COVID-19 versus higher ed: the downhill slide becomes an avalanche

How might the COVID-19 pandemic ultimately impact higher education?

In 2013 I introduced the peak higher education scenario. I’ve developed it further since. Alas, American higher education has generally fulfilled that forecast. Now that COVID-19 has hit, things are getting worse, and faster. Imagine peak higher education on steroids and with the fast forward button jammed down.

tl;dr — it could be bad. Very bad.

In this post we’ll identify the various pressures the pandemic exerts on colleges and universities. Let’s focus on the financial dimension. For sake of (relative!) simplicity I’ll focus on the United States. Reader can carry some findings over to other countries’ post-secondary systems, depending on local conditions.

Preparatory notes: the economic hit may be severe and complex, with many moving pieces and interlocking elements. As you read on keep in mind those connections.

Pandemic: I’m going to refer to my previous scenarios about how COVID-19 could play out, short, long, and wavy. My assumptions about the broader economic picture will stem from those futures.

Apologies for being telegraphic or clipped in what follows. I am running low on time.

Cuts to public higher education American states have reduced per-student funding since the early 1980s, generally. Recessions have accelerated this tendency, as reduced state economic activity cuts tax revenues. The American economy is hitting a recession for at least one quarter this year, so we should expect at least a 2008–2009-level reduction in support.

If COVID-19 follows my other scenarios (long, wavy), we’re looking at multiple quarters of recession. We could also call this a depression. Whichever terminology we use, state governments will have less to spend on higher ed.

To expand on that point a little: think of how unemployed people make less, so pay less in state income taxes. They also spend less, which means a smaller amount of sales tax reaches state coffers. State governments may also see certain budget lines forced to grow. Think of publicly supported health care as the pandemic sickens residents. Think, too, of state infrastructure work becoming more expensive: extra cleaning of certain sites, funding to public medical systems. Recall that states have community obligations as well.

Combine that with the very low regard most states have for their public colleges and universities ( see this story) and imagine just how far public appropriations can fall by fall 2020.

Endowments For the relatively small number of campuses that have significant endowments, those are in serious trouble now.

Three-quarters of the $630 billion in endowment funds at U.S. universities and colleges is invested in equities, or stocks, according to the most recent available accounting, at a time when share prices have plummeted since the start of the coronavirus.

This may rebound or even recover at some point, depending on how long the pandemic rages and just how far it ruins the economy. In the meantime, those colleges and universities will likely suffer a hit.

Families spending less As the overall economy sours many families will have less to spend, and still less desire to. They will hunker down for safety and survival. Not all — some will be profligate on cheap credit, while others maintain or expand their resources. But a good and growing number will lack the stomach to put out for college.

One result is down-shifting which institution they attend. Instead of a research-I, a state school. Instead of a state school, a community college. Rather than a liberal arts college, a wholly online enterprise.

Another result may well be holding off on going to university at all.

Now, there’s a strong counter to this, namely our habit of increasing enrollment during economic crises. Community colleges should see a spike upward, as they did in 2008–2009. Online-only schools may as well.

Charitable giving Gifts, donations, and alumni support may drop as well.

Paul Friga observes:

Philanthropy, especially annual campaigns, will decrease as individuals lose jobs and personal net worth. Overall giving in 2008 dropped 11.7 percent from the previous year, and donations to education also experienced similar double-digit drops. Endowment returns will decrease in correlation to stock-market performance; in the year following the Great Recession, endowment returns dropped on average by 23 percent, according to a survey of more than 400 universities.

Enrollment decline During this semester we may see some students disengage from classes for a variety of other reasons: personal stress, family health, economic crisis, bad experiences, technological issues, and more. They could take incompletes or withdraw from classes.

What happens to them in summer? How many will take classes then? Will that odd season see an enrollment drop?

But summer pales in importance next to fall term. As I’ve said, much depends on how the pandemic plays out. If COVID-19 is done by August — or, more importantly, if we perceive it as beaten by then — we could see students return to campus in full force. Some might not. They could fear infections, either from insufficiently cleaned sites or from risky classmates. Others might prefer the online experience because of its convenience or the safety of doing it from home. A gap year might look appealing. Overall enrollment might tick down.

And if COVID-19 continues to rage, or comes roaring back during fall term? How much further will enrollment slide? Art & Science Group polled high school seniors and found some who are rethinking college this fall, either considering attending a more local and cheaper campus, or who are pondering skipping this fall term entirely. And recall Brian C. Mitchell and W. Joseph King’s aphorism from How to Run a College (2018): enrollment means revenue.

I’ll return to this below.

Refunds Several universities have issued partial refunds to students for room and board. For example,

At the University of Wisconsin system, which encompasses the state flagship in Madison and 12 regional campuses, officials estimate they are paying out about $78 million for refunds of room and board charges after clearing students out of residence halls.

“We decided to refund this because we thought that was simply the ethical thing to do,” said system President Ray Cross. Students and families need the money, he said. “Of course, this is a huge revenue hit.”

