Published by digboston
…
These demographic shifts were a financial reality for Boston and its colleges well before coronavirus. According to David Strauss, Principal at the Art & Science Group and a higher-ed strategic consultant, size does not equate with survival. “Look at women’s colleges,” Strauss noted on a recent call. “There used to be 281 and now there are 34.” So, it is not only the Mt. Idas that are at risk—schools with pedigree, history, and extensive alumnae networks also faced the coming demographic emergency. Radcliffe comes to mind.
Some colleges have found a model that allows them to survive amidst the changing economy of higher ed. In Strauss’ experience, institutions whose leadership strategically focus time and resources on developing a market niche are not only surviving but thriving. A recent Boston success story is Simmons College.
In 2008, Helen Drinan, a former banking executive, became President of Simmons and immediately implemented reforms to create financial solvency and sustainability. She found that undergraduate programs on their own are barely viable, while graduate programs have less overhead and attract working professionals who are more willing to pay full tuition and don’t require food and housing. The problem was that there weren’t enough potential graduate students in New England. So, she took the programs online. After receiving fierce pushback from the school community, the numbers proved her reforms right. By 2018, the online courses were producing $26 million in net annual revenue.
For mission-driven organizations, it is often difficult to convince boards and senior leadership to focus on the bottom line and start profiting. “At the end of the day, it is not about making lots of money,” Strauss said. “It is about having control over your mission. You need money for that.”
Another example of creative restructuring is Michael Alexander, who became president of Newton’s Lasell College in 2007. After setting a goal of delivering an undergraduate education for 30 to 50% less than the typical price, Alexander launched a program called Lasell Works, a novel hybrid of traditional and online education. Students spend their sophomore year living off-campus, working part time, and taking all of their courses online. The savings amounts to a $22,000 reduction in total tuition.
If colleges were in trouble before, coronavirus will push many over a cliff and has already done so. In an interview with Chronicle of Higher Education, Bob Zemsky, a University of Pennsylvania Professor and co-author of The College Stress Test, noted 20% of all colleges are facing unprecedented levels of financial stress. One of the greatest concerns is how the virus will impact institutions’ retention and enrollment yields.
Early studies show that coronavirus has hastened Grawe’s projected demographic shifts—as the virus spreads, more students want to stay closer to home. A new student poll conducted in late March by Arts & Sciences Group LLC showed that one-in-six students who were intending to go to a four-year college in Fall 2020 are giving up on attending, while two-thirds of high school seniors are thinking about changing their first-choice school. The poll indicated that many students are thinking about taking a gap year, attending part-time, and/or going to a school close to home. In addition, the American Council on Education, which represents 1,700 colleges and universities, reports at least a 20% increase in students who need financial aid as a result of job loss or other related coronavirus impacts. That could worsen, depending on the pandemic’s duration.
If the domestic student market realities are worrisome for Mass colleges, the international scene is cause for great alarm. Before coronavirus, the Institute of International Education reported that new enrollment of international students in the US had declined by more than 10% between the 2015-2016 and 2018-2019 academic years. Boston is the fourth most popular US college city for international students, and a decline in this community, and its tuition dollars, would compound the domestic enrollment crisis. At the same time, Chinese students, who comprise 33% of the international student body in Massachusetts schools, are becoming a significant presence on Australian campuses. Enrollment of international students in Canada and Australia has skyrocketed, with the latter reporting a 47% increase between 2015 and 2018.
International students are sought not only for tuition dollars—most pay full—but for what they bring to an economy. In 2018, an estimated 75,000 international students attended school in the Greater Boston area, of which 48% came from China and India, and contributed more than $3 billion to the Mass economy. In February, the Beijing Overseas Study Services Association (BOSSA) reported that an estimated 36% of students are changing their plans to study abroad due to coronavirus. In addition, the epidemic has caused 40-60% of Chinese students to be directly blocked in college applications and visa applications. For instance, the February and March cancellations of all standardized entrance exams in China impacted up to 40% of new enrollment for Fall 2020. While BOSSA reported that students are not cancelling plans to study abroad, many are deferring for a year due to the epidemic’s spread. Additionally, early polls of international students indicate a 15-20% increase in need for financial aid among current and potential international students—similar to domestic students.
More financial aid is not something most Boston colleges will be able to provide. Those colleges operating with a deficit, 30% per Moody’s, will have difficulty weathering the revenue losses from the spring and coming summer. In addition, the spread of coronavirus and its impacts on the economy will make fundraising difficult. Another key element for monitoring college financial health is how endowments are doing, as investment income comprises up 9% of revenue at private universities and 2.5% at public institutions. Since the coronavirus pandemic hit America, the stock market has yet to stabilize.
Additionally, city, state, and federal government budgets are strained and will have less discretionary funds to support higher education. The federal funds from the Coronavirus Aid, Relief, and Economic Security (CARES) Act allotted $14 billion to support higher education, of which Mass colleges will receive $280 million. According to Ted Mitchell, president of the American Council of Education, this amount is “woefully inadequate” to replace the $46.6 billion colleges are projected to lose due to coronavirus.
Before the pandemic, Grawe predicted Boston could expect a 10 to 15% reduction in higher ed’s 165,000 jobs simply due to demographic changes. Every higher education job in Boston creates 0.7 jobs in other economic sectors, which translates to a loss of at least 28,000 jobs. These job losses equate to an estimated loss of $1.7 billion in direct economic activity, and a loss of $112 million in tax revenue. With colleges reeling from coronavirus, the long-term job loss and real impacts on Boston’s economy are unknown—but the above numbers may be a baseline.
This is a harsh reality. If colleges are to survive, Strauss recommends they think beyond the immediate crisis of 2020 and immediately realign their mission and programs to be sustainable in the long-term. Colleges were facing existential challenges before coronavirus and some, such as Lasell and Simmons, learned how to strategically adapt and thrive. These institutions may offer lessons learned and real-world models for colleges who still have the resources and flexibility to change.