Coronavirus To Decimate Colleges and Universities

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“Decimate” might be too charitable a forecast for American higher educational institutions, since the word originated with the Roman army practice of killing one man in ten. Coronavirus is hitting pretty much all of the bad aspects of their business models at once.

Let’s list them:

Dependence on/preference for foreign students, often not for their accomplishments but for their ability to pay full and even premium fees. Chinese students accounted for one-third of the total. Their enrollment was already falling as of 2019.

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But Chinese students’ contribution to revenues is out of proportion to their numbers. From the New York Times in March:

Universities in English-speaking countries, especially Britain, Australia and the United States, have grown increasingly dependent on tuition from Chinese students, a business model that the virus could dismantle.

With qualifying exams postponed, travel bans spreading and anger rising among Chinese students and parents at the West’s permissive attitude toward public health, enrollment could plummet in the coming years, experts said, potentially leaving countries with multibillion- dollar holes in their universities’ budgets.

Foreign students were dismayed by the way US schools shut down abruptly and gave little to no help in helping get them back home.

Skyrocketing prices leading more students to question college or emphasize “practical” degrees. As with mortgages, access to debt has led to higher prices. And with student debt terms so draconian, more and more students are trading down: going to cheaper schools or focusing on programs that teach harder skills that hopefully translate into market value.

Bloated adminispheres and gold plated facilities. MBA parasites have colonized universities, with the justification often that they increase fundraising. For what purpose? To pay themselves better, and to create naming opportunities for donors with new buildings, and to justify high charges via plush dormitories. Apparently swanky gyms are common.

All those expensive buildings have become an albatross.

Now consider the impact of coronavirus.

Litigation over terminating on-campus instruction. This is probably the least of their worries. Plaintiffs are seeking refunds for the degradation of the educational product. The schools argue quite explicitly that they are not in the business of educating but of conferring credentials, and it is they alone that determine what is adequate for them to hand out a degree. There is precedent supporting the universities’ arguments, albeit with less bad facts than these.

Low likelihood of resuming classes on campus this fall. My colleagues with contacts among university administrators say no one has any idea how to make dorms safe if coronavirus is still on the loose. This has many negative implications.

Why should students and/or their parents be willing to pay full prices for a degraded product? They won’t get interaction with instructors. For science and engineering classes, they won’t get lab work. They won’t get to make connections and meet potential mates. They won’t get tips from other students on career and summer job strategies. They won’t get to participate in extracurricular activities, which is a low-stakes way to learn to work with other people. They won’t learn how to grow up in a somewhat protected environment.

There is the very real possibility that employers will downgrade the value of degrees conferred during the plague years.

It’s hard to see how colleges and universities escape cutting tuition, save perhaps the most elite. I can’t see any schools besides the most elite can maintain their charges without seeing a big falloff in enrollment. And with them administering classes remotely, the cost of delivery has fallen. And that’s before seeing students postponing or abandoning degrees due to the horrible state of the economy.

And what happens to university budgets due to the loss of room and board income?

Schools already looking at probable downgrades. Standard & Poors is already put a long list of higher educational institutions on its negative watch list. Bear in mind that S&P and Moody’s tend not to downgrade before Mr. Market already has the bond trading at a lower rating level. From an April 30 Ratings Action:

The public and private colleges and universities affected by these actions include primarily those with lower ratings (‘BBB’ rating category and below), but also those entities that, in our opinion, have less holistic flexibility (from both a market position and financial standpoint) at their current rating level…

While S&P Global Ratings’ outlook on the U.S. not-for-profit higher education sector has been negative for three consecutive years now, we believe that the COVID-19 pandemic and related economic and financial impacts exacerbate pressures already facing colleges and universities. The financial impact on institutions from the loss of auxiliary revenue from housing and dining fees, and parking fees; as well as revenues from athletics, theater, and other events, is material for many. For schools with health care systems, lost revenue from cancelled elective surgical procedures could also be significant. The recently passed CARES Act will provide some budgetary relief to higher education institutions; however, despite this aid, we expect to see stressed operating budgets, the scope of which will ultimately be determined by the magnitude of lost revenues, the duration of the pandemic, fall 2020 mode of instruction, and ultimate enrollment figures.

Colleges and universities have reacted rapidly to the challenges presented by the pandemic. They have moved classes online to adhere to social-distancing rules, adjusted admission policies to accommodate disruptions to high school exams, and suspended academic conferences and travel. At the same time, many have implemented material expense cuts, including deferring capital expenditures, and imposing furloughs and layoffs, in some cases, with plans to continue to ramp up cost containment under various fall scenarios. Many colleges and universities have disclosed estimates of 2020 budget shortfalls, despite the inclusion of CARES stimulus funds. We expect that the colleges and universities we rate will face an unprecedented level of operating stress and tightened liquidity, which will worsen the longer and deeper the pandemic lasts.

It’s bizarre to see S&P depict sports programs as a financial plus; college football programs in fact are money losers and I doubt basketball programs are enough to bring college sports into the black.

It is also not clear how much more help the Federal government will be willing to provide. Even though Congresscritters will be under pressure to help institutions in their district, the flip side is the Republicans know well that higher educational institutions are a Democratic party province, so they won’t be high on their list of rescue priorities.\\

This section seems very much behind the curve, as if S&P talks to too many Wall Street types who are betting on a V shaped recovery:

Many of the colleges and universities that we rate have some headroom to absorb the impacts associated with COVID-19 at their current credit ratings, as they have built up reserves over recent years, hold solid balance sheets, and have relatively low debt levels. However, colleges and universities will face increased downward pressure on their current ratings depending on the extent to which economic disruptions associated with COVID-19 persist. If global travel restrictions are prolonged, or the imminent recession diminishes foreign students’ financial means, then some could opt to study or work in their home countries instead. In our opinion, a fall 2020 with significantly fewer international students, as well as lower domestic enrollments overall, will cause serious operational pressures. At the same time, most U.S. colleges and universities depend on endowments and fundraising for a significant portion of revenues, and declining investment performance and endowment market values along with weaker fundraising results could negatively affect credit metrics during the outlook period.

