This paper will explore the impact of COVID-19 on higher education finances. COVID-19 is a deadly health crisis that continues to spread across the globe. As a precaution, in Spring 2020, many higher education institutions sent students home and moved their courses online or moved to a hybrid of online and in-person learning to limit the number of students on campus (Hodges et al., 2020).
The pandemic's impact was felt by everyone globally, and the number of cases and deaths continue to rise due to new variants. The number of reported cases of COVID-19 and its variants worldwide was 34 million as of August 1, 2021 (CDC Data Tracker).
Many institutions of higher education expect this disruption in learning to impact college admissions drastically. Colleges and universities anticipate a substantial decline in enrollment. Over 80 percent of university presidents surveyed by the Chronicle of Higher Education. (Friga, 2020, April 3) expect a decrease in enrollments for new and returning students. These enrollment declines could impact the finances of higher education.
Higher education institutions need to understand how the pandemic impacts their finances to plan for necessary changes to policies or processes. My institution's finances were deeply affected when the campus closed in March 2020 and students were sent home. Without the revenue from room and board, the administration made severe budget cuts to stay operational. It is imperative to determine how profound and if the effect is widespread or specific to public or private institutions. The variants in COVID-19 continue to grow despite the availability of a vaccine. As universities across the country begin to open their campuses for Fall 2021, over 625 institutions require at least some students and employees to be vaccinated before returning to campus (Thomason & O'Leary, 2021).
State appropriations have been a significant source of income for public colleges and universities. State funds have a more limited impact on private institutions. Each state determines its appropriations for higher education (Barr & McClellan, 2018).
Between 1971-72 and 2019-2020, the average cost of tuition and fees in inflation-adjusted dollars has more than tripled (DePietro, A., 2020). Yet, the net tuition has been declining over the past decade due to lower enrollments, increased tuition discounting, and more inadequate state funding due to rising costs for healthcare and a decline in tax revenues. Fewer international students enroll in higher education in the United States, and these students typically pay full tuition (Friga, P., 2021).
The number of graduating high school students is predicted to peak at 3.93 million in 2025. Projections show a steady, moderate decline for the next 12 years due to the low birthrate during the Great Recession (Seltzer, R., 2020). These numbers could change due to the pandemic. Some research has shown that the pandemic's most significant effect has been on middle school students who will be entering the college admissions process in 2025. This effect could substantially impact low-income students and students of color (Seltzer R., 2020).
Tuition & Fees
A study by Collins et al. (2021) used a literature review and existing data from the U.S. Department of Education to discuss issues related to institutions of higher education (IHEs) stability and fiscal health during the pandemic. The authors determine tuition and fees provide the most revenue for proprietary IHEs that receive funds from the United States Department of Education (ED) covered by Title IV, and two significant sources of revenue for public and nonprofit IHEs. Student enrollment drives tuition and fee revenue. Many IHEs lowered tuition and fees during the pandemic when they pivoted to virtual instruction due to pressure from students and parents. This reduction in tuition revenue will negatively impact higher education finances, even if enrollment stays the same or increases (Collins, et al., 2021).
According to the National Student Clearinghouse (NCS), postsecondary enrollment for Spring 2021 dropped by 3.5 percent, seven times more than the decline for 2020. The decline in undergraduate students was 4.9 percent, but graduate enrollment increased by 4.6 percent. The most significant decline of 5 percent was among traditional college-age students. Enrollment of students 25 years of age and older increased by 2 to 3 percent. Male students saw a more significant decline in enrollment than female students (National Student Clearinghouse (NCS), 2021). This data indicates declining enrollment will continue to be a problem for IHEs.
A study by Kim et al. (2020) used data sets from a student survey completed in April 2020 to determine the impact of COVID-19 on college enrollment. The authors conclude that students' ability to succeed in a remote-learning environment differs significantly by income levels. Over 60 percent of students from lower-income households report not getting the necessary equipment for remote learning. Almost 35 percent of students from low-income families do not have reliable internet access. Over 55 percent say their home environment does not support remote learning.
International student enrollment in higher education is declining. There is an expectation that a significant number of students attending an out-of-state institution will transfer to in-state or nearby public institutions due to the economic impact of the pandemic on their family's finances (DePietro, 2020).
Koch (2020) compares the short-term impacts of the pandemic on higher education to the impact Hurricane Katrina had on college enrollment using data from 33 public institutions inside the disaster areas of those regions. Enrollment decreased across all public institutions and was still under the pre-hurricane levels in 2008-2009, despite an immediate increase in state appropriations. Research universities fared better than other institutions because they relied significantly more on grant funding, not tuition or state appropriations (Koch, 2020).
Blankenberg et al. (2020) use Gaus's ecological approach to discuss the impact of COVID-19 on higher education. This approach identifies catastrophic events as change agents that force systems to react to achieve a new equilibrium. Because of COVID-19, higher education had to shift from traditional delivery to distance instruction. The switch to online learning is also a mitigating factor of COVID-19. Some institutions already use online education but will need to expand and adjust what they already do. For other institutions, they will need to adapt at a larger capacity. Large-scale studies of community college students have shown that students with lower GPAs, males, and African American students suffer steep declines in fully online courses. Enrollment declines could escalate these inequities, especially for students of lower socioeconomic status. The study concludes that universities need to be prepared to deliver additional services for online learning to address the potential adverse outcomes.
