American Universities, the most overpriced in the world, show students how not to run a business. Many will go bankrupt

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Imagine 40 years ago. Colleges could stay afloat with costs at 1, revenues at 1.2.

Now fast forward 40 years. Costs are 1.8, revenues are 4. They can’t get it done.

Lesson, doesn’t matter how much you bring in if you allow incompetent bureaucrats to run things.

via NPR

Most campuses in the United States are sitting empty. Courses are online, students are at home. And administrators are trying to figure out how to make the finances of that work.

“The math is not pretty,” says Robert Kelchen, who studies higher ed finance at Seton Hall University in New Jersey. “Colleges are stressed both on the revenue side and on the expenditure side.”

On one end of the equation, colleges are spending money to take classes online, in some situations purchasing software, training professors or outsourcing to online-only institutions. That’s on top of refunds for room and board and parts of tuition. On the other side, money isn’t coming back in, in the form of expected tuition and revenue from events such as athletics, conferences on campus and summer camps. College endowments, which can sometimes offer some insulation from hard financial times, have also taken a hit.

“This will touch every sector of higher education. Every size of institution, every region of the country,” says Dominique Baker, a professor of education policy at Southern Methodist University in Dallas.

And it already has. The University of Michigan estimates it may lose up to $1 billion by the end of the year. For the University of Kentucky, it’s $70 million. Hundreds of schools — including some with endowments of more than a billion dollars, like Duke University, Virginia Tech and Brown — have announced hiring freezes. Other institutions have cut pay and have laid off staff and contractors. In Vermont, state officials have floated potential college shutdowns.

Despite the fact that no institution will be spared, says Baker, the pandemic will affect different institutions in disproportionate ways. “For some colleges, this is an existential threat that means they’ll have to close,” she says, while others will have the financial backing to weather the storm. What keeps her up at night? Those institutions that serve more vulnerable populations and are in more remote or rural places. Because, she says, they have the potential to feel the financial pain even more. There, students rely on colleges for services such as health care, campus jobs, child care and free food. Baker says those places, which have already been largely underfunded, will be hard-pressed to stay afloat.

The federal government did attempt a buoy: In the CARES relief package passed in March, Congress allocated about $14 billion for colleges and universities, though many have said that’s not enough. “Woefully inadequate” is what the American Council on Education called it. The group, along with 40 other higher education organizations, have lobbied Congress for about $46 billion more. And that’s a conservative ask, they say.

Additional state funding for higher education also seems unlikely, considering revenues are way down across the country from an economy on hold. In most states, funding for higher education isn’t constitutionally required, so when states are strapped to balance their budgets, it’s often an easy target. “When state budgets take a hit, higher ed really takes a hit,” says Kelchen. This happened in the last recession, more than a decade ago, and in many places, state funding for higher education never rebounded.

With less funding, colleges have continued to lean on tuition. But over the past eight years, college enrollment nationwide has fallen about 11%. Every sector — public state schools, community colleges, for-profits and private liberal arts schools — has felt the decline. Over the years, international students, who often pay full tuition, have helped. But now with travel restrictions in play, schools are expecting very few of them this fall.

 

 

h/t Playaguy

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