I strongly suggest you look at the list. You’ll see many familiar names. In particular, the ones at the very bottom group, which already had a negative outlook before coronavirus, are the most downgrade exposed. Interestingly, Northwestern, which went to the “hedge fund with a university attached” model early and has an AAA rating, is in that cohort. Did they have an even bigger than typical blow up in their portfolio?

Needless to say, this isn’t cheery reading. While the universities set themselves for a big fall, a lot of people who had nothing to do with the bad policies will get hurt.

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84 comments

  1. PlutoniumKun

    As an aside, this is another reason why the ‘we should relax lockdown as soon as possible’ crowd are so very misguided. The education business, along with so many others, gears up after the August holidays right across the northern hemisphere. For many countries, there is a good chance of suppressing the virus between now and the summer so that there can be at least some sort of normalcy restored from August onwards. At the very least, this gives a chance of a normal academic year for students. But this is only a possibility if infection rates can be brought down to a ‘track and trace’ level over the summer. Failing to do this by September will be devastating for all education providers. The UK third level sector, already hit by Brexit, will be similarly wiped out if the virus is visibly not under control by then.

    Reply
    1. Joe Well

      I’d also point out that productivity tends to drop off in the northern hemisphere over the summer when people take their vacations, so if we have to scale back for a few months there’s hardly a better time…of course, I’m in the US, which has not much hope of getting it under control over the summer anyway, at least out of Hawaii.

      Reply
  2. Another Scott

    Regarding football programs.

    Although they are unprofitable for almost all schools, I’m not sure that the impact from cancelling the season is as clear cut, especially for the large D-I programs. Many of the costs like million-dollar coaches, hundred million-dollar stadiums are fixed. Scholarships will likely continue as well. Schools can probably cut costs of the lower paid employees without contracts, like assistant coaches and trainers, but I don’t think those are the biggest drivers of costs.

    Gameday revenues are almost certainly cashflow positive for the schools (ushers and cleaners aren’t paid very much); without them the football teams will be even bigger money losers for the school. The schools might even get fees from their broadcast partners, as is the case with many professional teams.

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    1. The Rev Kev

      What happens with all these high-cost games like football and basketball if they cannot get crowds to watch them? Do these crowds off-set much of the costs of staging these games? I suppose that the institutes would be loath to drop them as they are such a “status” program to have but I fail to understand how a coach in such a place is entitled to a multi-million dollar salary as that money has to come from somewhere.

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      1. kevin

        Most of their money is made through TV broadcasting rights, not in game ticket sales. People will still watch them. Arguably even more people will watch them, although I don’t think that matters because the deals are already locked in with the various networks.

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        1. Left in Wisconsin

          TV is the king but game day revenues are not insignificant for most of the big programs that count on 70,000+ spectators times 7-8 home games a year.

          Also agree with Another Scott that big-time college football especially has a lot of fixed costs that will not go away if the season is cancelled. On the other hand, once you get outside the big D1 programs, I do think cancelling football would be net cash flow positive.

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          1. rd

            Title IX meant many third tier athletic programs eliminated fooball and had a wide assortment of much cheaper sports for men and women.

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    2. SAKMAN

      Comments like, “Football programs lose money” are so poorly thoughtout I just cant believe they are posted here.

      Honestly. . .

      Huge amounts of dollars go through those programs and the benefit of that circulating money to sooo many people and companies is enormous. There are many people who want to see those programs continue.

      If a Florida school thinks the price tag is too high, it is the begining of a series of price negotiations. . . thats it. Come on!

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      1. curlydan

        first, your “quoted” material wasn’t a quote in this write up or comments, so you can take the quotes off. Second, look at the link Yves posted to see how football is a money pit for many D1 schools. Third, I think I understand what you’re trying to say that there’s tons of money flowing in and around college football, but the gist is that we’re talking about the impact to and financial ratings of colleges and universities and not the impact to the Purple Porpoise in Gainesville, FL or similar establishments.

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      2. m sam

        You make it sound like it doesn’t matter if they lose money, because with all that money sloshing around there then it’s a net positive. The only problem is those universities aren’t there to slosh money around in their football programs, they are there so our society can be an educated one. And when instead people start to think that the money sloshing around is more important (as in all areas of human life) the part that was point of the whole endeavor (as in, the education at the university) comes to look more like a cost. And what costs is what is cut. And what is cut is degraded, given a higher price, and otherwise forced to submit to those market forces that looks so good (well, at least when you have dollar signs tattooed on your eyes).

        The point is, whether football programs lose money or make lots of money slosh around, this model is exactly the thing that is destroying our society, and exactly what needs to be dismantled. So comments like “Football programs lose money” are exactly why people come around here in the first place, and it seems you must be confused if you “can’t believe they are posted here.”

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      3. Merf56

        AS A PSU grad and active alumnus I can attest that Penn State uses its massive football revenues to fund ALL other of the school’s sports programs. Though not part of the topic being discussed, football Game day revenues also basically fund theTown of State College’s Downtown businesses FOR THE YEAR. And the full fare Chinese student contingent absolutely ‘makes’ the bottom line there. Those of us involved in alumni activities and meet with Board members and others often are VERY worried….

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      4. Duke of Prunes

        If one reads the article, the key part of the statement about “most football programs lose money” is that it’s referring to FCS (Football Championship Series) schools which are the “lower tier” Division 1 schools. Not Big10, SEC, etc. I don’t think there’s much in the way of TV revenue for FCS either, except when they get a cut of the deal when playing a major team (once or maybe twice a year).

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  3. Larry

    My cousin attends Union and decided she’ll take a leave of absence in the fall if they are still remote.

