Debt Reveal Day uncovers Whitman College’s institutional debt

Alasdair Padman, Editor-in-Chief

While student debt and loan cancellation have become a part of mainstream political discourse, institutional debt has, for the most part, remained in the shadows. In an effort to bring visibility to institutional debt and its consequences, the national American Association of University Professors (AAUP), in collaboration with faculty from at least 45 schools and organizations, including the Whitman AAUP chapter, have organized Debt Reveal Day, which occurred on Thursday, April 15.

In their invitation to participate in Debt Reveal Day, the national AAUP stated:

“Decades of cuts have forced public institutions to take on debt to keep their doors open. Millions of dollars each year go to private financial companies while workers are furloughed and student tuition goes up. As long as universities are in debt to private banks, profits come before students, workers and communities. It’s time to reveal the invisible infrastructure driving higher education austerity.”

Peter Harvey, Whitman’s Chief Financial Officer, responded to Debt Reveal Day by saying that the very existence of such a day suggests “that somehow the college is not transparent about the debt we take on. There are several ways information about the college’s debt is made public. First, Whitman’s debt is disclosed in our audited financial statements that are posted annually on the Whitman website. That is a common practice for institutions like Whitman.  The second place information can be found about Whitman’s debt is on the web page for the President’s Budget Advisory Committee.

Additionally, he emphasized that, when the college does issue debt, the decision is brought to the President’s Budget Advisory Committee and a final report on the approved budget is shared with the broader Whitman Community.”

Faculty at higher education institutions were asked by the AAUP to participate in Debt Reveal Day by calculating their institution’s debt based on publicly available information that can be quickly input into a debt reveal worksheet that was provided by the Public Higher Education Workers (PHEW) network. 

As part of this movement, an anonymous member of the Whitman AAUP volunteered to participate in a debt audit workshop co-sponsored by the AAUP and the American Federation of Teachers (AFT). The workshop was divided into two initial sessions. The first was meant to “indicate why this group, the AAUP and the AFT together, wanted to engage in these debt audits, why it wanted to highlight questions of institutional debt, why it sees questions of institutional debt related to student debt and to indicate that it’s ultimate aim is to engage in this debt reveal day on April 15.”

The second session tasked its participants with tracking down publicly available documentation, and then provided them with a spreadsheet that, after inputting certain figures, would calculate an institution’s approximate debt burden and its potential consequences on the college.

To complete Whitman’s debt audit, the AAUP member used data taken from both Whitman’s 2019 Consolidated Financial Statement and the Integrated Postsecondary Education Data System (IPEDS).

Although neither session focused on student debt, the AAUP member explained that the two issues are inextricably linked. It is impossible to talk about institutional debt without also addressing student debt.

“[Institutional debt and student debt] are linked insofar as when an institution, when it takes on debt, it must pay the principal as well as the interest and whatever management fees, if any, apply,” they said. “There’s only so many ways for an institution to pay off debts. One way to do so is to raise tuition to generate the revenue necessary to pay off institutional debt. When students find it necessary to pay higher tuition, they often have to take on additional debt in order to pay the tuition that is then paying off the institutional debt.”

Based on data from the debit audit workshop, the AAUP member stated that, at this time, Whitman’s total debt burden is between $60 and $70 million and its annual debt service payment is $1,160,000. While this ostensibly indicates that the college is significantly burdened by debt, the truth is that Whitman’s debt ratio (debt payments / total revenue) suggests that the institution is actually in a far better position than many of its peers. 

Whitman’s debt ratio is 1.21%. This is much lower than what the general guidelines say are acceptable debt burden limits, which  “range from 5% (for on book debt service) to 10% (for total debt service).”

This was echoed by Peter Harvey, who said, “As we have heard many times throughout the Financial Sustainability Review process, Whitman is in a much better financial situation than many of our peers because of our relatively low debt burden. That means we have not had to make the kinds of major reductions that other small, liberal arts colleges have had to make.”

This is due, in part, to the college only recently taking on debt. Professor David Schmitz, the Robert Allen Skotheim Chair of Whitman, told The Wire that the Board of Trustees only agreed to take on debt in 1999.

“The college was, historically, fiscally conservative,” Schmitz said, “and in 1936, it had made a decision due to the financial crisis it had found itself in at the time to not take on any more debt. Basically, that policy held until 1999, and in 1999, the Board voted to agree to a change to borrow, and the borrowing at that time was up to 25 million dollars and was for building the Reid Center and expanding and renovating the Hall of Science. So, all the debt that the college has taken on has been for capital projects, not for the operating budget. It allows the college to accelerate projects rather than waiting to raise all the money.” 

While Whitman has continued to take on debt during the 21st century, it has been careful to not rely on borrowing for its operating budget. However, its use of these funds to fuel capital projects is in line with other institutions across the nation. 

In her article, “It’s not just students drowning in debt. Colleges are too!” Eleni Schirmer writes, “The biggest increases in institutional debt have been used to finance the explosion of shiny new buildings on less wealthy campuses. Luxury dorms and state-of-the-art gyms serve a common purpose: to lure top-paying students, especially out-of-state and international ones.”

Schirmer goes on to describe it as an “amenities arms race” by which institutions recruit paying customers (or students). We can see this arms race in action on Whitman campus with the recent construction of Stanton Hall and Cleveland Commons. Some would likely argue that these projects are indicative of the national trend and that Whitman’s finances would be better applied to its academic curriculum and not its amenities.

Professor Arielle Cooley, Biology Chair and Whitman AAUP President issued this statement to The Wire about Debt Reveal Day: “Whitman tends to be cautious about taking on debt, which I would say is generally a good thing. I don’t think there is one right answer as to how much debt a college should take on, but there are good reasons to keep that number low. To me, the Financial Sustainability Review showed the importance of all of us having a better understanding of how college budgets work, and how institutional debt has big implications for the budget. Whitman’s solid financial situation, combined with its relatively low debt burden, puts it in an enviable position compared to many other small liberal arts colleges, and I think that we should be leveraging that strong position to invest in academic excellence.”

As part of the debt audit workshop, the anonymous AAUP member was able to tease out some of the financial and academic consequences that faculty and students experience because of Whitman’s debt. On average, each full time equivalent (FTE) student pays about $800 per year or $3,200 over four years to service Whitman’s debt. So, if the college’s debt servicing was eliminated, each student’s debt burden upon graduation would be, on average, at least $3,000 less than what it currently is.

In addition, based on Whitman’s mean faculty salary, including benefits (around $125,000), the college’s annual debt service is sufficient to cover the cost of hiring nine full FTE faculty in any given year. Based on the five course teaching load, this would add another 45 classes to the academic curriculum.

However, Harvey emphasized that, “As far as investments in academic excellence, it’s worth noting that Whitman’s single largest cost is for instruction and in support of the academic program and will continue to be.”