Dick Startz, a professor of economics at the University of California, Santa Barbara
Covid-19 is a short-term financial disaster for colleges and universities. Long-term? Not so much—although risks do exist.
In the first half of 2020, revenue from room and board, campus bookstores, athletic tickets, and the like plummeted. Much more important is how many tuition-paying students actually show up this semester. Especially at public colleges, how many high-tuition-paying out-of-state and international students will be missing this year? And even as revenue is lost, switching to online teaching requires significant investment in equipment, cloud services, and tech support.
Some smaller colleges that were already teetering on the edge of insolvency are going to go under.
This approaches a crisis for most schools. Some smaller colleges that were already teetering on the edge of insolvency are going to go under.
In the longer run, nothing much will change about desires for higher education—so demand will return to normal. Nothing much will change about the cost of delivering higher education—so supply will return to normal. Online instruction might grow as a niche product, but for most purposes human contact is superior. In a few years, college finances should be back to their usual state of at least getting by.
But there are two threats for higher education in the United States. In the Great Recession, U.S. states drastically reduced financial support for higher education—and that support never recovered. If this happens again, public universities will have a permanent problem. In the last decade, colleges have adjusted in part by seeking out high-paying international students. This is the second risk: If international students shift to schools in Australia and Europe because of U.S. immigration restrictions, so will their tuition payments, which have subsidized American students.
There is certainly trouble today—and probably for a bit longer. But long-term consequences can be avoided if state governments return to supporting higher education, and if the U.S. federal government returns to the country’s traditional welcoming attitude toward foreign students.