Private college in Chicago cut to junk amid falling enrollment

A 135-year-old arts college in downtown Chicago had its bond rating downgraded to junk, the latest small school to see its finances bruised by declining enrollment. 

Columbia College Chicago was lowered one notch to BB-plus from BBB-minus by S&P Global Ratings on Tuesday. The rating agency said the new junk status and negative outlook reflect the school’s falling headcount and diminished demand, “which we expect will limit management’s ability to stabilize operations.” The downgraded debt was issued through the Illinois Finance Authority.

Enrollment is down more than 35% since 2013, according to the latest available data from the National Center for Education Statistics. The college has also operated with large deficits in recent years, and supported operations by stepping up spending from its endowment — typically seen as a last resort for struggling schools. S&P analysts said they expect the school will continue to rely on additional endowment withdrawals to keep running. 

“Sustained deficit operations and continued supplemental endowment draws will continue to deteriorate the college’s financial resources, which have historically been a credit strength,” wrote the analysts led by Nicholas Fortin. 

Columbia Chief Operating Officer Jerry Tarrer said the school’s leadership is taking the credit ding seriously and will continue efforts to stabilize the school’s financial health, including adjusting its budget and identifying new revenue streams. 

“We are confident in our path forward and the strategic initiatives underway to support Columbia’s sustainability,” Tarrer said in a statement. 

The downgrade and financial challenges highlight the tough outlook facing many small higher-education institutions, including art colleges, which recruit from a smaller segment of potential students. The University of the Arts, a private college in Philadelphia, closed down in June 2024 and later filed for bankruptcy, while Moody’s downgraded Walt Disney’s California Institute of the Arts in January.

Founded as a public speaking school in 1890, Columbia College Chicago grew into a private liberal arts college that specializes in fine and performing arts, film and other media-related studies. The school boasts numerous alumni who have been successful in entertainment, including former Wheel of Fortune host Pat Sajak and actors Aidy Bryant and Lena Waithe. 

As of August 2024, Columbia had about $130 million in debt on its books, according to S&P. The college also maintains a $10 million line of credit, which it didn’t draw down in fiscal 2024. That agreement requires that the college’s income must be 1.2 times its debt-service requirements. S&P said the school wasn’t in compliance with its covenant in fiscal 2024 but received a waiver from the relevant financial institution.

“We believe there is a possibility that the college will not be in compliance with the covenant in fiscal 2025,” analysts noted. “If this is the case, we expect management will seek another waiver from the related financial institution.”

In a May 2024 report, Columbia’s then-president Kwang-Wu Kim characterized its financial situation as an “adverse circumstance” which, without immediate action, could become an “existential threat.” Since then, the school has laid off staff and faculty and consolidated or cut many of its majors and programs. 

Shantay Bolton also took over as its new president earlier this month, joining from a chief business officer role at the Georgia Institute of Technology. S&P noted that “ongoing turnover in the senior leadership team has made effective implementation of the strategic plan difficult,” and that management is now aiming for breakeven operations — without additional endowment spending — by fiscal 2028.