Higher Ed Finance and the Need to Understand It Thoroughly
The coronavirus pandemic has impacted the finances of colleges and universities globally. With many colleges and universities in the U.S. reversing course and going online, some families are asking for tuition discounts. It’s too soon for final reports on enrollments, even as some universities report unprecedented numbers of incoming freshmen who requested an enrollment deferral (also called a gap year).
There have been more than a few articles written about the financial impact of COVID-19, and a few more have attempted to rate or rank the financial risk of institutions based on publicly available data. Recently, I read an article written by a professor who argued that institutions should increase financial aid in a situation like this pandemic, rather than discount tuition.
I realized that he chose not to recognize or did not know that most institutional aid is not funded through the endowment, but is a discount of tuition to a sizeable number of students. If a professor did not understand a piece of higher ed finance, how many others do not understand it?
Rather than write a primer on higher ed finance, I opted first to search the web for source material on higher ed finance. One of the higher ranking search results was a higher education finance graduate course reading list from Seton Hall professor Robert Kelchen, published in January 2020. The list is organized by various topics, including:
- The higher education finance landscape and data sources
- Institutional budgeting
- Policy analysis and higher education finance
- Federal sources of revenue
- State sources of revenue
- Higher education expenditures
- College pricing, tuition revenue, and endowments
- Financial aid policies, practices, and impacts
- Free college
- Student debt and financing college
- Returns to education
- The financial viability of higher education
Another source was the syllabus for a course, Higher Education Finance and Budget, which was posted on academia.edu by Arizona State professor Rebecca T. Barber. Readings are also organized by topic and sequence in the course:
- Tuition and Financial Aid
- Appropriations, Endowments, and Other Costs
- Cost Control
- Public Private Partnerships
- The Future of Higher Education Finance
The topics organized by the two professors appear to cover most areas of higher education finance. It is not a subject that is easily understood.
Students appear to be the customers on the surface, but college revenue sources may come from students (tuition and fees, room and board), federal sources (financial aid and grants), state sources (financial aid, grants, and state subsidies to higher education), gifts, endowment, ticket sales, sponsorships, and so on. There are researchers whose academic work focuses on a single area like public funding policy or tuition discounting or athletics in higher education.
As the COVID-19 pandemic continues, there will be more and more articles about the financial impact of the coronavirus to higher education. Administrators are making tough decisions daily about staff and faculty furloughs, as well as delaying funding of pensions and other benefits. College and university board members will be presented with challenging situations.
Those who understand higher education finance will be valuable assets to the administration. Those who don’t may want to find a primer and buckle up. It’s going to be a rough ride.