    Northeastern in Boston has stated they’ll be back in the fall. I believe they are deeply dependent on tuition revenue and have massive debts due to a campus expansion that must have been costly due to Boston real estate prices.

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    1. rd

      I went to a very renowned university in the 1970s. The dorms were concrete block with concrete and linoleum floors they could basically firehose out in the summer to clean them. The engineering school was effectively the same types of buildings. The cost wasn’t too bad. Did not take on much debt and was able to pay for a significant percentage with summer jobs.Got a great education.

      Now everything is fancy and VERY expensive.

      I think community colleges and state schools that invested in distance learning are going to be overwhelmed in September. That will hit the student loan industry hard because you don’t need a lot of money for those options. but the students will likely be better off in the end.

      Reply
    1. Yves Smith Post author

      I made this post unduly US focused due to having the S&P analysis, so thanks for additional input on the UK. The New York Times article above made it clear that UK unis were even more dependent than American ones on Chinese students paying hefty fees.

      Reply
      1. Colonel Smithers

        Thank you, Yves.

        If I have time today and it’s still “live”, I will pipe up again.

        Reply
    2. Biologist

      Thanks for that article. I’ve also heard that rumour about Queen Mary, is there any public information about them?

      I wonder how many other UK universities will announce redundancies in the coming months. Would be interesting to know numbers of current vs. normal (last year) applications from Asia for the coming year.

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      1. Musicismath

        Yes, Edinburgh’s situation is well known. Other prominent Scottish universities are in similar positions, having gone all-in on rich international students to subsidise their “free tuition for Scottish students” model. They’re all very exposed now.

        In England, I’ve heard of a number of institutions this week setting up voluntary severance and redundancy schemes, with rather alarming stated goals for how many staff they want to shed. Big, prestigious universities, too—again, it’s that reliance on international students. The word I’m hearing repeatedly is “bloodbath.”

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    3. rtah100

      Interesting NYT article about Bath. We live on campus (our house is a former uni property) of another southwestern University, famous in no particular order for its campus being a botanic garden, its current vice chancellor being about to retire after 20 years of market-leading pay and it having closed its chemistry department, among others, 20 years ago to make savings to pay for other priorities.

      Again in no particular order, we gave remarked in the last few months:
      – just how many east Asian students and junior faculty the place has attracted. We have Japanese student lodgers!
      – just how many purpose built student factory farms are being built in the city and, more financially perilously, on the campus (building a massive student dorm extension campus on farmland that was prime city centre green space and materially upgrading facilities at other student blocks) and how distorted the local housing market is
      – just how long the grass is getting since lockdown. There’s little infection risk on a single seater ride-on mower – the groundstaff, botanic garden not withstanding, have been furloughed / laid off to save money. One vice chancellor’s salary could pay for them all. Austerity for thee, public subsidy for me.
      – just how tone deaf the University is to assert its campus is now closed to the public, when public roads run through it and it is used as a cycling and pedestrian right of way to cross the northern half of the city. The buildings are closed and the students are in their hutches. There is no danger of infection from people taking a walk from their confines….

      There is a big reckoning coming, with these bullying institutions suddenly acknowledging their public and local obligations in return for a bailout.

      Ps: I don’t think the reaction of bath students to avoid sharing an elevator with a Chinese student was racist. Just prudent. On a risk adjusted basis, a Chinese ethnicity student is most likely a Chinese expat and if returning from Christmas or CNY to campus represented a higher risk than a non-Chinese. I was very wary on my weekly commute in January from London, of the Chinese students with big suitcases tagged Heathrow who were all getting off at my stop…. Tables have turned now, of course!

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  4. Steve H.

    > They won’t get to make connections and meet potential mates.

    : Sherri Tepper: See. The word Festival. In the Onomasticon it carries the meaning ‘opportunity for reproduction.’ We talk of School House, but the book says, ‘Protection of Genetic Potential.’ We say True Game. The book says ‘Population control.’

    The university of my town had moved from offering professions to Learning How To Learn in the last couple decades. Along with that was the gilting, providing a shared cultural experience, more in line with Tepper’s definitions than educational outcomes. The incoming cash provided support for community culture as well, restaurants, arts, weird shops. The fallout for our cosmopolitan lifestyle in a small city is unfathomable.

    Deeper even still, in the middle of the last century, educator Frank Templeton wrote from the perspective that every citizen was like a brick, in the structure called a nation, and schools made for strong bricks.

    The harsh partial truth is that primary and secondary schools were hollowed out as daycare centers to increase the labor pool. And many parents who were willing to pay to get the older kids out of the house are now forced with a calculation: what’s the roi on the educational/professional dimension, and what’s the roi on the social/Tepper dimension? If both are low, why pay in this time of great uncertainty?

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  5. nick

    Chinese student applications are well down this year–this from direct knowledge at one school and anecdotal at a few more. Companies that operate in China to connect students to US institutions are laying off. And if numbers at any given school don’t absolutely crater (50%+), know that the discounting will have had to have been ramped up to make that possible. Obviously there are health and safety concerns, but there is also a nasty political climate with racist/xenophobic stuff coming from the Republicans that has been in some cases matched by e.g. Biden campaign or NYT and that might clear the way for disastrous bans on student/post-grad visas, if not increased violence.

    Reply
    1. Shiloh1

      University of Illinois “flagship” was prescient to purchase insurance from Lloyds Of London for fortuitous Chinese student reduction risk. International students pay top dollar rate. All good, their insurance broker should be commended!

      Reply
  6. Duke of Prunes

    Yesterday, Northwestern announced they are laying off ~250 personnel and cutting administrative salaries 10 – 20% (so it must be serious). So much for the “safety” of a higher education job.

