College Enrollments Drop Due to Covid, Adding to Budget Damage

It shouldn’t come as much of a surprise to learn that the number of students attending college has fallen due to Covid-19, 16% for incoming students and 4% overall, with the total decline greatest among foreign students. Those foreign students, who pay top dollar, have been staying away first due to China bashing (the Chinese were very well represented) and then due to Covid risks and travel restrictions.

Remember that the drop in enrollment comes on top of other hits to revenues. We gave the broad outlines of how Covid-19 translated into a grim future for higher education in May:

“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.


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….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….

Low likelihood of resuming classes on campus this fall….

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…

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:

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……

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.

Back to the current post.

As our May piece anticipated, the shift to online instruction is a net loser. Students on campus generate lots of other income. Some schools like Princeton have lowered their tuition as an acknowledgement that online instruction is inferior to live classes; holdouts like Harvard have gotten a lot of criticism but have not relented.

The spate of articles on enrollment levels in higher educational institutions breaks out the results by type of organization as well as other categories, like the fall in male enrollment (6.4%) versus female (2.2%). But one surprise is the big hit to community colleges, which saw a 22.7% drop in enrollment. From the Wall Street Journal:

We had thought that young people might switch from four-year degree programs to the more practical instruction that community colleges offer. What appears to have happened instead is that the devastation in lower-income jobs hurt the ability of students to work part-time to participate in those programs, and may also have reduced the attractiveness of some programs.

From Bloomberg:

Empty seats are inflicting financial damage on colleges already reeling from the pandemic. Earlier this year, when the virus began spreading, many schools cleared their campuses of students and refunded housing costs. With enrollment waning, revenue from tuition, dormitories and dining halls is being hurt at a time when some institutions are posting low endowment returns.

“The colleges are losing billions of dollars,” said Jack Maguire, founder of the enrollment-consulting firm Maguire Associates and former dean of admissions at Boston College. “It may not be the end of it if this new waves hits and students are sent home again.”

On the one hand, it’s hard to feel sorry for most of these institutions, since it’s become evident that the beancounters are in charge and the educational mission has become a mere product, and too often crapified in the process. Add to that the fact that the adminisphere and top level salary bloat is inextricably tied to relentless increases in higher educational costs and student debt burdens. But as with the economy overall, the ones that will take the hits first are low level workers like food service personnel and adjuncts.

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  1. Larry

    It’s anecdoctal, but Smith College allowed many foreign students to remain on campus through the initial shut down and even this year as the college remains virtual. Most of the students are Chinese and they had concerns that if they left, they would be unable to return. I’m not sure what this costs the students or the college, but this is one model of keeping foreign students enrolled.

  2. PlutoniumKun

    One point about Chinese students abroad is that its not just a matter of getting an education, or a ‘prestige’ education – for families who are reasonably well off, but not rich, its all about getting a foothold in a western country – a family member with citizenship and a bank account. For many families (by which I mean extended families), it’s essentially a hedge against anything going wrong domestically and a way of investing money without Beijing knowing about it (and usually getting better returns).

    At the moment, the RMB is likely to rise significantly against other currencies, and very quietly, Beijing has relaxed capital export rules. So there is still a ‘push’ factor for students coming from China. The question is where they want to go. It’s very difficult to say, but I suspect that many will keep their powder dry and stay home for the next year, without necessarily abandoning their ambitions to study and work abroad. But there is little doubt that the English speaking countries have lost a lot of their allure. I suspect that big winners in the foreign student game will be other Asian universities in Singapore, Japan, South Korea, which have seen their stock rise for students from China, Vietnam, and other rising countries.

    I don’t know much about the US education sector, but I think universities that have built up debt and spent big on the bet of constant growing foreign student money will suffer far more than those who focus on either a prestige degree, or high quality vocational training, and are able to deliver it in a manner and cost suitable for a range of students. An Ivy League (or Oxbrodge) degree is still highly valued around the world and will continue to be so, although I suspect it will be seen by many as not worth the money.

