June 1, 2013
David R. Anderson ’74, President
Good morning, and welcome to the All-Alumni Convocation. Over 3,000 Oles and their friends and families have returned to the Hill this weekend to renew their connection to the College and to take pleasure in one another’s company. I extend to all of you a heartfelt welcome.
In a few minutes we will receive the class gifts from our reunion classes, and that’s always a moving experience. We make gifts to the College out of thankfulness for the people and experiences that shaped us while we were students here, and for the friendships that began at St. Olaf and have flourished in the years since. We make gifts to support the mission of the College, and to recognize its influence in our lives.
A gift to the College is also an expression of faith in the future, a proactive step to ensure that future by investing in kind of young men and women, Oles, who are going to be needed to shape that future in ways that make our world more prosperous, more healthy, and more just.
But before we turn to the gifts, I’d like to offer some thoughts about the state of the College by way of reporting to you, our stakeholders, how we are living out our mission, what results we are achieving, and where we see the College headed.
The most important element of the College is our students, so let’s begin by talking about them. Last weekend we graduated 683 of them, equipped by their St. Olaf education with a base of knowledge, skills and competencies, and habits of mind and heart that will enable them to flourish in the vocations they will discern, the communities in which they will live, and in the families they will form. One graduate earned a quadruple major, the first in St. Olaf College history, 11 earned three majors and 217 declared two majors, but most graduates, 68 percent of the class, declared one major. The most popular major was biology, followed by economics, psychology, English, and mathematics. Thirty-three percent of the class graduated with honors, and 73 students were inducted into Phi Beta Kappa. Seventy-three percent of the class participated in at least one off-campus domestic or international program. St. Olaf continues to lead all liberal arts colleges in the nation in the number of students who study off campus.
Of the 683 graduating seniors, 614 or 90 percent of them have told us about their post-graduation plans as of last weekend. 234 of them or 38 percent have jobs. 142 or 23 percent are enrolled in further education, nearly all of them in graduate or professional school. So, as my Grandma Anderson used to say about her grandchildren who had a plan in life and were pursuing it, we don’t have to worry about 62 percent of the graduates. 232 or 38 percent are “still working on it.”
St. Olaf has made a very public commitment to becoming the best in the country among liberal arts colleges at helping students discern their vocation — what they are called to do — and then translating that calling into an actual job that will lead to these three things: financial independence, professional accomplishment, and personal fulfillment. The first step on that path toward excellence was to get comprehensive, accurate data about the outcomes our students’ experience. One of the things we have learned in compiling this data is that it takes about a year for a graduating class to settle into a life path. Just this month we published on the St. Olaf website the data for the Class of 2012, the students who graduated one year ago. We know where 92 percent of them are, and of that group 98 percent are either employed or in graduate or professional school. You can go to the College’s website and click on the link called “Outcomes.” There you will see where those students are employed or where they are studying, and you will see the self-reported income bands within which they fall. You will also find there, by the way, copious information about the other kinds of outcomes that a St. Olaf education delivers, from measures of student learning that we gather through assessment to retention and graduation rates, to fellowships and awards that our graduates win.
The office at St. Olaf that assists students with vocational discernment and career services is the Piper Center for Vocation and Career. It reports directly to the President, it benefits from a handsome gift from Tad Piper, Chair of our Board of Regents and his family, that provides resources for it to do its work well, and it is extremely well-led led by an Ole, Branden Grimmett ’02. The Piper Center assists students with everything from career coaching to resume reviews to practice interviews, to placement in internships, to career placement. I encourage you to visit the Piper Center’s website and explore their many programs.
Having said good-bye to the Class of 2013, we’re turning our attention now to welcoming the Class of 2017. As you know, St. Olaf is a tuition-dependent institution. That means that we rely upon the comprehensive fee paid by our students and their families to fund 70 percent of our operation. The first, most obvious, and most critical question, therefore to ask about the welfare of the College is whether there is still a sufficient demand for the experience we offer and whether we can generate enough revenue to provide the experience that our students both want and deserve. The answer to both questions is yes.
The class of 2017 was admitted from the one of the largest applicant pools in the College’s history — 4,009 students applied for admission. The class we have enrolled comes to us from 43 different states and from 31 different foreign countries. China is sending us the greatest number of international students next fall. Fifty-eight percent of the class is from outside Minnesota. The next four states to send us the most students are Illinois, Wisconsin, California, and Washington.
Fifty-eight percent of the class is female and 42 percent male, which is a fairly consistent gender split for our college. Seventeen percent of our American students are students of color and seven percent are international students. So roughly a quarter of the entering class brings those kinds of diversity to St. Olaf. The average high school g.p.a. of the Class of 2017 is 3.63. The median high school class rank is the 91st percentile. The median ACT is a 29, and the median SAT is 1310.