    Reply
    1. polecat

      On a tangential tack, locally, a slight majority of voters in our city passed a school levy to firm-up/construct school dist. infrastructure – elementary/middle-school .. with the future goal of a new shiny high school to replace the old/failing one. In the recent years past, the school board and their boosters would put forth levies that amounted to Taj Maschool ‘wish-lists’ .. which the community rightfully voted down. Same for the towns within close proximity. So, the result of said measure .. even though it is lower that the previous ones, is the rise, by hundreds of $$ annually (a bond floated, to be pay off in X years .. only to have new one’s brought forth after), to every property owner to achieve these goals .. dollars that many would find a true burden Before the pandemic will be hit even harder going forward. We are not what one would call a rich community .. unless one only considers the movers/shakers/boosters. We rely less and less on timber exports – happening in spades now! – with incoming revenue predicated on the vaunted idea of ‘Tourism’. ‘Sigh’
      I see a failure of those same movers/shakers/boosters to consider that the whole college track gristmill is the wrong approach .. bring back hands-on vocational training instruction that was nixed years ago, having left it to the local college to do, with the added $-stream THAT entails .. and put much less emphasis on ‘college for college sake’ There are a plethora of skills that young folk are not being taught, that they will need for their very survival, in a conflicted and low resource world! Imo, the Federal Dept. Of Ed needs to be abolished, thus putting a end to it’s often onerous 4 to 8 year changing ‘mandates’, and allow state and local communities to come up with their own models of instruction. Sure, some will no doubt fail, but I believe many others would in fact, thrive. There should of course be iron-clad restrictions on just who has sway on funding and ‘pull’ (no hedgefunds/private equity/ scoundrels, rakes, and thieves !) Leave to the locals to hash out!
      A little over a century ago, we had that kind of evironment, where children actually learned of the world, whilst also becomeing proficient in the basics .. as well as taking on truly practical skillsets .. from often small school settings – just look at an any exam test-sheet from back then to get an idea of how badly we’ve handled things since. This pandemic has brought to light our learned follies for sure.

      Reply
    2. SouthSideGT

      Very true. I read that in EvanstonNow. Also saw a story from about a month ago about the Wildcats 2020 prospects which IIRC previewed the 2020 schedule. So I guess college football will go on even as colleges are decimated by the coronavirus. Priorities, indeed.

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    3. kareninca

      I looked this up. It does not appear to be as dire as you describe it. The staff members are being temporarily furloughed, not laid off. And it is “university leaders” and deans that are taking pay cuts. That is not administrative salaries generally. I am not saying it won’t get worse, just that it is not quite so terrible yet.

      “University leadership said approximately 250 staff members will be temporarily furloughed, the university will suspend 5% automatic and 5% match contributions to staff retirement plans, and university leaders will take a 20% pay cut.
      NU deans will also take a 10% pay cut reduction.”

      https://abc7chicago.com/education/northwestern-university-furloughs-250-staff-announces-pay-cuts-due-to-covid-19-pandemic/6175678/

      Reply
  7. rusti

    MBA parasites have colonized universities, with the justification often that they increase fundraising. For what purpose? To pay themselves better, and to create naming opportunities for donors with new buildings, and to justify high charges via plush dormitories. Apparently swanky gyms are common.

    I wish it were unique to the Anglosphere. Even here in Sweden one of the technical universities in my city is in the midst of a big economic crisis. My friends who work there as researchers attribute it to obscene administrative bloat that they’ve seen growing rampant in the past decade. This is also after the implementation of big tuition fees for non-EU students in 2011 (there were no tuition fees before that) which dramatically lowered the quality of international applicants.

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  8. KLG

    Athletic budgets (public institutions) in context:
    https://sports.usatoday.com/ncaa/finances/
    The far right column is the key: percent of athletic budget that is “allocated,” which means the part of the budget that comes directly out of the hide of the institution and its students. About two dozen of the usual suspects make a “profit.” My alma mater is way profitable but still takes several million from captives in “student fees.” Private institutions in the black would include Notre Dame, Stanford, USC, and probably Duke (basketball, which disappeared this spring). Note what the athletic budget does to schools like UCONN, Rutgers, and UMASS, not to mention the smaller state schools. Something’s gotta give. It won’t be the athletic departments.

    When I bring up these data with academic colleagues, especially from smaller institutions that have reestablished football as the prime money pit over the past 25 years, all I ever get is the bovine stare of disbelief.

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    1. kevin

      To be fair, what this analysis doesn’t take into account is how many students are going to the school (or how much more they are paying) who would not have gone if there were no sports teams

      I know thats a dumb reason to choose a college, but remember these are 18 year olds making a decision. I suspect many more than you would assume include going to a “winner” and additional social tailgating events as part of their criteria

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      1. MLTPB

        Good point. I was going to ask about that.

        Additionally, I think there is a mentality, or pride, that you too can be like Duke in basketball or Notre Dame in football. But, first you have to commit to winning, or invest early.

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        1. KLG

          Yes, this is the “intangibles, school spirit” argument, a perennial favorite of presidents and athletic directors and boards of trustees. It may be somewhat valid at the larger schools of the Power Five conferences (SEC; Big-10, where they apparently can’t count to 14; ACC; Pac-12; Big-12, actually 10) but absolutely nowhere else except Notre Dame. And even in these conferences, the financial drain on some schools is huge. Way past time to realize the sunk costs associated with college sports are simply lost. Georgia Tech and Berkeley need big time college sports (i.e., football)? Really? Georgia Southern and Illinois State? Connecticut and Rutgers? Robert Maynard Hutchins to the white courtesy phone, please. Yes, I am unreasonable, but these are unreasonable times.

          And except for a brief renascence under Lou Holtz, Notre Dame football hasn’t been much since Ara Parseghian retired…and the Boys from Chicago are still and forever nonplussed about that.

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          1. John Wright

            And there is the small irony of educational institutions promoting a sport that can cause serious head and bodily injury (American football).

            Maybe some football programs do eventually pay for themselves via alumni contributions, but one wonders if there is a herd mentality in colleges NEEDING to have a football team.