    But of course, if the pandemic hangs around into late 2021 without an apparent solution, then I think all bets are off – the entire culture of students moving from home to study may well change (in countries like Germany, this culture doesn’t really exist, most third level students study in their home cities). Its not just the cost of education, as casual work is decimated along with the food and drink service industry, students just won’t be able to self-finance.

    1. Nick

      This post makes a good point about the appeal of foreign education to Chinese that comes from its prospects for migration. The total of students coming from China isn’t really impacted from “China bashing” rhetoric as much as direct changes to visa rules and the availability of jobs. Biden team won’t have Stephen Miller et al around but they haven’t really been great on the rhetorical front themselves. So hard to figure how and when policies might be retired or replaced, and I couldn’t really guess how a change in president might help universities finances.

      1. juno mas

        Foreigners in the US on student visas aren’t allowed to work (earn money) from an off-campus job. Most undergrads work at on-campus services, if at all. Grad students have the opportunity to work as lab assistants.

        1. Nick

          That’s not true, they can work on CPT as long as it’s related to the major. But I was looking more post-graduation at changes to H1B policies, for instance the wage floors are going to be spiked unrealistically high..

    2. XXYY

      I’m not sure why a US college education was seen as particularly valuable in it’s own right, especially in the last couple of decades.

      US colleges have relentlessly been moving to an adjunct model, where couses are taught by minimum wage gig workers who struggle to cobble together enough courses to obtain enough income to live and who conduct no research or other scholarly pursuits. My guess is these colleges are coasting on past reputations and rose-colored memories of times when they actually had tenured faculty who did serious things and passed their wisdom on to young minds.

      The analysis above that US college educations are more important as a foothold in a foreign country than for the “education” they provide seems very likely given the reality of what’s happening in colleges now.

      1. Arizona Slim

        Gaining a foothold in a foreign country? Saw it right on my own street. Overseas investors bought a house and a group of young people, most likely students, lived there for several years.

        While the young people were living down the street, there was some renovation happening on the house. Methinks they were trying to flip the place to other investors from the same country.

        Then that country imposed currency controls, and that pretty well dried up the pool of buyers who were interested in American investment properties.

        The house was finally sold a couple of years ago. A young American man bought it.

        No word on what happened to those students. They never spoke a word to any of us neighbors.

      2. Ian Ollmann

        They still have tenured faculty that do serious things. The question is whether the senior faculty still teach Undergrads, or if they feel this is not serious enough to grab their attention. I’m sure graduate and post doctoral students get plenty of attention.

  3. Bob Hertz

    Colleges have been extraordinarily cautious about the virus. For example, Cal State University in Long Beach (with 37,000 students) recently shut down after five positive COVID tests. Nationwide, i believe the number is 70,000 positive COVID tests and three (3) students hospitalized.

    Medically this is ridiculous, but no college president wants to have one student die and be sued for $10 million, and probably have his or her career come to an end due to the publicity,

    1. Grumpy Engineer

      Three students hospitalized nationwide? Sheesh. From the standpoint of student health, it does sound like we’re overreacting. I’m having a difficult time finding hard statistics, but as best I can tell, it appears that Meningitis B kills 2 or 3 college students every year, and the ordinary flu probably kills 10X that number. And the number of hospitalizations associated with each disease would be several times higher. And schools remain open year after year after year, despite those risks.

      That said, the COVID-19 risk for older adults who work with the students (i.e., the faculty and staff) is considerably higher.

      1. drumlin woodchuckles

        Visible acute death is a rare problem for student-age corona patients. But the percent of student patients who will survive the infection with long-tail persistent illness and/or stealth organ damage which will become manifest when damaged organs and/or organ systems which have been robbed of their margin-of-safety are inevitably hit by age and/or the stresses of life or specific organolytic destructo-forces. No margin of organ safety will mean swift descent into expensive illness or expensive lingering death.

