Is New College dying?

The famed liberal arts school faces a financial crisis after a tough year
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gwschulz@sfbg.com

After a turbulent year in which its accreditation was suspended and school president Martin Hamilton reluctantly resigned, New College of California is in dire financial straits. Some even fear that the innovative liberal arts institution — whose central campus at 777 Valencia Street once housed a mortuary before the school was founded there 40 years ago — could be in its death throes.

New College has experienced a 41 percent decrease in enrollment this year, seeing its population drop to fewer than 500 students. And the institution is losing about $80,000 each month, according to minutes from a faculty meeting that took place in late November. The school needs more than $2 million to cover operating expenses into January, and school trustees have considered filing for bankruptcy protection.

A Chapter 11 reorganization would allow New College time to improve its finances without shuttering completely. But acting school president Luis Molina says bankruptcy would also mean the school wouldn't receive any federal financial aid for its students, a source of tuition revenue it desperately needs to survive. So he insists bankruptcy is off the table.

"I'm not going to deny that the school is in a financial crisis," Molina said. "But from my perspective, I don't see bankruptcy as the solution."

New College is nonetheless struggling to make payments to vendors, and payroll checks have bounced or been withheld by the school. Molina also acknowledged that in the summer Pacific Gas and Electric Co. threatened to turn off the school's power due to unpaid utility bills.

Dozens of financial aid applications for the just-ended fall semester still need to be processed, which means New College can't yet receive the federal loans and grants it pays out to students, many of whom rely on the funds to cover basic expenses while attending classes.

"We can't believe it's happening," said Cheryl Fabio, a second-year law student at New College. "No one knows anything. We're operating completely on a rumor mill, and the worst of the rumors keep on becoming [true]."

Fabio returned to school after working for several years as an Oakland city employee. Despite the uncertainty about New College's future, she was studying for finals and continuing to attend classes. But she hasn't received $10,000 worth of financial aid from New College this semester, and she's four months behind in rent at the home in Pittsburg where she lives with her daughter.

The US Department of Education sent a letter to the school in August informing administrators that applications for federal funds submitted by New College's Financial Aid Office would face heightened scrutiny due to the discovery by investigators earlier this year that the school may have illegally mishandled scholarships and other aid money.

New College must repair dozens of student files and submit a mountain of documentation for preapproval on each financial aid package before being reimbursed. Eighty such packets were submitted Dec. 12, Molina said, but as of now money from earlier applications is only trickling into the hands of students.

That's a considerable setback for the school, since it relies heavily on student tuition to continue operating, so it's considering a big fundraising drive and a halt in enrollment in some programs for the spring semester until its finances are stabilized.

The November minutes show proposals including an across-the-board 25 percent pay cut as an alternative to layoffs, but up to 20 full-time faculty members between January and spring of next year might need to be cut to keep the school from going under. Another option, Molina said, is for some faculty to work part-time and apply for limited unemployment benefits from the state to make up the difference.

Maria Bourn is a second-year law student who moved to San Francisco from Washington to attend New College.

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