            I know of one University of Calif campus (UC Santa Barbara) that dropped its football team in the late 1960’s, weakly woke it up in 1987 and then dropped it again in 1992.

            https://en.wikipedia.org/wiki/UC_Santa_Barbara_Gauchos

            “1985 a student referendum approved funding for a Division III, non-scholarship team. The team began play in 1987,.. with a 33-15 record from 1987 to 1991. However, in 1992 the NCAA decided to forbid schools playing in Division I in other sports from maintaining a lower level football program, and UCSB dropped the sport again.”

            Maybe other schools can learn from UCSB’s experience?

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            1. juno mas

              My high school buddy played on the last 1960’s football team at UCSB. As a student there, many of us were too busy protesting the war and burning the IV bank than attending football games.

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    2. John Wright

      I looked at the ncaa/finances link and saw the “allocated” section.

      I find that focusing on the allocated % is misleading as a school with an athletic budget of only $100 that is not covered by gate receipts would show as %100 allocated.

      This could be put in more perspective if the allocated dollar amount is divided by the number of students.

      For example, the University of California, Davis shows up at a high 81.90% allocated with the allocated amount of $30,680,083.

      UC Davis shows as having a student population of 35,186 per Google.

      Per student, this is about $872 per student per year.

      While Connecticut shows up at a seemingly better 49.23% allocation, but spreading the shortfall over the 32183 student body size of Connecticut gives a cost of $1213 per student per year.

      One can wonder why the document did not give the per student cost and instead published a %allocation figure.

      Reply
      1. KLG

        What does “per student” mean? At most Tier-1 research institutions graduate and professional students may opt out of “student activity fees,” which means they don’t get “discounted” football/basketball tickets. Most of them do not care. This can be 25-30% of the aggregate student population. In any case, $872 or $1213 per student per year, including postgraduates, is a lot of money that would be better spent elsewhere…and I say this as someone who attended one of the schools in the black in athletics for undergraduate and graduate school. Big time college sports are a distraction, a waste of time, a waste of money, and a case of the tail wagging the dog, even if the downtown merchants of State College and Tuscaloosa couldn’t survive without Game Day(!) coming to town at least 7 Saturdays a year.

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  9. Bob's Your Uncle

    These are historic times and one of the biggest sacrifices this generation of college students will have to make is…sitting through Zoom classes.

    Let’s keep this in perspective. Missing college because you’ve been drafted to fight in a war across the Pacific is not the same as delaying your college education because you can’t get drunk with your frat. In the coming years employers will look much favorably on students that stuck to their 4 year plan regardless of the troubles they were (or thought they were) facing.

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    1. CGKen

      At my university, the Registrar calculated that our campus has only ONE room large enough to seat more than 50 students maintaining 6 feet of separation.

      The rule of thumb is that covid capacity is 25-30% of normal capacity, so most classes will need to be capped at 20 students or fewer. Probably better for education, but very much not compatible with business as usual.

      I don’t see any way we reopen in any way approaching normal.

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      1. WJ

        My university is probably going to be requiring us to teach half of the students in a class in the classroom, then half of the students in the class online, alternating which group is taught in a classroom and online throughout the semester. Unless this doesn’t work, in which case we might go all online, or all in person. What is being suggested–I kid you not–is that we design each of our courses for the Fall to be taught in any one of three, or more, ways. We’re also taking pay cuts and losing the university’s contribution to our 403b plans. Good news though, we’re still going through with our application to the NCAA for division 1 status!!

        The rot at the top of the university structure runs deep, I am afraid.

        P.S. And, of course, our annual evaluations–usually the basis for a raise of between 1-1.5%–will continue, even though we’re all taking pay cuts. Lol

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        1. rd

          Deflation means your performance evaluation determines your pay cut level (or termination). I went through that in the early 80s.

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  10. David

    Thank you for this, Yves. The problem is much bigger – and with more ramifications – than most people realise, even in the education world itself .

    The Guardian article linked to by CS talks about some of the immediate financial problems this year. IN addition, huge numbers of students are going to consider putting off going to University, even in their own country, let alone abroad, because they can’t be sure that the classes will start on time, or even at all. There’s an increasing tendency, especially in Europe, for Universities to have highly complex exchange agreements with each other, especially at Master’s level: I’ve taught classes with fifteen nationalities, the majority on exchange from elsewhere. At the best of times that’s a logistic nightmare, and requires complex software to juggle. It’s worse because the tendency over recent decades has been to replace traditional degrees with a few options, by Starbucks-style hand-made degrees assembled from bits and pieces. This works, as long as all the students who have signed up to come can and do arrive. Otherwise, it can mean empty classrooms or teachers with one student. Chaos is the kindest word one can use to describe what might happen in September. Courses will have to be cancelled and lecturers’ contracts torn up. It’s also going to make it permanently much more problematic to run courses on the expectation that you can attract foreign students and send your own abroad. I’m not sure, for example that I would now sign up for a four-year degree in (let’s say) Japanese or Latin American Studies including a year abroad that might not materialise. Language degrees, indeed, are likely to be among the first casualties: it’s almost impossible for one person to teach, say, Japanese grammar on line.

    I’ve taught courses using Zoom, and to be honest it’s better than nothing but not a lot better. It only works if everybody is approximately on the same timezone, and even then, once you get above twenty students you can’t actually see all of them on the screen and you have no idea who’s listening and who’s doing their Facebook page. The students get no interaction with you, and if you are using Powerpoint or similar they may hardly see your face the whole time. It’s not clear that students in future years will sign up for courses where face to face teaching could be suspended at any moment because the virus comes back. Remember that the virus is now pretty much everywhere and could reappear pretty much everywhere over the next few years. When you add to that that, even today, students expect to “go to” University rather than have it come to them, and to at least start to mature and find their feet, you have to wonder how attractive University is going to seem, especially given the frightening costs involved.