Hands (2020) looks at the impact of the abrupt transition to online education for FGCS due to COVID-19, focusing on the students' cultural assets instead of a deficit lens. The six cultural assets are reflexivity, optimism, academic resilience, goal-orientation, civic-mindedness, and proactivity. The author discusses issues confronting FGCS, including the digital divide where there is no access to reliable internet or a computer. The article uses the concept of community cultural wealth (CCW) as its theoretical frame of reference for giving structure to how educators and libraries can draw on FGCS assets during times of transition. Suggestions for librarians include building alliances with trusted staff and advisors to educate staff within FGCS' networks on library resources; partnering with faculty to create assignments using transparent assignment design; creating opportunities where students can reflect on how their research process has changed due to sudden online-only access; and working with FGCS to share with their peers' tips and tricks based on their post-transition library, research and online experiences.
State revenue has declined during the pandemic, according to Collins et al., (2021). State appropriations for higher education were significantly less after the recession of 2008, indicating that the economic slowdown can negatively impact state funding for public IHEs for years. Current funding for higher education in ten states is lower than the funding in 2010, according to a new survey of state higher-education agencies conducted by New America and the State Higher Education Executive Officers Association (Nguyen et al., 2020). There are 32 states that have yet to increase higher education funding to the pre-recession levels of 2008. Depressed economic activity and increased costs due to the pandemic have affected state funding for public higher education. The level of impact on state funding for higher education varies widely between states. Some states have not seen a significant change in higher education funding. Other states have had made deep cuts to their upcoming budget or are waiting for another federal stimulus package before finalizing the state budget. The information in the survey will change as new state revenue numbers are determined and if an additional federal stimulus package is approved (Nguyen et al., 2020).
In contrast, federal revenue for IHEs increased during the pandemic. The CARES Act and the Consolidated Appropriations Act, 2021, provided $36 billion in emergency federal revenue to IHEs and students (Collins et al., 2021). However, the amount of additional federal funds allocated in the CARES Act is significantly less than what is needed to meet the financial needs of higher education institutions. For example, the University of Arizona received $16.7 million in federal money not earmarked for students but has sustained a loss of $66 million in revenue due to the pandemic (Miller, 2020).
Implications for Policy and Practice
The impact of COVID-19 on higher education finances is ongoing, and the total effect is not yet clearly defined. The new Delta variants and return to mask mandates and possibly other safety precautions could cause continue economic distress. State revenue is down due to the pandemic and will most likely result in lower state appropriations for higher education. Some states' funding for higher education has not recovered from the 2008 recession. Public universities will be most impacted by decreases in state funding and need to determine other revenue streams.
Enrollment is the number one driver of tuition dollars, and it has decreased during the pandemic and may continue to decline. Getting back to pre-COVID enrollment may take years. The low birthrate from the recession of 2008 will lower the number of high school graduates beginning in 2026, resulting in lower enrollments in higher education. Middle school students seem to be more affected by the pandemic, and these are students who will be part of the college admissions process beginning in 2025.
Many institutions discounted tuition and fees during the pandemic resulting in less revenue due to the pivot to online learning. Room and board and other auxiliary income were eliminated when campuses closed and institutions sent students home.
The transition to online learning impacted students' ability to succeed academically. The financial impact of the pandemic on families and the issues with online learning may force some students to transfer from out-of-state institutions to state institutions closer to home.
Federal funding increased during the pandemic, but not enough to offset the costs institutions incurred. There may be another federal stimulus package for higher education, but there is no guarantee.
The first step would be to develop a new funding model for higher education. In Holland, Michigan, the President of Hope College suggests moving to fully fund tuition through the school's endowment (Burns, 2021). This new model is based on philanthropy and asking graduates to give back to the school. Hope College is a Christian school, and generosity and giving are part of its culture. The new model will pay for 22 students' tuition this fall at the cost of $806,300. The benefit of free education allowed the college to recruit and attract students from geographic regions it does not draw from (Burns, 2021).
The second step would be to ensure each state determines the amount of state funding for higher education and continues to drive equity in access to higher education. A report on equitable funding and financing in the COVID era suggests that state funding for higher education should be determined by each state and based on the impact on low-income students and students of color (Lumina Foundation, 2020). This funding model will ensure equity in college admissions if cuts are made. The report suggests several policies and practices to guide states in this process:
Research should be conducted on how higher education institutions successfully increased enrollment and revenue during the 2008 recession. Knowing what worked in the past may help institutions recover economically from the pandemic.
Research should also be conducted on how the pandemic affected students' access to higher education. Understanding the barriers and challenges underserved, low-income students faced during the pandemic will give higher education institutions the information they need to change policies, programs, and procedures to serve these students better and ensure equity to the admissions process.
Research should continue to be conducted on institutions that are implementing new budget models that are not based on increased state funding. This research will provide best practices for other universities to determine what might work for them.
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