        Here’s an example. It has finally been admitted that N-SAIDS can cause chronic kidney damage after some long-term use. But you might still have enough left-over kidney function to survive. Now . . . if your “spare kidney capacity” has been stealth-destroyed by corona and you don’t even know, you will become very kidney-diseased or on dialysis or a transplant candidate or a death candidate after taking far less NSAIDs than used to be considered the merely-sublethal cumulative dose.

        So acute deaths are hardly the whole story.

    2. anon in so cal

      The Cal State system’s campuses have been implementing remote learning since March and will continue online through the Fall and Spring 2021 semesters. Some very limited exceptions have been made for some lab-intensive courses. One has to petition in advance to obtain permission to visit campus for very limited amounts of time (such as retrieving items).

      There’s nothing medically ridiculous about this. California has 867,000 cases and 16,752 deaths.

      1. Bob Hertz

        The vast majority of cases are asymptomatic (so far, and thank goodness)

        In a normal year I will assume that California has at least 300,000 deaths from all causes (based on national statistics),

        16,000 deaths from COVID (a vast majority who are very old) is not worth closing down a campus.

        1. anon in so cal

          Here’s how to understand it: there are 16,752 deaths right now (rather than, say, 160,752 deaths) *because* the campuses shut down.

    3. d

      just Texas schools alone have more than a few hundred positive tests for covid19. and thats just the sports teams because thats news. also seems to have cancelled a few games too

  4. cocomaan

    I do some fundraising consulting for some private non profit colleges. They are definitely hurting and leaning on their fundraising offices in order to generate revenue. Boards of Directors are hounding fundraisers to beat more bushes and find more funding.

    The problem is, from my perspective, that many funders are pulling back on higher education because they see it as a government funded enterprise. Fundraisers cannot make up the difference. The only real success in new monies are “student crisis funds”, where students can tap into funds for family emergencies and the like.

    I am uncertain whether the worst is past. Next semester’s enrollment will be an interesting stat to see. Will students get sick of this semester and then bail? Or will they see the worst behind us?

    1. Grumpy Engineer

      As a past “funder”, I can certainly tell you that I’ve pulled back. It happened several years ago, when I read an article about my alma mater having some sort of dispute with a professor. The deal they worked out was this: He was going to leave and work for his own company, and the university was going to pay him $4 million as he walked out the door. I was dumbfounded.

      And I got a fundraising call literally two days later, and I’m afraid I let the poor girl have it. Why should I give money to the school when they’re going to blow it on golden parachutes for exiting faculty?

      And today? Well, tuition rates keep rising inexorably, as do the debt loads carried by graduating students. Donations don’t seem to help. The university’s ever-growing appetite for dollars has dwarfed alumni’s ability to contribute. In my opinion, the IEC (industrial educational complex) needs to go on a serious diet. I don’t know that they ever have.

      1. cocomaan

        Hey Grumpy Engineer, that’s fascinating. I’ve heard complaints from donors that include your last paragraph, about tuition rising fast, but I also hear complaints about specific boneheaded decisions by admin too. Things like, why are you building a new structure when the old buildings are falling apart? Or, How can you start a new science program when the physics labs can barely afford shelves?

        Of course then there’s the complaints that make me roll my eyes, like “How dare you put a transgender person on the alumni magazine.”

        Administration didn’t ever listen to any complaints. They cut those people out. I am sure they are listening now.

      2. drumlin woodchuckles

        Perhaps the conclusion of a successful years-long serious diet can be made the pre-condition for a restoration of state funding back to pre-Great Tax Revolt levels.

        Another pre-condition for such nostalgia-funding levels restoration could be the mass jobicidal firing of most of the Administrative Staffs at all levels, starting at the top, for any and every university and/or college which seeks to regain pre-tax-revolt levels of state funding.

        If most of the colleges and universities burn all the way down, leaving just the physical plant in place, then perhaps some of them could be ” built back leaner” and go back onto the system of
        state funding making possible low tuition for those applicants who promise success. Just like in the Good Old Days. Back To The Future , as it were.