    The situation is no better in Europe. In France, governments over the last decade have made a huge push to attract foreign students, not just at Universities, but at the elite Grandes Écoles like Sciences Po in Paris, where a third of the student body is from abroad and many courses are taught in English. (You can study for some degrees in France without speaking the language). Not many people will pay for the privilege of hearing French teachers teaching in English while cooped up in their parents’ home in a country a long way away. For some institutions this is going to be catastrophic.

    I have to say, though, as somebody who’s been involved with Universities most of my life, that this isn’t all bad. In the UK, for example, there are simply too many degree courses, and people who aren’t really up to it are paying lots of money they can’t afford for courses they don’t need and won’t use. This could be the start of a sanity check. It’s interesting that the two universities mentioned in the Guardian article, including that of the author, didn’t used to be universities at all. They were both Polytechnics, specialising in vocational teaching, magically transformed into universities about 25 years ago by giving them a new name. This has led to too many graduates chasing university jobs, and too many, frankly, sub-standard courses. There’ll be some winnowing out. Partly for bad reasons – you can’t put engineering courses entirely on line – and partly for good ones: do I really need that Master’s degree in Intersectional Theory?

    There’s a lot more to say but that’ll do for now.

    Reply
    1. PlutoniumKun

      Thanks for the insight, David. As someone who did a Masters in one of the former Poly’s (in Oxford) back in the 1990’s I was astonished at the commercialisation and pressure on teachers in comparison to what I’d experienced doing under and post grad study in pre-crapified (if very under-resourced) Irish Universities in the 1980’s. Even then, the pressure the junior lecturers were put under seemed extreme. I’m told by lecturer friends that its gotten much worse over the years. And don’t get them started on the standard of some of the fee paying students….

      I hope you are wrong, btw, about Japanese grammar, as I’ve just started online classes in precisely that topic!

      Reply
      1. David

        Sorry, badly expressed.You can indeed study languages online – in fact I’ve done so, including Japanese as it happens. What I was suggesting is that actually teaching languages at degree level entirely on line, and especially when you’ve got three writing systems to worry about, or when you have tonal systems, or non-standard sounds to memorise and practice, is going to be a hell of a problem. I think there’s a substantial difference between studying a language online to use it, and studying it to degree level, which at least in theory qualifies you to teach it.

        Reply
        1. PlutoniumKun

          Don’t worry, I know what you meant!

          In fact, I was just thinking of that yesterday, when watching an online conversation between two YouTuber Japanese teachers who were discussing the different ways of approaching the language. It seems to me to be a golden age for language learning, there are so many great resources available cheap or almost free online (I’m still picking and choosing which method works best for me and which ones are worth supporting), but at the same time, I was wondering if this is positive or negative for the old fashioned academic method.

          Reply
    2. John Saari

      Newton spent two years on the farm during the plague years and invented the calculus and some ground breaking physics. Not to be too optimistic but perhaps there are some young folks who can profit from a bit of time alone to think and tinker.

      Reply
    3. SouthSideGT

      Thanks, David. Lots to unpack there. Much appreciated. And my two cents is that out of this historic pandemic, maybe our great established universities and colleges will drive online huckster “universities” out of business.

      Reply
    4. ambrit

      In a general view from the cheap seats, the real bottleneck here is the elite’s usage of “degrees” as gateway metrics for employment decision making. Thus, the above mentioned transformation of “Trades Schools” into “Universities.” I personally have encountered marginally competent managers who owe their positions to their credentials, and not any displayed skills. I have also encountered grossly incompetent managers who are not replaced by upper management because said upper management will not consider slotting “up from the ranks” workers into positions that they are manifestly qualified for by virtue of hands on working experience, but lacked credentials.
      This also highlights the mingling of both “Higher Education” programs with “Trade School” ones. As a rule of thumb, when one tries to be all things to all people, one ends up being nothing to anyone.

      Reply
  11. allan

    One to keep an eye on is the University of Austrian Economics Chicago.
    Under its current president, they have been spending like crazy, are heavily tuition dependent,
    and (like Northwestern) have a large medical center which will have taken a massive hit
    from the pause on elective surgeries.

    But six years ago, Chicago already an outlier:

    University of Chicago Is Outlier With Growing Debt Load [Bloomberg, 2014]

    … While the University of Chicago has about the same amount of debt as Yale University in New Haven, Connecticut, its $6.7 billion endowment is a third the size of the Ivy League school’s $20.8 billion. Chicago’s debt as a percentage of its endowment is 54 percent, compared with 17 percent for Yale.

    Harvard, based in Cambridge, Massachusetts, and Stanford University, near Palo Alto, California, have the most notes and bonds among the 20 richest schools. Yet as a percentage of their endowments, the obligations represent about 17 percent and 26 percent, respectively.

    It would be a damn shame if the home of expansionary austerity were to end up in the financial ICU,
    on the receiving end of Dr. Market’s shock therapy.

    Reply
  12. NoBrick

    “The schools argue quite explicitly that they are not in the business of educating but of conferring credentials, and it is they alone that determine what is adequate for them to hand out a degree. There is precedent supporting the universities’ arguments.”

    “What is adequate”,
    didn’t arise as a product of public debate (as it should have in a democracy),
    but as a distillation of private discussion. Their ideas contradict the original American charter
    veneer (of/by/for) but that doesn’t disturb them. After all, they are on a mission.
    A “doctrine of faith” was/is their cognitive source…

    Dewey’s Pedagogic Creed statement of 1897:
    “Every teacher should realize he is a social servant set apart for the maintenance of the proper
    social order and the securing of the right social growth. In this way the teacher is always the
    prophet of the true God and the usherer in of the true kingdom of heaven.”

    Not to worry, if credentialism doesn’t fly your kite, we have salvation by consumption, or
    redemption via electoral saviors…

    Reply
  13. Max

    Student jobs are probably some of the first to go, definitely anybody with a job on campus is probably now out of work. My brother lives in a small college town and he says it’s a ghost town. Their economy depends on students spending their loan/mom/dad’s money.

