boosts employment and other things that contribute to local economies.
At least a dozen private, nonprofit universities and colleges in rural areas or that serve rural students have closed or announced their closings in the last three years, including Chatfield College in Ohio; MacMurray College in Illinois; Nebraska Christian College; Marlboro College in Vermont; Holy Family College in Wisconsin; Judson College in Alabama; Ohio Valley University in West Virginia; Lincoln College in Illinois; Marymount California University; Cazenovia College in New York; Finlandia University in Michigan; and Presentation College in South Dakota.
But the Iowa Wesleyan rescue is also raising questions about risking taxpayer money to delay the seemingly inevitable closings of many of these institutions.
Rural universities, already few and far between, are cutting majors
The USDA loaned Iowa Wesleyan $26.4 million in 2016, more than the university’s annual operating budget. After struggles in 2018, the agency extended the period of the loan by five years; in December, it lowered the school’s monthly interest payments from $24,060 to $7,500 and offered an additional $2 million line of credit.
By then, Iowa Wesleyan’s own auditors had voiced “substantial doubt about its ability to continue as a going concern.” So bad was the university’s balance sheet that, after reviewing it, the state of Iowa turned down the school’s request for $12 million in American Rescue Plan money. The 181-year-old institution’s fate was sealed.
American taxpayers’ collateral for the USDA’s loan to Iowa Wesleyan, on which the university still owes $26.3 million, is the soon-to-be-abandoned 60-acre campus, which is valued at $19.1 million, including buildings and equipment.
If the experience of at least one other closed rural institution is an indication, it could be hard to find a buyer. After Green Mountain College in rural Vermont shut down in 2019, its 155-acre campus went up for sale for $20 million; the campus eventually sold at auction for $4.5 million to a whiskey distiller whose wife reopened one of the buildings as a private elementary school.
Rural colleges have another role that’s harder to quantify: simply making higher education available to rural students, who, research shows, prefer to stay close to home. The already low proportion of rural high school graduates who go directly to college — 56 percent, compared with 62 percent of their suburban counterparts — has declined substantially in just the last three years, according to the National Student Clearinghouse.
Private, nonprofit colleges and universities “are often the only options over a very long distance,” said Andrew Koricich, executive director of the Appalachian State University-based Alliance for Research on Regional Colleges, which has created a map of universities and colleges that serve rural students and communities.
