Fear and Loathing as Colleges Face Another Season of Red Ink

When the University of California’s Board of Regents got a close look at the numbers in September, it was the visual equivalent of a thunderclap. The massive university system, with 10 campuses and more than 285,000 students, was hemorrhaging money — $2.2 billion in lost revenue and additional costs, mostly due to the pandemic.

While some of those losses came from medical centers that temporarily gave up high-paying elective procedures in order to treat COVID patients, the bigger picture was as vexing as it was simple: In the age of pandemic-induced remote learning, the campuses were largely deserted. And when students aren’t living on campus, schools stop making money. Fast.

“Colleges and universities get very high premiums on their housing. It’s a big revenue space for them,” said Dr. Jorge Nieva of the University of Southern California’s Keck School of Medicine. “But for many, many schools right now, they just can’t operate in person.”

When they try, the outcomes have often been dire. A New York Times rolling survey of roughly 1,900 colleges and universities has tracked more than 321,000 viral infections on campus among students, faculty and staff, with at least 80 deaths. Most of the fatalities occurred in the spring, and hundreds of schools have since opted for either 100% remote instruction or severe limits on how many students may be on campus.

Those decisions, driven by administrators’ understanding that it’s nearly impossible to contain the spread of COVID-19 in classrooms, dormitories and cafeterias, are prudent and comply with local and state health protocols. But as schools attempt to finalize plans for the winter quarter or spring semester beginning next month, a sense of dread has crept in. Absent student housing and dining money, budgets again will be blown.

The expected arrival of a coronavirus vaccine is welcome, but at many campuses, students are unlikely to pay for room and board again until the fall — and, even then, perhaps in reduced numbers. Larger schools and private universities with significant endowments will almost certainly get through it, but after that, the picture gets cloudier.

“We’re fully anticipating that some of the smaller schools will not make it,” said Patricia Gandara, a research professor of education at UCLA. “Some of the liberal arts schools, especially, are struggling to stay afloat. It’s a really terrible problem.”

Indeed, a recent model created by a Boston education company, Edmit, estimated that more than a third of the private four-year colleges it studied may need to merge or close in the next few years. New York University professor Scott Galloway, meanwhile, has identified more than 90 colleges that fall into the “low value, high vulnerability” quadrant of his analysis, meaning they’re already in trouble financially and may be pushed to the edge by the budgetary effects of the virus.

The national figures are mind-boggling. In a letter to Congress in October, the American Council on Education said it had estimated that the pandemic would cost colleges and universities at least $120 billion. In every category of university operation, the council wrote, “revenues are down and expenses are significantly increased.”

At many large school systems, those losses are compounded by state budget crises that also loop back to COVID-related economic downturns — and they follow a decade in which state funding was already significantly shaved. California reduced its general-fund contribution to the UC system for 2020-21 by $472 million, and federal relief is uncertain with a likely divided government, said education consultant Ben Kennedy.

Smaller schools are more vulnerable to an immediate threat. This summer, tiny Wells College, in New York’s Finger Lakes region, pondered closing its doors permanently. “If we don’t have room and board revenue, we won’t have enough revenue to operate the campus next year,” said President Jonathan Gibralter. The college ultimately decided to open this fall, with students living in the residence halls; it went into a “pause” in November, suspending in-person instruction and advising students to essentially stay in their dorm rooms, after positive cases of COVID began to rise at Wells. Students ultimately left the campus at Thanksgiving break and, as Wells had planned months earlier, will finish the semester remotely.

For Wells and other small schools, collecting even part of a semester’s worth of housing and dining fees is critical. According to research by the College Board, room and board costs rose faster than tuition and fees at public two- and four-year institutions over the past five years. In 2017, the Urban Institute found that room and board costs had more than doubled since 1980 in inflation-adjusted dollars.

Some of this has to do with the way the college pricing game is played. Schools often post sky-high tuition rates, then offer to knock them down — often by 50% or more — via grant or scholarship. The profit margins on housing and dining services make up the difference in the budget.

At UCLA, an in-state student in campus housing would pay $13,239 for tuition and $17,599 for room and board this school year, according to the school’s estimate. Out-of-state and foreign students pay an additional $29,754 in “supplemental tuition,” a premium that many schools raised aggressively over the past decade to recover funding deficits after the recession of 2007-09.

The University of Florida charges state residents $6,380 in tuition, but $10,590 in room and board. At Dartmouth College, students of families with incomes under $100,000 can expect a scholarship covering the $57,796 retail tuition, but room and board add $17,022.

Campus lockdowns have been devastating. From March to August, UCLA lost nearly $185 million in canceled housing and dining programs and “lost enrollments,” part of a system-worst $653 million overall revenue decline. Despite UCLA’s losses, overall the UC system’s enrollment levels remained flat.

Remote instruction will continue at least through March in the UC system, with on-campus housing again serving only those students with no other options. The residence halls at UCLA were about 10% occupied this fall.

Schools around the country generally operate within the health and safety guidelines of their cities or counties. As the nation plunges into its worst phase of the pandemic, that means few opportunities for a return to campus until a vaccine becomes available for college students, which may be well into the summer.

Still, there are some differences. While USC has followed Los Angeles County’s very cautious approach to reopening, New Jersey’s Princeton University went the other way, announcing that all enrolled undergraduates would be offered campus housing in the spring, even as classes remained mostly remote. (Room and board at Princeton for the spring semester comes to $8,910, according to the university’s statement of fees.)

With an endowment valued at more than $5.7 billion, USC can survive an extended time of reduced housing and dining revenue, as can the UC system, whose collective endowments total $15 billion.

But as the pandemic rolls on, the pressure on schools that are relatively underfunded — or were already leveraged — will only increase. When MacMurray College in Illinois announced its closure this spring after 174 years, its president noted that 2020 was MacMurray’s third consecutive year in deficit, part of a longer pattern of students gravitating toward larger schools and their amenities.

“If an institution wasn’t running a structural deficit with dwindling reserves pre-COVID, they should be OK now,” said Kennedy, the education consultant. “If they were already two to four years away from an existential crisis, then COVID has brought them, likely, to the point of no return.”

This KHN story first published on California Healthline, a service of the California Health Care Foundation.