The class also brings with it characteristics that reflect our heritage, and that is something we continue to value. Thirty percent are legacy students, which means that another member of their family — a parent or grandparent, an aunt or uncle, or a sibling — preceded them at St. Olaf. Among those who report a church affiliation, 27.5 percent proudly proclaim their identity as Lutheran. The Class of 2017 comprises 756 students. This is a smaller class than we have enrolled in the last several years, by design. Our enrollment has crept up to just over 3,100 students, which puts an undesirable strain on our residence halls, dining hall, class size, and other resources. We are on a path to bring enrollment back down to just under 3,000 so that we can ensure the best possible experience for every student. The class will be full of students whom we chose, and who chose us, and who are eager to learn in community with others at St. Olaf College.
Let’s turn to the budget. When you step back and consider the cost of the College’s operations as a whole, there are only two numbers that really matter: the cost of compensation for the people — faculty and staff of the College — who provide the St. Olaf experience, and the financial aid that enables students from a broad range of economic backgrounds to attend St. Olaf. Compensation for the fiscal year that begins today will cost $64 million or 51 percent of our $126 million operating budget. We will spend just under $63 million on financial aid.
I want to spend a minute on financial aid to make sure that everyone understands the role it plays in populating the College with students and in the economics of higher education. St. Olaf has, for many years, hewed to this policy: that we meet the demonstrated financial need of every student we enroll. If you enroll at St. Olaf, and your family completes the FAFSA, the federal form that is universally used to determine the amount a family should contribute to their student’s college education, we know two things: how much St. Olaf costs, and how much of that amount your family can reasonably be expected to pay. The difference between those two numbers is the amount of your financial aid package at the College. It will be composed of grant, loan, and student work, and the amount and proportion of each may vary from student to student depending upon the family’s circumstances, but the aid equals your need. You hear a lot in the press about American college students graduating from college with crushing debt. Some do, but most of them are not Oles. Ninety percent of our students receive some form of financial aid, and the average indebtedness of our graduates upon graduation is $26,700. The national federal student loan default rate is 13.6 percent. The loan default rate for Oles is 1.6 percent, which tells me that our students who borrow are graduating with manageable debt and are in careers that make it possible for them to manage that debt.
Many colleges do not share our policy of meeting the financial aid of every student we enroll. They engage in what is called “gapping.” That is, they determine your need but they offer an aid package that is less than your need. It is then your problem to fill that gap any way you can. They are betting that you want to attend their college so badly that you will find a way, somehow, to close that gap.
St. Olaf has chosen not to go that way. We meet students’ demonstrated need, and that is very expensive. As I just told you, it will cost $63 million this year. How does financial aid “cost” a college? Only 8.6 percent of the $63 million in financial aid that we will allocate to students next year is funded by scholarship endowments. The good news is that that number is up by two percent over last year, but it still represents a very small fraction of our financial aid cost. The rest comes in the form of a price discount. In other words, 91.4 percent of the financial aid we will give takes the form of the college simply not collecting that amount of tuition from a student. The result is a drop in overall tuition revenue and, thus, less money with which to support the program of the college. If not managed properly, the practice of tuition discounting could result in a situation where you enroll a full class of students but because you have discounted the price so heavily to enable them to attend you can’t actually run the college. That’s why the key number to focus on is not actually the number of students you enroll but rather the net tuition revenue you generate.
Of the $126 million in our operating budget for this fiscal year $89 million or 72 percent will be funded by net revenue from the comprehensive fee. Earnings from our endowment will fund 10 per cent of the budget; revenue from the bookstore, government grants, and so forth will fund about 15 percent; and the remainder, about five percent, will be funded by gifts to the College.
You know and I know that there is a national discourse about the cost of higher education in America. Families are looking at the cost and wondering how, as much as they believe in the value of a college degree, they can pay for it. Because we are a private, intensely residential college with very high quality programming that is expensive to provide, St. Olaf is priced at the upper end of the college cost continuum. Our policy of meeting the demonstrated financial need of every student we enroll mitigates the cost for families, but there is no doubt that whatever your level of need, and hence whatever your financial aid package, the amount you pay as a family strains your resources.
There are three long-term solutions to this problem. The first, obviously, is to control costs. We have been relentlessly seeking ways to do more with less. But the plain truth of the matter is that since 51 percent of our operating budget is spent on compensation, and another 10 percent funds depreciation, we will never be able significantly to reduce our costs by focusing only on the non-compensation areas of the budget. Significant cost reduction will only come about through collaboration with other institutions to reduce duplication of programs and services, find new ways to deliver our program, reconfigure of our program, or other innovations. Recognizing that the cost of college can’t continue to climb in the next 10 years the way it has in the last 10, we are thoughtfully exploring these options.
As a sign of our determination to control costs, our strategic plan, which is on the website and which I encourage you to read, ties any future price increases at St. Olaf to the Consumer Price Index, the CPI. Our commitment is not to exceed the CPI by more than one percent in the event of future price increases. The CPI is a measure of the cost of living, and it’s much easier for families to think about, and for us to explain, our price in that context.
