Staying Out of the Red
As an incoming freshman at Wesleyan University, I never realized how my decision to study on-campus, study remotely, or to take a gap-year would have impacts that extended beyond my learning. I explored how my options would impact my own health and safety, my social needs, my mental health, and my learning experience. While the unpredictable social life and Covid-related safety on campus worried me, I also feared the quality of virtual learning, missing out on making friends on campus, giving up my single dorm-room, and feeling lost when I started learning on campus. While I had many friends who decided to take gap-years, take gap-semesters, study remotely, or transfer to lower-cost universities to study remotely, I decided that my best option would be to study on-campus with the option to return home for the remainder of the semester if I was unhappy. Looking back on this process midway throughout my first semester, I realized how I never stopped and thought about how Wesleyan would be impacted by the decision I made and how my classmates’ colleges and universities would be impacted by the decisions they made.
Since the start of the pandemic in early 2020, around the same time I was receiving my Wesleyan ED2 acceptance letter, schools began to close and financial losses began to occur. As students were sent home and classes began to move virtually for the remainder of their academic year, students received tuition reimbursements for housing and meal plans, and colleges and universities also lost many many sources of revenue. For example, Scott Carlson, a writer at The Chronicle of Higher Education, states that “We make money on the dorms. We break even on dining, and we lose money on everything else, including the education and tuition.” Further, athletic programs were canceled, causing a decrease in revenue from the teams as well as a decrease in publicity. Carlson states that “the athletics ends up being something that attracts students both to go to school there — to play athletics, but also to watch the athletics.” With already tight margins to make profits, the decrease in revenues schools faced is concerning.
While the threat of revenue losses has lowered in the current academic year (2020-2021) due to schools being able to return and implement increased safety measures and redesigned learning, schools are still taking in significantly less revenue than they are use to, which comes at an inconvenient time when schools are spending large amounts of money on redesign education, implementing new safety measures on campus, offering tuition reductions, and are not operating at full capacity. A survey done by Inside Higher Education in August 2020 showed that 40 percent of incoming freshmen, like me, who planned to study at four-year colleges were likely or highly likely not to attend in-person. In an attempt to persuade students to study on-campus or not take time off, schools have offered financial incentives. For example, according to Fortune, Williams College reduced its cost by 15% on a one-time basis for the coming academic year and Princeton University offered a 10% tuition reduction for all undergraduate students for the 2020-2021 year. Some also offered incentives to study remotely, such as Georgetown University who offered a 10% tuition cut in the fall semester for students who are learning remotely. Since colleges and universities have not returned to full operation, they are not only losing money on the tuition reductions. All are also facing losses in the meal plan revenue, room and board revenue, athletic revenue, donations, and the high costs associated with the new learning that accompanies such changes.
For example, there has been an increase in costs related to technology. Schools have had to invest more in online programs, technical support, training for teachers on various technological programs, and increasing the number of devices needed. For hybrid learning, schools have had to invest in cameras and speakers for the classrooms. One of my professors told my class that Wesleyan spent thousands of dollars implementing and upgrading the technology in the classroom we were in to make it suitable to hybrid learning. Along with that, educators had to go through training to use new programs and technology that Wesleyan implemented which was also costly. There are also numerous expenses related to maintaining safety for students physically studying on campus. There is a hefty cost to test students and staff on campus. According to NPR, testing can run $100 to $150 apiece. With many schools opting to test students and staff at least twice a week, this can become expensive quickly. There has also been an increase in the need for sanitation and workers due to the increased demand of cleaning and disinfecting that Covid-19 has caused. Lastly, many colleges and universities have reserved rooms in nearby motels and hotels for students who test positive.
Another major loss for universities is in terms of their endowments. According to Hechinger Reports, “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” Since Covid-19 has caused stock share prices to decline substantially, the value of investments have and continue to decline at high rates. This is not the only loss to endowments. Many endowments are funded by charitable donations. However, according to Hechinger Reports, universities and colleges have had to cancel events such as reunions. These events usually result in a high amount of alumni donations. According to Forbes, “there will be a decrease in gifts from alumni and parents who make small gifts to annual funds each year. Those $25 and $100 donations may seem insignificant, but collectively they add up to millions and can account for 5% or more an institution's annual revenue.”