    If I were a student, I would be seriously thinking twice about taking a semester off, moving back with my parents and waiting for things to shake out. Who wants to do zoom classes? No way would I have been disciplined enough to self study at that age (or even now).

    College is still in session in a lot of places. It would be interesting to know how many students have already disappeared.

    Reply
    1. juno mas

      My local California community college transitioned to online classes mid- Spring semester. Most of the foreign students (Chinese, Scandinavian, European, etc.) returned home pronto. Registration for Fall 2020 classes (likely to again be online) is way down.

      Colleges are huge economic drivers in most towns. It sustains high rental income for landlords, lots of late’s for Starbuck’s, and retail stores soak up mucho dinero from them. Fortunately the wild and crazy driving antics around campus have abated.

      Reply
  14. lyman alpha blob

    It would really be a shame if colleges and universities were forced to cut some of their bloated administrations in order to make up for the shortfall How would we ever get along without the people who go to meetings all day?

    Reply
    1. Alex Cox

      +1. CU Boulder just built a massive building which they call the Center for Academic Excellence. I thought the university was already such a center, but apparently not.

      What goes on in the Center for Academic Excellence? Is any teaching done there? No. It’s extra office space for the administrators/mbas.

      Reply
      1. KLG

        I remember a faculty member (an Australian, naturally) at my home institution commenting on our recently established Center for Excellence in Something-or-Other: Why don’t they just go ahead and call it the Center for Mediocrity in Something-or-Other? That one stuck with me during my subsequent peregrinations. I have been fortunate to avoid such centers during my career.

        Reply
    2. CGKen

      Well, no luck so far after the first round of furloughs. Some of the admin had their pay reduced (don’t worry they’ll still make well into six figures next year), but they all still have jobs.

      Reply
  15. DanB

    I am in Mass., retired and teach part time at two local colleges, one private and one a community college. The private college has already cut some classes for the fall semester, which they are trying to find a way to hold on-campus this fall. They are hoping to reinstate some of these canceled classes if enrollments of incoming freshmen increase in the next several weeks. As for the community college, it is conceivable -but who knows?-enrollments will increase due to the low cost option it presents compared to private colleges and universities -and even to public universities.

    Reply
  16. allan

    And on a completely unrelated note. /s

    Protecting Art in College Collections [Inside Higher Ed]

    Academic museum directors know their fortunes are tied to those of their parent institutions.
    Some worry about the possibility that collections could be raided to raise funds.

    Rather than worrying about this possibility, shouldn’t they be embracing the disruption?
    Campus art museums can be at the innovative cutting edge of modern higher ed finance.
    For $35 million, shouldn’t a job creator on the Board of Trustees get more than his name
    (and it’s usually a he) over the entrance to another cookie-cutter new dorm?

    I’ll take the small Turner for the master bath, the Modigliani for the dining room,
    and a really big Rothko for the wine cellar.

    Reply
    1. rd

      Thank God we have funded the billionaires who will be able to trickle down funds to these institutions by buying the art.

      Reply
  17. L

    I am at a University and I can speak to the fact that it is shaping up to be … complicated. Some institutions are clearly more leveraged than others but there has been another factor which is the increasing focus of institutions on branding. Some of the bigger names e.g. MIT and even some “state” schools such as Berkeley have long since shifted from serving their communities to being international brands. The others like mine have attracted large foreign populations which supplement some programs notably in STEM fields but also maintain mostly local students.

    As a side note the risk for the non-US students is partially travel though Trump’s behavior has already turned some off. It is also their own domestic economies. Despite the happy talk China’s economy is taking a big hit from this and will continue to do so. Going abroad requires someone at home having the money to send you. That is less of a thing.

    Going forward one route is already being shopped around in the groupthink of record (NYMag) The Coming Disruption Scott Galloway predicts a handful of elite cyborg universities will soon monopolize higher education.. The model here is neoliberal education on steroids or “MIT+Google” basically take the existing brands serve them up to 10,000 students and have the major brands survive by eating the weak. This of course completely sheds the idea of education or college as a public institution and doubles down on the credentialing concept with the assumption that students will prefer Amazon-approved educational materials delivered in the comfort of their home over learning from a live instructor.

    Call it disaster education.

    The idea is clearly an update of the “Moocs will kill education” argument and is being trotted out as “inevitable” by someone with extensive silicon valley connections who clearly believes that he will be one of the survivors. Interestingly there is no notion that this education will be better for anyone (except the smaller slice of winners) only that it will allow the already wealthy to survive. For all that the interviewee makes two points that are salient:

    Let’s look at Apple. It does something like $250 billion a year in revenue. Apple has to convince its stockholders that its stock price will double in five years, otherwise its stockholders will go buy Salesforce or Zoom or some other stock. Apple doesn’t need to double revenue to double its stock price, but it needs to increase it by 60 or 80 percent. That means, in the next five years, Apple probably needs to increase its revenue base by $150 billion. To do this, you have to go big-game hunting. You can’t feed a city raising squirrels. … People ask if big tech wants to get into education and health care, and I say no, they have to get into education and health care. They have no choice. (emphasis mine)

    So even the proponents are clear that this kind of eat-the-system approach is all about stock boosting.

    That’s the unfortunate part. When the government isn’t able to bail out America, billionaires step in. But it always comes at a price. Those people become largely untouchable, and they can’t be removed from office. Right now, we’re in a situation where it’s no longer NASA putting us on Mars or the CDC testing us for antibodies. It’s Elon Musk and Jeff Bezos. Basically, thanks to billionaires, you’re going to pay the lowest tax rates.

    And again it all comes back to tax rates, although so far as I can tell it is not my rates that keep getting lowered. Whether the economy is working for everyone? Who cares.

    That said there is of course another alternative which is to treat education as a service again and to fund the government again so that we can actually build the nation not in a few power centers but everywhere. This would be driven by the recognition that the students taking MIT+Google online gain no real benefit if they continue to live in a community with no jobs and that such an eat the young approach will only speed the slow death of the states. But that is not Wall Street’s concern.