  5. d

    i suppose for private schools, not surprised, they do seem to run as a sort of business, but without investors, but donors.

    in public schools, at least here in Texas, the state used to fund most of them …and still does…sort of…they cut their funding a lot, so now schools have to raise tuition….oh and see if they can get donors to chip in too.

    dont know if other states have done the same, but if…they are now controlled by the GOP, you can just about bet they have

    now oddly enough…they did the same thing to first to hs seniors too.

    and they got a lot of ….rough feed back from that
    decided maybe just maybe they needed to try and put money into schools after all ..

    course that basically only started back this year…

    1. drumlin woodchuckles

      If a stateGov wants to put enough money back into State Schools to make a real difference, the citizens of that State will have to accept taxes rising back to pre-Tax-Revolt levels. Are they going to be willing to accept that? Will they accept it under certain conditions, such as . . . . fire most of the Administaff FIRST and DEMonstrate that they will all STAY fired . . . and THEN you will get your funding restoration . . . ?

      We have a visible problem with tax resentment here in Michigan, for example. The gerrymandered majority of Republican Represented state legislature districts ( House and Senate) are dominated by people who resent the idea of car taxes and/or gas taxes being re-raised or raised anew for the strict purpose of road repair/maintainance.

      I have an idea about how to let the two different grouploads of attitudes-towards-taxation Michigan citizens pursue their two separate visions. Pass and get signed legislation permitting the creation of “special road-tax districts” exactly matching the State House Districts. Permit any or all of these Special Road Tax Districts to hold its own special election, all by itself, to raise car taxes and/or gas taxes strictly within the borders of that Road Tax District. Those Road Tax Districts whose inhabitants want to pay more taxes in exchange for better roads . . . can do so. Those Road Tax Districts whose inhabitants want to pay less taxes in exchange for more money in their pockets . . . can do so.

      The Special Road Tax Districts which vote FOR more strictly-and-only road-targeted tax money do not have to spend ANY of it outside the borders of their own Special Districts.

      If the Republican-matching Special Road Tax Districts vote often enough and long enough for “no new taxes”, eventually their roads will go back to mud and gravel, as they deserve.

      1. d

        oddly taxes in the state really have changed much, since the man one, is property taxes. and since that funds the cities, counties….and schools budgets that the state didnt fund. but the difference until this year, was that in the past, the state funded close to 50% of public schools, with local taxes funding the rest. the reason the state changed this ? people started noticing that the kids in schools werent able to compete with other states who hadnt done what we did. plus their was parents who were angry that their children werent being taken care of. we sort of already did what you suggest for roads. a few years back, the state decided that they couldnt afford to support roads n several counties (oddly enough these were very rural areas too), so the counties took up the cost of the roads, otherwise they would have been dirt or gravel roads. at best . course the states other solution to roads was the ever popular …toll roads, which are about as popular as Stalin would be in Texas. and no the state hasnt decided to fix the roads …yet…they do act…eventually…like maybe a decade or more from now

        1. drumlin woodchuckles

          I suspect that here in Michigan,t if everyone paid higher-than-now gas taxes and registration taxes strictly for road spending, the rural areas would get a higher per-capita-equivalent of road spending back than the suburb areas or the urban areas would. And the suburb areas and the urban areas would not mind this. Because everyone would benefit from having the roads get better and be better rather than be bad and get worse.

          But the rural areas ( and probably some suburb areas too) prevent and obstruct raising taxes for road repair and then improvement, meaning they prevent it for the people who want it as well as the people who don’t care. So my idea was a way to set the “more taxes for better roads” regions free from the dead weight ball and chain acme-anvil-tied-around-the neck of the “No taxes, Never! Ever!” eye-diddy-o-logical Republican areas. My idea was “let them go their way and let us go our way within the State”. They can have more money in their pockets and we can have drivable roads in our areas.

          But stupid sentimental liberals keep demanding to impose their help on people who don’t want their help. Keeping that portal open is what allows conservatives to reach back through it to keep liberals from even being able to help themselves alone. This is a mental monkey trap which the stupid sentimental liberals are proud of choosing to stay trapped by.

