Government stimulus funds may have bought many private schools “another year or two,” but “there’s a reckoning coming in higher education…that’s been years in the making,” reports the business, policy, and politics publication Axios.
This financial reckoning is coming “especially for smaller, private liberal arts schools,” writes business editor Kate Marino in a June 14 article.
“COVID-19 accelerated some of the trends,” that are giving college presidents and boards heartburn, “but college finances have been hurting for a while,” she writes.
Axios found one trend that might be particularly painful is a permanent fall in demand for housing and sustenance:
Schools lost much of their room-and-board revenue over the last year. And some of that may never come back as remote learning expands.
Another huge problem is that America may have too much college for the future expected demand:
A declining birthrate means the pool of college-age Americans has been declining, and could it be as much as 15% lower by the mid-2020s compared with the early 2000s.
Some kinds of schools are expected to be able to weather the changes more easily than others, because of the sources of their funding:
Smaller, nonurban liberal arts schools take the brunt of the shrinking student body, more so than elite universities with huge endowments, or large state schools that receive public funding.
Axios found good news for colleges in a pinch from financial institutions and bad news for default options.
Banks and other lenders that provide loans to colleges are usually willing to provide more leeway than they would to corporate borrowers — with maturity extensions and other relief, says Mark Podgainy, managing director at consultant Getzler Henrich. No bank wants to see headlines about it tossing kids out of school, he says.
Colleges can’t file for Chapter 11 bankruptcy the way insolvent companies can because they would lose their accreditation and student access to federal loans.
Axios’s best insight for colleges looking to come out on top in the coming contraction is that they have to find a way to differentiate themselves from the heard of other private liberal arts colleges and offer students a good reason to go there and not elsewhere.
Finding ways to lower tuition probably wouldn’t hurt, either.
Read the whole article.