COVID-19 Impact on Higher Education

October 13, 2020

COVID-19 and the economic downturn it has caused abruptly changed higher education in the United States, leaving many institutions with significant financial challenges. These institutions were already facing financial hardships pre-COVID-19 due to declining student enrollment from both domestic and international students and decreased state funding. COVID-19 has brought new challenges.

Soon after COVID-19 was declared a national emergency in March 2020, the higher education institutions switched classes from inperson to online. Students were sent home to finish out their spring term and some received partial reimbursement for their room and board and other fees. Northwestern University said these reimbursements cost them approximately $25 million.¹

Now several months into this crisis, COVID-19 continues to hurt schools financially with declines in endowments, cancellation of summer programs, suspension of athletic programs, and other lucrative events – all of which generate millions of dollars in revenue. To illustrate, Clemson University generates approximately $31 million from tickets for sporting events, mainly football,² which is now in jeopardy if there are no games. But the biggest financial challenge may result from tuition shortfalls due to unpredictable enrollment. The economic downturn has caused families to lose income and the ability to afford the tuition without financial aid. Others may stay home if classes are held entirely online. The American Council on Education, an advocacy group for colleges and universities, stated higher education institutions should expect a 15% decline in enrollment for the Fall 2020 semester and a $45 billion decline in revenue from tuition, room and board and other services.² In anticipation of funding shortfalls, these institutions have cut back on non-essential spending, reducing or freezing staff salaries and stopping construction projects. They are also increasing their applicants that are waitlisted and being less selective in their admissions process.

Looking to the new school year, colleges of all sizes have been forced to balance the competing concerns of community health and financial hardship. Many began announcing their plans for the Fall 2020 semester early in July. Some universities announced they will only have online classes while others announced a mix of both online and in-person instruction. However, there is uncertainty whether there will be any in-person instruction while COVID-19 remains active. Harvard University (“Harvard”) was one of the first institutions to announce classes for the Fall 2020 semester will be held entirely online. Shortly thereafter, the United States government issued new rules that would require international students with visas to leave the country or transfer elsewhere if their schools were fully online. Harvard and The Massachusetts Institute of Technology (“MIT”) immediately responded with a lawsuit challenging the government’s new rules. This lawsuit was supported by numerous universities in the nation with some saying they would file their own lawsuits. It is not surprising higher education institutions were opposed to the new rules considering the financial impact international students have. International students pay double the tuition of domestic students and are an important source of revenue, especially at a time when COVID-19 has decreased all funding. According to the Institute of International Education, Inc., the number of international students in the United States has almost doubled in the past 10 years to 1.1 million.³ These students contribute almost $41 billion to the economy and support 458,290 jobs according to the National Association of Foreign Student Advisors.^⁴

Michigan has approximately 33,000 international students contributing $1.2 billion annually and account for 14,000 jobs.^⁵ The majority of these students study at the University of Michigan and Michigan State University, ranking 15th and 25th in the nation, respectively, in terms of international students.^⁶

In addition to the colleges and universities, several of the nation’s largest tech companies including Google, Microsoft, Facebook, and others filed a court brief in support of Harvard and MIT’s lawsuit. They claimed the new rules would “inflict significant harm” to their business and their ability to recruit top talent from the universities. They added international students are essential to educating the next generation of inventors. The attorneys general of 18 states also filed a separate, joint lawsuit against the government.^⁷ Shortly thereafter, the United States government rescinded its new policy requiring international students to take at least one in-person class.

With the Fall 2020 semester set to begin shortly, a clearer picture will emerge of the damage inflicted upon higher education institutions across the country. Often, such a systemic shock creates permanent change. For the college system that may relate to trends in online learning, declines in international student enrollment, or a reassessment of the value of a college degree. While some schools focus upon minimizing short-term financial losses and others focus upon survival, all will be looking to the future wondering how this pandemic will change the landscape of higher education forever.

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COVID-19 Impact on Higher Education