As to collaboration, we are now friends with Carleton! The time has come to declare that it doesn’t make sense to have two of everything in Northfield, and two very fine colleges located minutes apart from each other ought to be able to find efficiencies and enhancements by cooperating and collaborating where it makes sense. Carleton’s President, Steve Poskanzer, and I like and respect each other, and we are committed to moving thoughtfully but quickly down this path. We are having regular meetings with members of our respective teams to explore areas where cooperation can benefit both institutions. Don’t look for the St. Carleton football team any time soon, or the CarlOlaf choir, for that matter, but with the assistance of a planning grant from the Andrew W. Mellon Foundation, we have begun taking steps to share staff and consolidate operations between our two libraries, to explore shared staff and operations in our technology areas, and to explore one health plan for employees at both colleges. Collaboration in the academic areas will occur more slowly as we work though challenges posed by our different academic calendars, but faculty from both colleges have begun conversations about joint courses and synergies between programs.
The second solution is to grow revenue. For us, that means seeking alternate revenue streams, because we are already asking students and their families to provide the majority of our revenue. We are seeking, thoughtfully, opportunities to use assets that we have to generate new revenue. There isn’t an obvious revenue source for us, or we would have seized it already, but we are committed to exploring new revenues.
The third solution is to grow the endowment. We estimate the value of the endowment at the end of May at an all-time high of about $380 million, which is up from $325 million when I gave this talk to last year’s alumni convocation. I would like that number to start with a four, rather than a three, sooner rather than later. As you know, the endowment operates on the same timeline as God: it exists in perpetuity, and it will rise and fall with the markets in which we are invested. The investment committee of the Board of Regents is working hard to keep the trend line positive over time. But the main point is that whether the endowment is $325 million or $380 million, it’s too small. As I reported earlier, the endowment funds roughly nine percent of the operating budget. Every new dollar of support from the endowment is a dollar we don’t have to collect from students and their families in order to run the College, so growing the endowment to fund faculty and staff position and to support student financial aid, our two largest expense items, is absolutely our top priority going forward. Our Advancement team has raised 23 and a half million new dollars for the College this year and counting. Our new fiscal year begins today, but it takes a few weeks for the dust to settle, so that number will grow. This is the fourth year in a row that the new gift attainment exceeds $20 million, and that is a righteous trend. Not all of that amount is “green” money — it includes estate plans and other types of gifts that will not result in cash to spend or place in the endowment this year — but if we can consistently gather in resources at this level, we will be laying the foundation for our College to continue to flourish. In a few moments we are going to see some pretty awesome numbers from our reunion classes that will be inspiring. Oles understand the importance of supporting the College, and they are stepping forward to do that.
I am frequently asked how the College is responding to the disruptive innovations that are at play in higher education in America today. The example most people of heard of is the MOOC or massive, open on-line course. Both for-profit and not-for-profit organizations are offering free courses on line, some taught by famous scholars and the best universities. They enroll tens of thousands of students all over the world. The concern is that if this opportunity, or others like it, become ubiquitous no one will desire, or be willing to pay for, an experience like the residential liberal arts education St. Olaf provides.
We are watching these innovations with great care. We do not think it makes sense today for St. Olaf to take a right turn and make a big investment in a completely different model for education. However, we do think it makes sense to explore ways in which disruptive innovations in higher education can be incorporated into our educational program. So, some of our faculty have “flipped” their classrooms, which means that the material which used to be communicated in a lecture is now posted on line for students to absorb on their own time and the problem-solving that used to constitute homework now happens in the classroom with the professor there as a resource and coach. We are offering a calculus course online this summer as a pilot to see whether it can be done well in our context and whether there is a demand for it. We plan next fall to stream live a number of lectures from the campus, again as a way to determine whether this is a good thing to do and whether there is demand for it. Ultimately, we believe that there continues to be a market for a residential experience that combines high-quality academic preparation with the opportunity to gain and strengthen by living in community with others, key life skills that will make students better employees, more engaged citizens, and happier family members. Those are things you don’t glean from a computer.
At the end of the day, what matters most are our students and the experience we offer them. St. Olaf is distinctive in its tradition of combining the highest levels of academic excellence with a fully thought-out and thoroughgoing commitment to its identity as a college of the church in the Lutheran tradition. We continue to offer daily chapel and Sunday worship. Two Lutheran campus pastors minister to the needs of our community and encourage and support students in their faith development at the same time that we welcome faithful students from all traditions to campus and seek to support their faith development as well. We continue to require each student to take courses in religion, theology, and ethics. And we continue to encourage and support among our students inquiry into what their ultimate commitments will be and how they will live those commitments out in their lives.
Oles leave the campus prepared to be leaders in their workplaces and in their communities. We expect them to both do well and do good, and we prepare them for that result. You are the living proof that we deliver on that aspiration. When this year’s graduating class returns for their 50th reunion — in 2063 — they will look back as all of you are doing today, whatever your reunion year, on lives well lived and the experience at St. Olaf that helped prepare you for that life. We are delighted to have you back on campus, and I wish you the very best this reunion weekend.