          1. BlakeFelix

            Although I will point out that at least in PA the grift in road construction/maintenance is egregious, so in my opinion a lot of the money spent never gets to help the people in the rural area. It’s kinda like when the government pays someone to call us fat and give us an aspirin, and marks it down as a $300 favor. It’s even more annoying than when they just steal the money that they were supposed to bomb brown people with. My one employee quit PENNDOT because his crew spent so much time hunting turkey on the clock he couldn’t stand it even for the good pay and benefits, and he loves hunting turkeys.

            Edited to add local control would help that, too.

  6. Sutter Cane

    For the past decade or so college has, quite frankly, been known to be a scam, but a college degree was still looked at as the main way to get access to a middle class job, so parents and students didn’t really think they had a choice. I think in years past the divide between parents who went to school when tuition was less expensive and jobs were more plentiful, and current reality, was less stark. A lot of parents had the attitude of “Well OF COURSE my child is going to college” and they didn’t really appreciate just how much more expensive school had become since they went. Now, you’re starting to see the first generation of students who are heading to college while their parents are still paying off their own student loans! I think the bloom is well off the rose, and rather than getting misty eyed thinking about those carefree college days, there are way more people cursing the name of their university whenever they get another call from whatever company is handling their student loan payment extortion.

    Contrary to a comment above regarding universities being cautious regarding covid-19, from what I’ve seen many schools were more worried about getting the students on campus to milk them for tuition and (non-refundable?) housing deposits than with any concern for safety. Flagrant disregard for it, in fact.

    I do think a liberal arts education is valuable and all of that, but I don’t think it is worth going into lifetime debt for. Especially knowing what administrators, deans, provosts, and football coaches get paid, and how little the adjuncts who do the actual teaching get paid. And with what the job market is going to look like in the middle of a depression, prospective students really need to look carefully at whether the exorbinant tuition they are going to take decades to pay back (if ever) is going to be worth it.

    1. d

      suspect the life time debt thing is more of a creation of those who provide them. (and that does seem to be more of a Congressional creation than any thing else….states dont actually push for them). course as we all know…Congress critters….always being on the look out for how to help business (while getting lots of money to fund their campaigns) will do almost any thing to help them. like making it so that debtirs cant get the loans discharged in bankruptcy….

      1. drumlin woodchuckles

        But the anti-tax publics of various states opened the door to that sort of Congressional help when they launched their Great Tax Revolt and instructed their state governments to boycott their state universities and starve and strangle them of tax-funded support.

  7. chris

    Not mentioned here are the colleges dealing with requests from parents for room and board reimbursement when kids are sent home and there’s no dorm for them. I’ve heard some interesting letters have been sent home from James Madison University claiming that even though they did not fulfill their promised services and their was no on campus living they will not reimburse people who paid for a full semester on campus last year. I know other schools are dealing with similar requests and are having similar problems paying students back.

  8. Ep3

    Yves, my local university has been marketing itself for several years as the place to go for both studying abroad and bringing in foreign students (the majority of the foreign students are of chinese decent). Not only will the university suffer financially, but local private businesses will suffer. Local apartment builders (financed backdoor by the city) have tore down parking & expanded into new lands to build apartments to house these students. No longer do they stay in the dorms. They pay high priced rent instead of dorm fees. Further, local auto dealerships have benefited. Most of these foreign students come from wealthy families. The children need transportation. So the local Porsche/bmw/Mercedes dealers look forward to these students coming to town. No, the students don’t go to the local Chevrolet dealer. They buy a Porsche. I would really love to see the sales numbers by race for that dealer. Most of the students pay full price and no expense is spared to add new wheels, maintenance packages, etc. It’s unfortunate. Bcuz the dealer recently tore up several acres of farmland to abandon their current dealer showroom to expand and build new showrooms.
    We are going to see some serious economic consequences next year and the next.

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