Impact Of Coronavirus (COVID-19) On College Tuition And Finances

Recently, we looked at the impact of coronavirus (COVID-19) on colleges and universities. That article looked at the effects on colleges and universities in general, while here, the focus is more on the effects in regards to tuition and related financial matters. For both students and colleges, the coronavirus crisis has created a massive disruption in the financial “norm” of higher education. With schools closing, switching solely to online, restructuring classes, cutting costs and so much more, some of the most basic assumptions about college and college life have already been thrown out the door.

Impact of Coronavirus (COVID-19) on College Tuition and Finances

Long before the coronavirus pandemic, college costs had already entered unprecedented territory. According to a study by BrokeScholar, the average cost of tuition and fees — in inflation-adjusted dollars — at both private and public schools has more than tripled from the academic year 1971-72 to 2019-2020.

  • In 1971-72, average tuition and fees at a private nonprofit four-year institution cost $11,540 in 2019 dollars. For the 2019-20 academic year, the current average cost is $36,880 for tuition and fees: an increase of 220%.
  • In 1971-72, average tuition and fees at a public four-year institution cost $2,710 in 2019 dollars. For the 2019-20 academic year, the current average cost is $7,730: an increase of 285%, which means it nearly quadrupled.

Thus, the costs associated with attending a college or university were already moving in an unfavorable direction for the average American household. But throwing the coronavirus pandemic into the equation is now presenting a multitude of issues that could accelerate this trend or send it off into erratic directions. On the other side of the equation, the colleges are facing troubling financial straits due to the disruption in tuition, fees and on-campus life.

“When it comes to higher education institutions, the pandemic has had — and will continue to have — a drastic financial impact. Institutions are suffering from lost revenue to partial tuition refunds, room and board, fees, etc.,” said Michael Hansen, CEO of Cengage. “For example, the Pennsylvania State System of Higher Education, which oversees 14 universities, including the first HBCU (historically black college and university) of Cheyney University, and 17,000-student West Chester University, is projecting a $100 million loss from room and board and other fees. And the University of Wisconsin at Madison is estimating a $100 million loss due to COVID-19 impacts, which does not include potential lost revenue from lower enrollment in the fall. While a select few institutions have large endowments to help them navigate through this unprecedented period, the majority do not.”

The Effects Will Be Felt by Small and Large Schools Alike

With colleges and universities facing such substantial losses in revenue, there’s a very good chance tuition costs could climb at a faster rate to compensate for losses. As a corollary, to match these increasing tuition costs, student loan debt could surge even more. “This pandemic is existential for many universities. State schools have seen funding dwindle over the years, as most states are not constitutionally required to fund them. The pressure has driven tuition higher. In this new environment, online learning is requiring them to return room and board fees, refund some tuition and compete with universities with large endowments,” said Gil Gibori, CEO and founder of The House Tutoring Lounge. “Even the ones with significant endowments, like the $1 billion University of Michigan has stashed away, are finding it difficult to model their next few years. Many large schools have depended on NCAA athletics to fund much of their campus. Imagine Notre Dame, Penn State, or Alabama without football.”

Facing these shortfalls in expected revenue, schools are turning to cost-saving maneuvers, many of which having already been standard operating procedure, but could now go into overdrive. “Universities have reduced the number of tenured professorships for the last decade. Low paid, adjunct professors, have been a major trend in university staffing to reduce the cost of payroll and benefits. This trend will likely accelerate as campuses have already begun to lay off staff and faculty,” said Gibori.

“Many schools have implemented hiring freezes, paused capital building projects, the list goes on. University of Arizona is projecting to lose $250 million from the pandemic. University of Michigan estimates losses from $400 million to $1 billion. Syracuse University has already lost $35 million in unexpected expenses since the pandemic started,” said Dr. Kat Cohen, founder and CEO of IvyWise. “These losses stem from a hard stop on the major revenue streams including college sports, which can run into the billions, refunds for dining and housing expenses for current students, to elective procedures in university hospitals.”

All agree that the financial implications and impact will be felt by institutions of all sizes and forms. The question is in which ways and to what degree the impact will be felt that remains difficult to answer. The effect will hit different institutions in very different ways. “For the top schools with incredibly large endowments, this pandemic will have a significant financial impact, but they have the deep pockets to weather the storm. It’s the smaller colleges that have been in financial trouble for a while that won’t be able to withstand this financial blow,” said Cohen. “This pandemic, on top of stagnant population growth that has been affecting colleges for a while now, will unfortunately be the final nail in the coffin for a lot of these schools.” 

