Debt-ridden Dowling College on New York's Long Island is shutting its doors after 48 years, the school's president announced late Tuesday.
The two-campus private school's closure that takes effect Friday, nearly a year after it defaulted on debt service payments following years of enrollment declines and after efforts the last few months to find an academic partner were unsuccessful. The July 20, 2015 default impacted $47 million in bonds issued by the Suffolk County Industrial Development Agency and the Town of Brookhaven Industrial Development Agency. The college entered into a forbearance agreement with bondholders for the missed payments that is scheduled to expire on June 30.
"This painful decision is a reflection of the unprecedented financial challenges facing countless private educational institutions across the nation and the difficult choices that many must now face," said Dowling president Albert Inserra in a statement.
The college was founded in 1955 as an expansion of Adelphi University, and was established as an independent institution in 1968, taking the name of its then principal benefactor, Robert Dowling. The school operated a primary campus in Oakdale, N.Y. in Suffolk County and another campus in Brookhaven. It reported enrollment of about 2,400 students.
Moody's Investors Service currently rates Dowling at Ca; it expects bondholders to receive a recovery rate of 35% to 65%. Standard & Poor's downgraded Dowling bonds to D from B last August in wake of the missed debt payments.
Dowling officials could not immediately be reached for comment on the status of paying off its debt. The school has around $57 million in total debt outstanding, according to Interactive Data analyst Jon Barasch.
"Dowling College's announcement to close and the default of its debt last year is another unfortunate example of the extreme financial pressures colleges and universities face today and the particularly difficult operating environment for small regional institutions, both private and public," said Jessica Matsumori, senior director for S&P's U.S. Public Finance Higher Education Group. "While such defaults and closures are still relatively rare, we do expect to see an increase in school closures in the next few years – particularly of for-profit, very small, or unaccredited institutions."
A May 31 report issued by Moody's Investors noted that Dowling was the only higher education issuer it rates that defaulted in 2015. Moody's described the school as "unusually tuition dependent" with around 40% of its enrollment deriving from graduate business, aviation and other professional programs. The college's enrollment sunk 53% in the four-year period leading up to last summer's default, according to Moody's.
Matt Fabian, a partner at Concord, Mass.-based Municipal Market Analytics, said Dowling's closure is likely a precursor of an increasing number of smaller private colleges without a defined niche or regional draw that will likely be forced to shut down in the next five years. Vermont's Burlington College also closed in late May due largely to debt from a $10 million property purchase spearheaded by the school's former president Jane Sanders, the wife of Democratic presidential candidate Bernie Sanders. Sweet Briar College in Virginia announced plans to shutter in March 2015 before the 114-year old women's institution was saved by an alumni fundraising campaign.
"Many private colleges over-spend to attract students and find their finances too tightly leveraged," said Fabian. "They are too overly reliant on tuition."
