A Private Liberal Arts College Is Drowning in Debt. Should Alabama Rescue It?

On a crisp fall day at Birmingham-Southern College, the students were making their way to class, stealing a few cold minutes under the golden ginkgo trees. Inside the red brick buildings that dot the 192-acre campus, professors were preparing exams for finals week, while administrators readied the first round of acceptance letters for the next school year.

Yet looming over those quintessential scenes of college life was an unsettling question: Would the school even make it to another fall semester?

The private liberal arts school in Birmingham, Ala., has been plagued by financial instability for years, with the 2009 recession and the coronavirus pandemic exacerbating the consequences of overly ambitious investments and hulking debts.

Closure seemed imminent earlier this year, until Alabama lawmakers appeared to offer a lifeline: a law tailored toward saving the 167-year-old school with a program that could loan millions of dollars. But in October, the state treasurer denied the school’s loan application, sending administrators scrambling once again to save the school.

For many outside the school, its fate is simply about whether a private school that has mismanaged its finances deserves any kind of taxpayer support, especially in a state that has chronically underfunded its public education system. But for alumni and the school’s supporters, it is also a question of whether a classical liberal arts education is still valued at a moment when colleges and universities are facing intense scrutiny over their curricula, admissions and cultures.

Caught in the middle are hundreds of students and professors, drawn to the school’s promise and now forced to reckon with its mistakes.

“There was a while where I didn’t even want to do my homework or my work or go to class because what’s the purpose now?” said Jadynn Hunter, 21, who is one semester away from graduating with a media studies degree. She, like many on campus, had been rattled by fears of the school’s possible closure a year ago, before the Legislature acted.

Should Birmingham-Southern close, it would be the end of one of the most prominent liberal arts colleges in a state that has very few. Its allies also argue that the city of Birmingham would be deprived of a renowned institution that has funneled millions of dollars into the local economy and kept the state’s youth from leaving for opportunities elsewhere.

“If a state like Alabama loses Birmingham-Southern, it’s not good for anybody,” said Daniel Coleman, the school’s president and a former Wall Street executive who used to commute weekly to Chicago and New York from Birmingham.

He added, “It’s easy to complain about flyover country, but if you want to do something about it, you’ve got to support the institutions that are doing things about it.”

There is no denying the longstanding financial despair of the college, which traces its roots to the founding of a Methodist university, Southern University, in 1856. Previous administrations liberally borrowed money to fuel a series of architectural improvements as a way of attracting more students. (A man-made lake, in particular, represents what is now described by many on campus as the folly of a “if we build it, they will come” attitude.)

And then, in 2010, the college learned of a multi-million-dollar accounting error in how federal financial aid was calculated for students, and plundered its relatively modest endowment without replenishing the funds. The debt soon became insurmountable, and last year administrators quietly began to seek out as much as $30 million from the state while they also worked to raise more private donations and rebuild the endowment.

Though Alabama repeatedly sits at the bottom of national rankings for money spent per student in kindergarten through high school, it currently has a surplus of education funds, boosted in part by federal pandemic aid.

“The challenge we’re facing right now — it’s really, it’s a political question, not an educational question,” said Ream Shoreibah, an associate professor of marketing at Birmingham-Southern.

Since last December, students have wrestled with whether to transfer and possibly lose credits, or stay and risk the school closing. Among the nearly 280 employees, professors talked with their families about moving, and worried about whether the cafeteria and custodial staff members could find comparable jobs.

Enrollment at the school — which has a $21,500 annual tuition, though the administration said every student received at least some financial aid — has faltered to about 731 students this fall. A third of the student body is made up of first-generation college students.

“Some of my friends had to go to transfer to other colleges, just because their parents wouldn’t let them come here anymore, so all this happening a second time really did a number on the students,” said Gabrielle Houston, 23, a junior studying for an English degree. Like other students, Ms. Houston had believed that the Legislature’s creation of the loan program had permanently staved off the threat of closure.

But Ms. Houston, who requires a number of learning accommodations in the classroom, said she couldn’t imagine continuing college elsewhere without that level of support.

The school’s survival is also irrevocably intertwined with Bush Hills and College Hills, two predominantly Black neighborhoods that surround it in western Birmingham. The precarious funding situation has resurfaced some hurt and criticism, such as how the school’s commanding exterior wall — built after a student was murdered days after her graduation in 1976 — fueled the perception that a largely white institution was isolating itself from its Black neighbors. (Black, Asian and Latino students now make up roughly a third of the student body, a figure that the school notes is higher than some of its Alabama peers.)

But several community leaders worry about the prospect of having nearly 200 acres sit empty in their midst. Shuttering Birmingham-Southern, they have said, would end a blossoming partnership: no more Halloweens where neighborhood children can trick-or-treat on campus, no more student volunteers at the community farm or student teachers in their schools.

“Being a private college does not hinder us or impede us from thinking about the ways in which we can educate this community that is out here around us,” said Marlon A. Smith, a visiting assistant professor, who had been drawn to the possibility of building a Black studies program in a city shaped by the civil rights movement.

“So you’re going to take an institution that can make that investment?” he asked. “I don’t know how well they’ve done it, but I wasn’t here then. I’m here now.”

Some professors, who have warily watched the conservative overhaul of public schools like New College of Florida, also said that working at a private institution gave them more freedom to challenge their students on sensitive subjects.

“We are a liberal arts college — that doesn’t get translated very well in the state of Alabama,” said Jim Neel, who graduated from the college in 1971 and now teaches sculpture there. “Liberal arts education is the foundation of all higher education. It’s not something new, and it has nothing to do with party politics, but it seems to read that way.”

Though top Republicans balked at handing the school a grant, the Legislature ultimately negotiated a loan program tailored to Birmingham-Southern’s circumstances.

Young Boozer III, the state treasurer, was given the authority to determine the worthiness of any applicant. In October, he denied applications from both Selma University, a historically Black Christian college, and Birmingham-Southern.

“It is a shame, it’s tragic, what’s happening to the students — there’s no question about that,” Mr. Boozer said in an interview. “But it is not my blame. It is the blame of the management and the board of trustees of the school.”

He added, “I’ve just been asked to try to evaluate whether or not the state of Alabama taxpayer money is going to be used to rescue a school that’s a private school.”

The school unsuccessfully sued Mr. Boozer, and has also tried to modify its application to address his concerns, pledging to prioritize its debt to the state and mapping out an ambitious plan to raise enough outside money.

He has remained unmoved, and has pointed to the school’s small enrollment and low teacher-to-student ratio — both part of its appeal to students and faculty alike — as causes for skepticism that the school will be able to claw out of a deficit.

The Birmingham City Council recently approved a $5 million loan to the school, joining the Methodist Church in offering financial support.

But, said Victor Biebighauser, a former president of South University, a private school in Montgomery, and a longtime friend of Mr. Boozer’s, “if they can’t resolve their structural financial problems, namely their declining revenue and their excessive debt, those are just band aids.”

For now, the remaining students are holding out for something to change.

“People really try to beat down this school and we keep rising above,” said Anna Withers Wellingham, a 22-year-old senior and the student body president.

“This is a school that teaches you a lot more than a liberal arts education,” she added, “and it’s worth fighting for.”

Kitty Bennett contributed research to this story.