Colleges and Universities maybe casualties of Coronavirus

Bloomberg:

The coronavirus has already dealt a vicious blow to key sectors of the U.S. economy. If the pandemic drags on into the fall, though, it’s likely to devastate yet another area that has so far escaped with minimal damage: higher education.

The problems confronting the nation’s colleges and universities long predate today’s crisis. But if current trends continue, the pandemic is likely to act as a catalyst for a historic reckoning that may transform the delivery of higher education in this country.

It’s common knowledge that the cost of attending both public and private institutions has grown far faster than the rate of inflation over the past 40 years. Since 1980, the sticker price of tuition, room and board has more than doubled in inflation-adjusted dollars.

In 1971, for example, the average total of tuition, fees, room and board per year at private four-year institutions was $18,140 in today’s dollars. Compare that to the average cost of attending now: $48,150. Likewise, that average at public institutions rose to $21,370 from $8,730 in the same period. This has fueled the much-publicized explosion of student-loan debt.

But colleges and universities have their own debt woes. Over the past 40 years, schools, particularly less selective ones, have fought ever harder to attract students. The conventional wisdom held that the best way to do so was to upgrade facilities, build new dormitories and student centers, and provide increasingly luxurious amenities. The result has been a flood of debt, with a growing proportion of revenue dedicated to servicing it.

This has made many of these schools more dependent on tuition dollars for their annual operating budgets (and fueled yet more hikes in the cost of attending). In 1999, tuition and fees provided 16 percent of total revenue at all public colleges and universities. Ten years later, that percentage had crept up to 22 percent. Private schools went to 40 percent from 29 percent in the same period.

These trends have only intensified in recent years: more building, more debt, higher tuition. Yet this happened in the face of declining enrollments. Enrollments have fallen by 11 percent nationally over the past eight years despite significant increases in the number of international students attending American colleges and universities. And that’s not even factoring in the coming “baby bust,” a demographic dip that will likely intensify this trend over the coming decade.

Taken together, these trends were spelling trouble for higher education before Covid-19. A recent survey of college and university trustees found that more than half were worried about the financial future of their institutions. And then the pandemic hit, along with the worst quarter for the stock market in well over a century. As a consequence, we’re looking at a shakeout of epic proportions, particularly for the less selective, tuition-dependent institutions.
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Many of them turned dorm rental into a cash cow to sustain operations and that is already gone for the Spring semester.  Colleges have also hiked prices and made student loans a racket.  These loans to unsophisticated borrowers are hampering graduates' ability to become productive citizens because so much of their income goes to paying off the debt they accumulated in college. 

The colleges and universities have also started paying administrators and some faculty members like they are part of the one percent.  These salaries are not going to be sustainable if more young people make alternative career decisions.  I would certainly not encourage anyone to become dependent on student loans.