Higher Education Finances Looking Better for 2021, But Sector Still Has a Long Way to Go

While it’s difficult to paint one clear picture of the impact the ongoing pandemic has had on the financial state of colleges and universities across the country, it’s evident that without the federal aid they have received throughout the past year, the situation would be much more dire than what it is today.

A virtual panel discussion hosted by the Bipartisan Policy Center (BPC) on Thursday broke down both the current and long-term impact the coronavirus is having on school’s finances, noting just how varied the situations are across various higher education sectors.

Experts agreed that the financial outlook institutions are currently facing is heavily dependent on their stability before the coronavirus hit, adding that the pandemic has further exacerbated the disparities that already existed.

For some institutions, the federal relief packages allocating billions to higher education have been enough to offset losses, said Belle S. Wheelan, president of the Southern Association of Colleges and Schools Commission on Colleges (SACSCOC). For others, it hasn’t been nearly enough.

“Definitely had the federal dollars not come through, our institutions would have been up a creek without a paddle. No doubt about it,” she said. 

Nadrea R. Njoku, a senior research associate at the Frederick D. Patterson Research Institute of the United Negro College Fund (UNCF), said the relief funds came at a critical time, particularly for minority-serving institutions (MSIs), which have long been underfunded. 

Still, projections have shown that the federal aid to higher education falls far short of making up for the potential revenue losses institutions are expected to face by fiscal year 2021. 

And while each of the previous tranches of funding for higher education have provided aid for both institutions and students, Robert Kelchen, associate professor of higher education at Seton Hall University and a current fellow at BPC’s higher education project, said it will be important to watch how Congress decides to allocate funding going forward.

“So far, the relief packages have split the difference [between students and schools],” he said. “But how much longer will Congress be willing to fund colleges directly instead of giving the money through colleges to student financial aid?”

Kelchen added that revenue streams for schools — namely tuition and revenue that comes from having students on campus — are rebounding, giving institutions some optimism. 

Armand Alacbay, vice president of trustee & government affairs at the American Council of Trustees and Alumni (ACTA), said due to the revenue losses and the changing landscape of higher education, institutions are beginning to adjust their financial models accordingly. 

“During this pandemic, every industry has had to reckon in some way with how it views the use of real estate,” he said. “Higher education is no different.”

He added that for decades, colleges and universities have been investing in real estate and building infrastructure, but the pandemic has forced institutions’ leaders to assess the use of their physical spaces on campus.

“Buildings are expensive. Think of things like energy and maintenance costs and the issue of environmental sustainability,” Alcabay said. “There’s a long way to go in coming up with creative, cost-effective solutions.”

Njoku noted that even though the impact on institutions has been varied, virtually all students have been impacted by the pandemic in some way — and it’s up to their schools to understand how to best support them.

She said how institutions respond to students’ technological needs when they are not on campus has been a major question for the schools that UNCF represents. From providing WiFi and laptops to transportation, institutions — regardless of the financial struggles they may be facing — need to be putting students and their needs first, Njoku added. 

“As we move into a new year, finding ourselves a year later still in the same place with the pandemic, how are we going to help our students feel more secure considering what they’re facing and what we’re facing as institutions, particularly around what that means for their education and their mental health?” she said.

Considering the year ahead, the panelists varied on their level of optimism when it comes to institutions’ financial shape. Kelchen predicted schools would continue spending on technology upgrades to give them the ability to offer classes in remote and hybrid methods, but spending reductions almost everywhere else — including on personnel — would likely continue at most institutions.

“I’m watching very carefully for the many colleges that gave pay cuts to employees. Do those cuts get fully restored? Or does it take several years for them to get back to anywhere near where they were?” Kelchen said.

When each panelist was asked to rate how dire the current financial situation is for higher education for the coming year, all agreed that the outlook for the sector is much better than it was a year ago and expressed some optimism for the future, yet every panelist said the situation is still concerning, on a scale of one to 10.

“Last summer, I would have said 10, because colleges got wiped out financially and they didn’t know when this pandemic was ending,” Kelchen said. “I’m optimistic at this point that fall will be something closer to normal. So if last fall was a 10, this fall would be more like a seven or an eight. Still messy, but at least some of the revenue sources are coming back.”

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