Over the past six months, the novel coronavirus (COVID-19) has delivered a very significant and systemic impact on the way that we lived our lives. However, nowhere is the impact of COVID-19 felt than on the economics of America’s colleges and universities. Even before the pandemic, these educational institutions were barely managing to stay afloat financially. And now, because of the new circumstances, schools are being forced to innovate ways to keep their finances in check or risk sinking into debt and bankruptcy.
Looking at the short-term effects of the COVID-19 pandemic, we see that there is a massive decrease in the amount of confidence that financial offers at educational institutions have in their economic health (Briger, 2020). Roughly 25% of institutions have said that they have either furloughed employees, reduced the pay of senior administrators, or promoted early retirement to current faculty. And more than 33% have said that they expect to remove administrative and adjunct faculty positions along with removing unprofitable academic programs by the end of 2020, which are disproportionately arts, writing, and humanities programs in favor of STEM and business-centered degrees (DePierto, 2020).
However, colleges and universities are not considering merging very seriously. Only about 5% of schools are saying they are seriously considering merging with another institution, which is down from 12% in 2019 and 17% in 2018 (Smalley, 2020). However, more than 33% of schools were open to the idea of merging administrative operations with another institution.
More than 25% of colleges and universities have said that they believe their institution would continue to weather the current crisis for the next two years, while nearly half of schools have said that their institution would be using the current pandemic to make transformative changes to their core structure and operations, showing a change away from a short-term business model to a longer-term financial pathway.
And for those that want to continue to maintain normal operations by having in-person classes and allowing students to live on-campus, there are added costs that schools have to deal with. California State, one of the largest universities in the country with almost half a million students, said that if they were to have in-person classes and test every student weekly, it would cost them almost an additional 25 million dollars in operating costs (Finance, 2020).
Along with that, the costs associated with the pandemic have continued to increase in specific aspects (Organization, 2020). Just as one private college president in Ohio said “We make money on the dorms. We break even on dining, and we lose money on everything else, including the education and tuition." This financial situation of having an economic model in which living on-campus is the most profitable part of the college experience, coupled with the
pandemic not allowing students to live on-campus, is forcing colleges and universities to take unique risks in order to continue staying afloat (Payne, 2020). Almost 20% of American educational institutions are offering primarily in-person classes, which around 16% are offering a mix of in-person and online classes (Organization, 2020). This is mainly because of the financial strain of not having in-person classes, due to the profitability of students living on-dorms (Organization, 2020).
Beyond the impact of the pandemic on the actual college campus, there are significant implications for many of the local businesses and retailers in the area. For one college town in State, College, Pennsylvania, the costs of the pandemic have been very taxing. They would normally make 80% of their revenue from students (Harris, 2020). And almost 20% of total revenue would come from students spending money during sports events, and 60% during the rest of the year (Harris, 2020). However, due to the cancellation of sports and the reduction of enrollment, this college town is only making 25% of its normal revenue. And there appears to be no end in sight for the businesses (Harris, 2020).
And for the impact on academics, we see that the impact of the financials is making colleges look at their roles as either a business or an egalitarian educational organization. Many colleges, due to budget cuts from financial losses, are beginning to remove majors and programs
that they consider to be “unprofitable.” For example, Ohio Wesleyan University cut almost 18 humanities majors from its academic year due to believing the programs are not profitable enough to continue. And across the country, many graduate programs in the humanities and some social sciences are being told to not offer admissions to any candidates that are being canceled, like in the University of Chicago and the University of California, Berkeley. Colleges are being forced to reckon with their missions of educating people on the humanities and social sciences while also dealing with their lack of profitability and lack of donations from alumni of these majors.
However, despite all the challenges at the beginning of the pandemic, it seems that schools are being able to catch their stride and are being able to adapt to the crisis. Around 56% of colleges and universities have reported that their institution had “the right mind-set” to continue maintaining operations during the pandemic, along with 48% of the institutions having the “right tools and processes” to respond quickly to any changes that might arise (News-Review, 2020). In 2019, these figures were only 38% and 35%, respectively (News-Review, 2020).
Eventually, there will come a time when colleges and universities will return to bustling centers of life, energy, and student creativity. However, until this time comes, it will be up to colleges and universities to develop thoughtful and reasonable financial plans and solutions that are able to keep their programs alive while keeping students safe at the same time.
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- Finance, C. (2020, May 18). The Impact of COVID-19 on College Students. Retrieved October 05, 2020, from
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