DePaul University is facing financial pressure after the pandemic intensified declining enrollment and widened the Chicago private school’s budget gap.
To narrow the growing gap between revenue and expenses the largest Catholic university in the U.S. is starting to cut its budget. It is offering a voluntary separation program to about 15% of the school’s 1,400 full-time staff and administration, according to an April 4 notice by DePaul University President Robert Manuel, faculty are ineligible. School officials project a shortfall of $56 million for the fiscal year beginning July 1, barring cost-cutting measures.
Higher education institutions across the country, in particular small private schools without the cushion of a large endowment, are facing financial strain as pandemic stimulus fades and students become increasingly leery of expensive loans at higher interest rates. Many students are even turning to alternative paths after graduating from high school.
“DePaul is facing a lot of the same challenges that a lot of their peers are facing, especially in the Midwest,” said Emily Wadhwani, a senior director at Fitch Ratings. Those challenges include post-COVID-19 recruiting as students weigh alternatives, alongside inflation pushing the cost of expenses like wages and utilities higher.
University-wide enrollment at DePaul fell 3.5% year over year to 20,917 students in 2022. Since 2018, total enrollment fell 6.8%, with steep declines more recently among graduate students, according to data from the school. Nationally, undergraduate enrollment fell 9% to 15.9 million students between 2009 and 2020, according to data from the National Center for Education Statistics.
Manuel and DePaul University’s nine-member Strategic Resource Allocation Committee will need to submit a budget proposal to the board for approval in May.
“Currently, the university is engaged in its annual budgeting process, and is working to close a budget gap in order to meet its budgeted operating income for fiscal year 2024,” said spokesperson Kristin Claes Mathews in an emailed statement. “These activities will not impact the university’s outstanding debt, and we do not expect to issue any additional new debt.”
Wadhwani also stressed the budget gap is only about 10% of total revenue — a sum she said is significant, but not insurmountable.
“Our first concern is can they pay debt service — the answer here is definitively yes,” she said. DePaul has about $240 million of bonds and notes payable, about $186 million of which is public debt.
In the spring of 2020, DePaul was facing an $11 million budget gap but leadership delayed cost-saving measures to give the school flexibility during the pandemic, which exacerbated financial challenges.
DePaul received authorization for $77 million of stimulus funds as of June 2021, according to Fitch Ratings, and about $34 million of those funds were earmarked for student aid.
Many universities faced similar pressures before the pandemic, according to Dora Lee, director of research for Belle Haven Investments, who said COVID-19 stimulus helped only temporarily.
“The federal aid papered over some of those stresses,” Lee said. “As that aid is sunsetting, we are seeing those same pressures reemerge.”