Digest No. 03 - August 2017
Troubling Changes in Capital Structures at Small Private Colleges
This article focuses on problems associated with long-term debt at smaller private colleges and universities used to fund large capital projects, such as the construction of new academic buildings or residence halls and the renovation of existing facilities. James Dean Ward explains that colleges and universities use various methods to fund capital projects such as major gifts, grants, reallocation of currently available money, withdrawals from endowment, borrowing, and issuing bonds. The choice of how institutions fund their projects, depends on the debt adversity each college sets for itself. Some institutions elect to use debt to fund capital projects. Ward issues a caveat to smaller private colleges, stating, “tuition-reliant, less wealthy and highly leveraged institutions are in danger of being overcome by financial deficits” (p. 58).