Larger schools, however, are vulnerable in their own ways. “The larger schools have become dependent on revenue from sports, federal research grants, licensing. They may have more students, but their financials likely lean harder on non-student revenue that will surely be reduced with the economy driving toward,” said Gibori. “Small colleges tend to have smaller endowments, but also more student-based, leaner financials. This may work to their advantage.”

Measures Colleges Are Taking With Tuition and Enrollment

With so many factors pointing to massive revenue downturns, it seems like higher tuitions are almost inevitable. And, along with higher tuition costs comes the specter of even greater student loan debt. Fortunately, however, some institutions are taking measures to prevent or at least mitigate these effects.

“Student loan debt should not increase as a result of the COVID-19 pandemic unless it impacts the time-to-completion. Colleges and universities are taking great efforts to ensure this will not be the case. Many already have announced tuition freezes for next year, and some are even offering lower tuition or other incentives to continue enrollment and degree progression,” said David Rosowsky, a professor of civil engineering at the University of Vermont who previously served for six years as UVM’s provost and senior vice president. “And of course, it is likely that ‘melt’ will be significant this summer. That is, a larger percentage of students than we normally see in a given year will not return to campus, likely as a result of changes in family financial situation. We can expect to see more students transfer to in-state, and even nearby, public universities.”

This last statement is especially important because tuition costs — and the resulting revenue they bring in — depend on where the college applicants are from, such as in-state, out-of-state or international.  “Universities are certain to see dramatic declines in their international student population, and likely to see declines in their out-of-state student population. Whether this can be compensated for with increased in-state admissions, or if this even possible — given demographics, competition, or the need for out-of-state tuition revenue — will vary by institution,” said Rosowsky. “But we can certainly expect to see more creative and aggressive recruitment strategies, more flexibility in everything from payment plans to semester start-date and length, and to the ability to combine on-campus with online and remote classwork.”

At the same time, the behavior of prospective college students could force colleges to take action, if they haven’t already. With so many American households adversely affected by the coronavirus pandemic, outlooks on spending will change. “Big picture, it comes down to the way many families look at their own household budgets. The money you bring in has to match the money you are willing to spend in order to balance your checkbook. For colleges, the same applies,” said Bryan Gross, vice president of enrollment management and marketing for Western New England University.

“Moving forward, schools worry that students will not be willing to pay the same amount for tuition and will want certain fees waived if the full campus experience is not able to happen. Right now, there seems to be a movement towards allowing some short-term flexibility for students with loan debt. Long term, there is no doubt that consumers will be even more sensitive to taking out loans, making the admissions landscape all the more competitive,” he said. “It may bring a new wave of schools who consider tuition reset policies to counter what is happening. We may be seeing the beginning of the end for the unsustainable high-price, high-discount model that has prevailed over the past few decades in this country.” 

Changing Views Towards College Tuition and Experience

A shift in students’ behaviors and attitudes toward college and the college experience is a very real likelihood in the wake of the coronavirus pandemic. Changes in these areas of thinking could have major financial implications for colleges and universities. “Colleges are in a tough spot and they need more tuition money in order to pay the bills, and right now the only way to get new students is through online offerings. Even worse for the colleges: An unprecedented number of students may want to take a break from their educations altogether until things have thoroughly normalized. This will make the need for online offerings more pressing,” said Jonathan Roberts, director of the Ancient Language Institute.

For students that were or are taking online classes and paying the same tuition for them as they would for a “traditional college experience,” questions arise about what the college experience is worth. “It communicates that online classes offer the same value as traditional ones,” said Roberts. “This will change how students evaluate whether or not the traditional college experience is worth it. The traditional college experience, which has been deemed normal, will come to be seen more and more as a luxury. Why move across states, pay rent, pay for return trips, and so forth, when you can stay home and work while pursuing education at a more flexible, personalized pace?”

While many of these views on the implications of the coronavirus are conjectural, many colleges have already implemented or accelerated procedures to cut costs, restructure and tighten spending in response to the crisis. And there will be consequences from these actions down the line. “At the moment, much remains uncertain, but unless a vaccine becomes available in the near future, I would bet that a lot of colleges will remain closed until 2021 and try to move all of their classes online,” said Pierre Huguet, CEO of H&C Education. “The main issue with this scenario is that online courses aren’t as appealing to students as living on campus. So, if this happens, and even if moving instruction online is an expensive process, colleges will have to find real financial incentives to make sure that enough students enroll in the fall.”

— to www.forbes.com

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