Colleges are facing a cash crunch and it could alter campus life

CNN correspondent Evan McMorris-Santoro looks into the financial impact coronavirus has had on academic institutions such as colleges and universities.

Posted: Apr 29, 2020 9:53 AM
Updated: Apr 30, 2020 3:30 PM


The coronavirus crisis is hitting every college in the United States, university leaders say, and will likely continue well beyond the fall semester.

With Friday's traditional May 1 decision day looming, some universities may get a better idea of who wants to attend their classes and pay tuition, but the financial costs of stay-at-home will continue to bite.

'Every college and university in the country is facing a cashflow crisis,' said Terry Hartle, of the American Council on Education, which represents 1,700 institutions and related organizations and associations.

Colleges are having to refund an estimated $8 billion in room and board fees to students who were told to switch to online learning. Much of that will be covered by the federal government stimulus packages, Hartle said, but there are also the costs for deep cleaning and increased security on empty campuses.

Research labs that usually rely on students might have to pay others to maintain projects. And vital auxiliary revenue from renting out university facilities for conferences or athletic camps for instance has also stopped.

'That works out to $50 billion a year for colleges and universities and that has just come to a complete stop,' Hartle said.

University of Michigan President Mark Schlissel said his institution could lose between $400 million and $1 billion from its $9.5 billion operation.

Michigan includes a health system, but with the 1,000-bed hospital becoming devoted to treating coronavirus patients, the usual income from non-essential procedures and non-emergency surgeries has dried up.

As the state and the country begin to open up, that income stream could resume, but other costs will increase, Schlissel said.

'One of the sources of our predicted budget gap is going to be the need to invest more money in financial aid to help students whose families have undergone cataclysmic changes in their financial situation,' he said. 'We want to help these students continue on in school.'

And there the uncertainty returns. 'We wonder ... whether students are going to think about taking a year off from their studies and waiting for the epidemic to die down,' Schlissel said. 'There's a lot of uncertainty and risk around enrollment levels and 70% of our revenue to operate the research and education part of our community comes from tuition.'

Schlissel said if necessary he would cut hours for staff rather than positions so people keep their relationships with the university and their health benefits.

No school will come out 'completely unscathed'

For students, the days of sitting in a lecture alongside hundreds of other classmates could be over. At least for the near future.

'We'll probably not have large classes with 500 students,' Schlissel said. 'Those things we could do online. But we can have smaller seminars or teaching labs or smaller groups in larger rooms. We're going to have to readjust for the sake of doing things as safely as we can based on public health advice.'

Brown University President Christina Paxson stirred some controversy in an op-ed for the New York Times where she called for on-campus life and classes to resume this fall to avoid 'catastrophic' financial losses.

She told CNN's Brooke Baldwin it was a national issue. 'Those colleges and universities depend on tuition. If they can't bring students back safely, which is very important, then they are going to be under severe financial stress and I don't know how all of them will recover.'

She said Brown was making a plan involving testing, tracing and separating those who could be infected but much would depend on the state of the pandemic.

Johns Hopkins University said it would see a projected profit of $72 million on its $6.5 billion budget become a $100 million loss for this financial year, and it expected a loss of up to $375 million for the next financial year ending in June 2021. To mitigate some of the losses, the university will suspend employer contributions to retirement accounts, cut salaries for leaders and expects to have staff furloughs or layoffs.

Earlier, Harvard said it would take similar measures, with salary cuts for the top leadership and pay and hiring freezes elsewhere.

Hartle of the ACE echoed Paxson on the scale of the issue. 'There are a large number of institutions that date their existence prior to the civil war. Anything that's been around for that long has shown that it can change,' he said. 'But the suddenness and depth and ambiguity created by the economic crisis and the public health crisis, mean that for a lot of these schools it's potentially an existential crisis.'

He added: 'There is no school that will go through what we're dealing with now and come out completely unscathed.'

Michigan's Schlissel said he was focused on delivering the best education possible in the circumstances. 'I'm completely convinced to that the educational mission is in our bones. We get up every day trying to figure out how to do it better, and we'll do it in whatever context we can.'

But it's those unknown circumstance for the coming academic year that are concerning returning and new students.

Students will have 'resiliency as their middle name'

Sam Zellmer of Prior Lake, Minnesota, said his first semester at the University of Wisconsin-Madison was 'everything and more.' But when spring break turned into three weeks at home and then an entire semester online, he said he and his friends were 'bummed.'

'I am considering either taking a gap semester or maybe transitioning to something like an online community college that's closer to me in order to like minimize the cost of going, especially if I'm getting relatively the same amount out of it,' he said.

The rising sophomore said it was hard for him because the second year would start to get into the more specialized courses he wants for his engineering degree. But he feels online learning is not the best for him.

'I kind of rely on the discussion to feel comfortable and move on,' he said.

High school senior Henry Tieder of St. Paul, Minnesota, said the coronavirus pandemic was also making him think of sticking closer to home, a change from his earlier plans.

But he is also trying to think long-term.

'Am I comfortable going somewhere farther away? That might not be great the first year, but after that would be awesome,' he said. 'Or do I want to go somewhere less expensive. That's more appealing the first year, but is it going to be a decision I regret later on?'

Jenny Buyens, an 20-year independent educational consultant who has worked with hundreds of college students, said she understands why students are hesitating.

'They're like, 'I was buying a college experience that meant showing up on campus, participating in events and activities. And if I can't do that, then maybe I don't want to buy that experience right now,'' she said.

But she also sees advantages for the young men and women she is working with now. 'These students are going to have resiliency as their middle name. And I think they'll get through it and they'll teach us how to do everything better.'

This story has been updated with the correct name of the American Council on Education.

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