Refunds could go beyond room and board. Fees are a likely target, as we can see in this petition, which calls on the University of California San Diego to reduce fees that the author deems to be no longer appropriate:

Since UCSD decided to put all the classes online, then the school fees, like

Spr Qtr Campus Activity Fee 73.06
Spr Qtr ICA Activity Fee 259.04
NonRes Supplemental Tuition Sp 9918.00
Spr Qtr Recreation Facil Fee 117.00
Spr Qtr College Activity Fee12.08
SPRING QTR STUDENT SERVICE FEE 376.00
SPRING QTR TRANSPORTATION FEE 64.58
TUITION SPRING 3814.00
Spr Qtr University Center Fee 101.46

Should be lower or cancel. Please support please. A lot of students still suffer from the student loan.

The bigger target is tuition. It may well be that many students find the digital experience to be of lower quality than the face-to-face instruction they had recently received. Beyond student opinion, stories could circulate through mainstream and social media of badly designed classes, slow response times, awful video interaction, etc. How many will request partial refunds or reduced tuition prices? How many will do so informally versus filing lawsuits (Americans do love litigation) versus lobbying states legislatures?

Campus medical costs The majority of college and university costs are compensation to staff. Custodians to presidents, professors to librarians, paying for people is typically the lion’s share of a campus budget. And that may shoot up. Medical costs have already been rising, as insurance costs rose and institutions were unable to pool resources for improved economies of scale.

The pandemic should make this worse. As more people get sick insurance companies will have to pay out more, which puts pressure on them to realize more revenue through fees. And as more academics get sick, ditto. It may well get more expensive to operate a campus — just as revenue starts dropping.

International student numbers These may decline worldwide for obvious reasons: fears of infection and official travel restrictions. How long these fears persist depends on how long the pandemic lasts and with what severity.

Some American colleges and universities have relied on international students since around 2000. Their absence is another financial blow.

Campus sports The NCAA is paying Division I campuses much less than they expected, as games get canceled:

Two weeks after the event was canceled, the NCAA announced it will be distributing $225 million to its approximately 350 Division I members, much lower than the $600 million it was set to dole out in installments had the tournament been played.

This isn’t a great deal of campuses — precious few actually make money on spots — but points to ripple effects throughout American academia. Some schools offer sports to boost recruitment. What happens when those games are no longer played? How long does fondness for and awareness of teams last when they’re mothballed?

Put all of these together and what happens to American higher ed by this time next year?

One academic thinks one fifth of these institutions are staring at a cliff:

I think in the short term, it’s not 10 percent that are in real trouble, it’s 20 percent. That’s not to say 20 percent are going to close. But it ups the possibility. We’re now going to have upward of 20 percent really terrified. If this crisis is going to take out all of next academic year, that bottom 20 percent may never come back.

Let me flesh out that death’s head a little more. Think, first, of queen sacrifices. As enrollments slide for some, doing a cost-benefit analysis is going to be very appealing for quite a few administrators and trustees, not to mention making sense for legislators. Departments that bring in the lowest number of students — and also fail in institutional politics — are likely to face cuts or mergers with other departments. The same goes for other units: programs, schools.

Campuses can also merge. This can be voluntary, when a healthier college or university absorbs one on the edge of extinction (really “acquisition” is a better name than “merger” for this reason). It can also be involuntary if state governments get involved.

Closures are now more on the table than they have been for the past decade.

Alongside these measures all colleges and universities have some tested tools in their toolbox:

  • Nudge faculty and staff out the door with buyouts, early retirements, and other inducements or maneuvers.
  • Cut faculty and staff compensation through furloughs, reduced medical support, reduced retirement support, cuts to salaries.
  • Increase tuition and fees, expecting students to go further into debt. When will we reach the $2 trillion mark, fall 2021? Spring 2020?
  • Double down on adjunctification after an initial wave of not rehiring adjuncts. Who will be able to fill open tenure lines, much less create new positions?
  • Cut all kinds of budget lines: professional development, building maintenance, salaries. Campus politics will heat up as units and individuals jockey to avoid the next swing of the ax. I expect academic libraries will be in some cross hairs.
  • Expand online offerings. After all, these can’t give you coronavirus. And there’s little expectation of tenure among online instructors.
  • Keep trying to tell the story of higher education’s value in more effective ways.
  • Deny that there’s any crisis. Seriously, people will do this… and they’ll tend to have tenure.

I do wonder if we might not see some new construction, since interest rates are effectively zero and campuses can borrow… unless their credit ratings are too low for banks.

About those cuts: back in 2001 and, less so, in 2008 there was talk of “cutting the fat.” I’ve heard some of this since, usually from Republicans complaining about some of higher ed. Yet as Chris Newfield acidly and correctly notes:

We’re out of fat. We’re cutting sinew, muscle, and bone. Hence my forecasting of queen sacrifices, mergers, and closures. Peak higher education on steroids.

How higher ed can best navigate this terrible crisis is… the subject for another post.

PS: The title of this post is a reference to a classic line from the great science fiction tv series Babylon-5.

For more reading consider Paul Friga’s recent article.

(thanks to Todd Bryant, Michael Horn, and more friends for links and thoughts; cliff and birds photo by Derek Bruff; cliff by Michael Coghlan)

Originally published at https://bryanalexander.org on March 31, 2020.

Futurist, speaker, writer, consultant, educator. Author of the FTTE report and ACADEMIA NEXT. Creator of The Future Trends Forum.