(Edited excerpt from: “From a Grove of Oaks,” by the late George Troxler, professor of history and University Historian)
The rebuilding program after the Fire of 1923 had left the school with a heavy debt. The goal of the Emergency Fund campaign in 1923—to raise $300,000 for construction and an additional $300,000 for the endowment—had been based on the architect’s estimate that the five proposed buildings could be built for $300,000. President Harper reported to the board in May 1926 that construction of the five buildings had cost $518,441, leaving an indebtedness of $303,029.
With the onslaught of the national economic depression, the school faced a financial crisis that would have greater significance for the school’s future than the fire that had destroyed the Administration Building. Although the Depression is associated with the dramatic stock market plunge in 1929, it began in the agricultural sector, which included the support network for Elon College.
During the Depression, most colleges suffered a drop in enrollment and a decline in the value of their endowments. Concurrently, income from gifts and pledges plunged. At Elon, these losses, which would have made it difficult to meet operating costs under any circumstances, converged with the huge debt to threaten the school’s survival.
Plummeting enrollment hiked the debt. The size of the student body fell from a high of 424 in 1925–26 to 319 in the fall of 1929 and further to 245 in the spring of 1930. Enrollment would reach a low of 227 in the fall of 1931.
The value of Elon’s endowment and the anticipated income from endowed funds dropped during the Depression as individuals and churches defaulted on loans from the endowment, and the value of stocks and bonds declined.
In May 1931 when the trustees met for graduation, Elon was a college with a declining enrollment and no president. Its physical facilities were pledged as security for loans on which the school was unable to make payments, and the interest from the tiny endowment was pledged as repayment on debts and loans.
In December 1931 the Southern Association of Colleges and Secondary Schools, announced that Elon would be dropped from membership in September 1932. The school had been warned the previous year that its financial condition would have to be improved if it were to retain accreditation. Despite continued efforts during the next 14 years, Elon College did not regain membership in the Southern Association until 1946.
On December 9 the board’s executive committee granted President Leon Edgar Smith total control of college finances, requiring him only to report his actions to the board in writing. They authorized him as acting president “to take all steps necessary in his judgment and discretion in the matter of the management of the College, dealing with the creditors, raising funds and making such arrangements as in his discretion may be necessary to the saving of the Institution.”
The next month, Smith met with the bank creditors at the office of the school’s attorney in Greensboro and explained Elon’s financial condition in what he later described as a “frank consideration of the assets and the future of the college.” Most of Elon’s creditors agreed to a two-year moratorium on the payment of principal and interest. The agreement postponed the debt crisis for two years; Smith believed that during that time Elon’s enrollment would grow and donations would increase.
Just before students were to register and pay fees for the spring semester in January 1932, Smith received an anonymous message that an attorney representing local creditors was planning to secure a warrant authorizing the county sheriff to come onto campus and attach the funds as they were collected from enrolling students. Smith sent the college’s cash box across the railroad tracks to the home of Charles D. Johnston, the superintendent of the Christian Orphanage, who was a trustee and also the college treasurer. Sixty years later, Johnston’s son, James William Johnston ’43, described how college students came to the Johnston’s front parlor to pay their tuition and fees for that term. After all the students paid, members of the faculty went to the Johnston home to receive checks for a portion of their salaries.
As well as focusing on reversing the decline in enrollment, Smith quickly appealed for small donations to fund continued operations. Following the 1932 graduation, Smith oversaw the restructuring of the curriculum to reduce the number of departments from fifteen to nine and to enable elimination of several faculty positions. Thanks to the efforts of the college’s field secretary, George D. Colclough ’26, enrollment grew during the first years of Smith’s administration, albeit slowly. Two hundred fifty-six students enrolled for the spring semester in February 1932; in 1934 the fall enrollment stood at 355.
The liquidation of the pre-1932 debt was finally resolved in April 1935 when the executive committee approved a revised agreement with the Virginia Trust Company. In May 1935 the full board was informed that the debt had been refinanced, and trustees approved a campaign to retire the loan, but fundraising proceeded slowly.
On September 14, 1941, with less than four years left before the principal was to be fully paid, Elon launched the “Elon College All or Nothing” campaign to raise the remaining $105,000 that had not been given or pledged. If the goal was not reached by the announced close of the campaign on July 1, 1942, and the pledges paid by January 31, 1943, all the money and pledges given with restrictions would be returned to the donors. Smith later recalled that the pledge goal was not reached until he received the last phone call at 11:30 p.m. on July 1, 1942. In early 1943, Smith traveled to Richmond to deliver the final payment on the loan to the Virginia Trust Company, two years ahead of schedule.