Remote learning has taught students and parents that they’re paying a LOT of cash for little more than on-line lectures.
The $670 Billion College-Industrial Complex Is Under Threat From Online School
The global health crisis took a big bite out of higher-education revenue. But the pandemic’s long-term effect on colleges and universities may be the changing attitudes about remote learning. Hundreds of American colleges are at risk.
By Spencer Jakab June 25, 2021 12:00 pm ET
College Inc. is facing a reckoning.
American colleges and universities recorded their largest drop in cash inflows in decades this past academic year, thanks to a big drop in enrollment and a lack of room-and-board revenue from the students who did enroll but took their courses online.
But that was just the start. Now that a generation of would-be applicants has grown used to online learning, the business of higher education will likely never be the same again.Published four-year college tuition before aidSource: College BoardPrivatePublic19902000’10’20010,00020,00030,000$40,000
The affected schools are mostly not-for-profit, but they represent a huge enterprise with $670 billion in collective revenue, more than $300 billion in debt and about 3 million employees. During the height of the outbreak, between February 2020 and February 2021, they laid off about 13% of their workforces. And researchers at The Federal Reserve Bank of Philadelphia estimate that higher-education institutions will lose revenue of between $70 billion and $115 billion over the next five years as a result of the pandemic.
Many schools already were facing financial stress before the pandemic as they doled out more scholarships to offset stagnating enrollment. Many also were hurt by fewer foreign students paying full-freight amid former President Donald Trump’s less-friendly visa policies.
With millions of students switching to remote learning, institutions that specialized in online education got a boost. They have suffered from a stigma in the past, in part because of the sometimes low standards and predatory behavior of for-profit online colleges that make most of their money from federally subsidized loans and grants. But more respectable not-for-profit schools—like Purdue Global, Southern New Hampshire University and Arizona State University—now rival them in online enrollment.
“We grew significantly in the last year, partly as a result of Covid,” says Jon Harbor, the provost of Purdue Global, the online adult education division of Purdue University. “A lot of institutions have faced financial stress.”
The online threat has even appeared at the high end. Minerva Institutes at KGI, which rotates its student body between rented sites globally but is taught by remote staff and has its own admissions tests, received 25,000 applications for the class of 2024, admitting less than 1%—far more selective than even Ivy League schools. It is cheaper too.
And perhaps most alarming for the college-industrial complex, Google has launched certificate programs that it says it will treat as the equivalent of four-year college for hiring purposes.
Every student that opts for an online college degree—or the Google equivalent—is another student that won’t be shelling out for the far-higher cost of a traditional education. And fewer students necessarily mean fewer colleges.
Residential colleges won’t disappear entirely—many young people relish the experience. Big state universities as well as name brands with global snob appeal and huge endowments can survive the additional pressure piled on by the pandemic. But hundreds of smaller institutions facing precarious finances—yes, maybe even your alma mater—might not if tuition and enrollment pressure outlast the pandemic.
They were giving it the old college try, but Covid-19 has forced higher education to face economic reality.