Overall, the losses colleges and universities anticipate facing are large. According to Weform, the University of Michigan anticipates a pandemic-induced loss of up to $1 billion by the end of 2020 and Harvard University is projecting a $750 million revenue shortfall for next year. One unfortunate implication of this is that the size of the school and it’s reputation may impact its likelihood to survive given these increased expenses. According to NPR, “The elite colleges, they're always going to be OK. Not only because they have the endowment, but because they're able to pull students up when they're lacking in demand. For colleges that don't have that prestige, that's going to be really tough.” Allison Vaillancourt, vice president of organizational effectiveness at Segal, states that “there are predictions that some small institutions may need to close or merge.” While the educational disparities between large prestigious universities and those of lower prestige have been large, this pandemic is exacerbating those differences. While small institutions are facing closure or mergers, Segal states that larger universities would only need to reduce the number of faculty and staff employed or cut their hours and benefits. Still, reducing the amount of staff and programs can impact the quality that colleges and universities seek in their education and programs.
I can see the impact Covid-19 has had on my own education. While I am on-campus, many of my classes which were advertised as in-person or hybrid ended up being online. I am taking 4 courses, and I only go to one in-person class per week. I feel that it is hard to learn virtually and that I would have a better experience if all my courses were in-person. I also have many friends at Wesleyan who say they will not be returning next semester to study in-person as they have been disappointed by campus life under Covid-19 regulations. If campus life does not return to normal and virtual learning persists, more students could decide to take time off or study remotely, which would further negatively impact the financials of colleges and universities. The government has attempted to intervene by implementing the CARES Act (The Coronavirus Aid, Relief, and Economic Security Act) which, according to the University of Central Florida is “designed to assist with expenses related to the disruption of campus operations due to COVID-19, such as housing, food, course materials, technology, healthcare and child care.” However, according to an NBC News analyst, this does not help all schools since “for-profit schools got proportionally more money from the aid package than the nation’s community colleges.” It is shocking that schools which already may have been struggling financially are not disproportionately being impacted and not receiving the aid they need to help with their losses.
As Covid-19 cases continue to rise each day, the losses and expenses universities face continue to soar leading to an unpredictable future. The remaining weeks of the first semester for students all over will be an important learning experience for both students and schools. Many students, like myself, will make decisions regarding next semester based on how this semester concludes. As the weather has been getting colder and Covid-19 cases slowly begin to rise in both Connecticut and at Wesleyan, I may decide not to return next semester based on how the upcoming weeks go. While it is impossible to predict the future, I feel that the losses plaguing colleges and universities will not stop or decrease until Covid-19 is nationally contained, which will not occur until there is a vaccine made available.
Sources
Briger, Sam. (September 16, 2020). “As Campuses Become COVID-19 Hot Spots, Colleges Strain Under Financial Pressures.” As Campuses Become COVID-19 Hot Spots, Colleges Strain Under Financial Pressures | WBUR News, WBUR. www.wbur.org/npr/913500758/as-campuses-become-covid-hotspots-colleges-strain-under-financial-pressures.
DePietro, Andrew. “Here's A Look At The Impact Of Coronavirus (COVID-19) On Colleges And Universities In The U.S.” Forbes, Forbes Magazine, 1 May 2020, www.forbes.com/sites/andrewdepietro/2020/04/30/impact-coronavirus-covid-19-colleges-universities/.
“Inside Higher Ed.” Survey: 40 Percent of Freshmen May Not Enroll at Any Four-Year College, www.insidehighered.com/admissions/article/2020/08/10/survey-40-percent-freshmen-may-not-enroll-any-four-year-college.
Lorin, Janet. “Williams College Cuts Price 15%, Cancels Sports Due to Virus.” BloombergQuint, Bloomberg Quint, 30 June 2020, www.bloombergquint.com/markets/williams-college-cuts-price-15-cancels-sports-in-virus-tumult.
Marcus, Jon. “Universities Now Face Tens of Billions in Losses for University Endowments.” The Hechinger Report, 30 Mar. 2020, hechingerreport.org/already-stretched-universities-now-face-tens-of-billions-in-endowment-losses/.
Seville, Lisa Riordan, and Andrew W. Lehren. “Why Did the CARES Act Give More Money to Hair Schools than to a Community College?” NBCNews.com, NBCUniversal News Group, 20 May 2020, www.nbcnews.com/news/education/why-did-cares-act-give-more-money-hair-schools-community-n1209366.
“What Are the Types of Expenses Covered by CARES Act Funding?” Coronavirus, www.ucf.edu/coronavirus/question/what-are-the-types-of-expenses-covered-by-cares-act-funding/.
Written by Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy and Professor of Economics. “An Economist Explains How COVID-19 Will Impact Universities.” World Economic Forum, www.weforum.org/agenda/2020/07/will-universities-learn-from-lockdowns/.