    Rebuilding communities would mean making sustained community investments and paring down our obsession with branded elites in favor of local institutions. But doing that requires governing for Americans not Wall St.

    Reply
  18. flora

    My uni’s admin sent out an email saying something along the lines of “our uni isn’t a ‘place’, it’s an intellectual endeavor that continues even when we’re apart. We’re a global enterprise that can be joined and participated in from anywhere.” They’re trying to convince parents and students that remote online learning has the same value as in-person classes, lab work, and faculty mentoring. (Not to mention the ‘college experience’ and meeting people in your age group who you may meet again in your career.)

    I’m afraid the uni’s sales pitch is running into strong headwinds. Parents have no interest in paying full, high dollar tuition for half a college experience. Students have no interest in paying full, high dollar tuition for online only classes.

    Reply
    1. flora

      adding: a few years ago, the admin went all in on a public-private debt financed real estate development campus buildings scheme that has left it in a world of financial hurt, even with full enrollment and high tuition. For some reason the endowment (huge) is never touched as a funding source for dire times. Nor are the sports programs’ funding. odd.

      Reply
  19. Alex Cox

    Higher education in the US is not necessarily a Democrat environment. The professoriat may be liberal, but the regents and administration can be extremely right wing – as is the case of the University of Colorado, where I taught.

    Reply
  20. Swamp Yankee

    The President of Northwestern, Morty Schapiro, was the President of my undergrad alma mater (Williams College) back in the early 2000s. I personally tousled with him, made fun of him on the dais as Class Commencement Speaker at graduation, called him names in the school paper — because then, I saw, though I may not have had a fully adult consideration of it, that he was a tool for The Money Power. Outright contempt for the scholarship kids who couldn’t get donations.

    Scuttlebut from Professors, with whom I was close, both in the humanities and stories I heard from my friends in the Sciences, was that while “Morty” (as he demanded to be jocularly known) led a building wave that tore down much of a quaint semi-rustic campus and put the endowment funds in the hands of banksters, which came a’cropper in 2008 when he had providentially moved on to better and brighter opportunities…. at Northwestern!

    It seems he did much the same there.

    On a tangential note, I was a grad student during the Great Financial Crisis of ’08, and in the State of Michigan, which was among the worst hit (poor Michigan, so far from God, so close to the United States….), the differences that a hit to endowment reserves entailed were immediately and viscerally felt. A good example: food. Before the Crisis, we’d be treated to sumptuous, delicious spreads, Indian, Middle Eastern, quiches and cakes, you name it. After the crisis — if there was anything beyond coffee and rolls, you might be lucky to grab some pizza or fruit. It was night and day. And that was at a relatively rich institution.

    As someone who teaches at a community college that was holding on by the skin of its teeth beforehand, I am not optimistic as to its long-term viability.

    We shall see. Stay safe and healthy, everyone.

    Reply
  21. Jeff N

    Sad that all the big Illinois public colleges are found in the last list in that link, under “schools which already had a negative outlook”

    Reply
  22. kareninca

    If your family still has the money for this sort of thing, and there is a college that is very hard to get into that you would like to attend – in one manner or another – this would be a good year to apply. There will be less competition for admission.

    Maybe the pandemic will bring a partial reprieve to small local rural colleges. People with money may decide to send their children to someplace like St. Olaf (if they live in that state). It is easier to arrange physical distancing when you have lots of open space – rather than eg. at NYU or Columbia. And if the kids have to come home in a hurry, they will still be in-state. And they won’t be bringing back big city exposure.

    Reply
      1. flora

        St. Olaf is a very good small private college in Minnesota. Much respect to them. This doesn’t diminish the sudden new larger requirements for the larger world, as is. imo.

        Reply
  23. mario

    I was wondering where you’ve seen that “The schools argue quite explicitly that they are not in the business of educating but of conferring credentials”? I research this and it would be very helpful to be able to follow up.

    Reply
    1. Yves Smith Post author

      This is in the schools’ in response to lawsuits. I know this is in Columbia’s response, and it’s been used in earlier cases. I have not tracked down the filings but several academics confirmed what my contact said, that this is a long-standing and successful position that colleges and universities have taken when previously challenged in court that their “education” was sub-par.

      Reply
      1. JBird4049

        Following that logic why should anyone take classes, buy the textbooks, spend the time when they could just straight up buy a degree?

        Reply
        1. philnc

          Seems to me that has already been happening for generations: e.g. our last two MBA Presidents.

          With one child on the cusp of deciding whether to transfer from community college to a small local private university (for a specific “hard skills” technical program), and the other only a year away, this discussion has been painfully relevant for me. Thanks to Yves and the commentariat for their thoughts, as always.

          Reply
  24. Dang Me

    Not particularly important but major college athletic programs are major money makers. They are expensed as money losers with Enron accounting in order to justify free labor and major donorship for the “cost” of an athletic scholarship which is hardly any cost at all. They use tuition costs as an expense when in fact there is no cost for tuition for an athlete. Facility expenses are also passed on to students in the form of fees.

    The University of Alabama killed the University of Alabama-Birmingham’s football program until it was revealed how much money the school was making in an expose by Vice exposing the cost sham. They immediately reversed course and brought back the team.

    Reply
  25. DeBee Corley

    Oh, goody, college.
    I worked at IBM. They hired me because I passed their test. Everybody I worked with then was a duplicate of me. Smart, innovative, hard worker, can do attitude.
    Some how, the federal government mandated IBM not use the “test”, because the results were not “proportional’.
    So naturally, IBM started hiring from the “top” universities, from the “top” 10%. You might have noticed that IBM has been on a downward spiral the last 30 years.
    Now, I notice that employment tests are now administered. Guessing “credentials” from “elite” schools aren’t cutting it.

    Reply

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