On March 6, 2020, the University of Washington became the first college in America to cancel in-person instruction due to the spread of coronavirus. Within 4 days, 134 other colleges had done the same. And a week after that, nearly every college in America had sent their students home.
Colleges throughout the United States have faced challenges in making an unprecedented move to online instruction, but for some, the transition may have a more lasting impact. In fact, the financial losses incurred by the changes made in recent months may be insurmountable for smaller institutions. Relevant financial effects of the coronavirus on colleges are discussed below.
Impact on Colleges
Intuitively, colleges rely on tuition paid by students to endure financially. Many colleges fear that if they choose to go online in the fall, many tuition-paying students will take a gap year. Along with this, there is a projected drop in international students applying to American colleges, due to restrictions on travel and a potential reluctance to come. International students typically pay full tuition, and therefore losing many of them would prove financially devastating to colleges. According to a recent Brookings Institute study, California colleges alone are at risk of losing $400 million dollars without foreign students.
Along with all of these anticipated losses, universities are amassing large hits financially already. The cancellation of spring sports proved devastating: Colleges lost $350 million alone through the cancellation of the NCAA basketball tournament in March. Schools are also paying millions in room and board refunds, which is highly detrimental for small liberal arts schools like Bates.
So what have colleges done in response to all of this? Many have implemented hiring freezes, furloughs, staff salary reductions, and other cost-cutting methods. For a few colleges, namely MacMurray College and the San Francisco Art Institute, coronavirus has spelled the end of their existence. Many colleges have also chosen to suspend capital projects, such as the construction of new dorms and athletic facilities.
Impact on Students
Although this has not yet happened on a large scale, many colleges may resort to cutting need-based aid to students, which may force them to take out bigger student loans. Students at small liberal arts schools should expect major upheavals on their respective campuses in the coming years, given their lack of funding–One potential change is this reduction of need-based aid.
All things considered, students taking out loans now have more potential benefits in light of the coronavirus. With the opportunity for lower interest rates, now is a better time than ever to refinance student loans. Putting student loan money into a new loan with more manageable terms enables students to pay off their loans more quickly. Federally-held student loans, on the other hand, have been suspended until September 30 with an interest rate of 0%, so no payments can be made on these.
A prevailing pattern with the financial impact of coronavirus on colleges includes uncertainty and anticipation. How the virus will spread over the coming months remains unknown, and so too do the magnitude of financial losses colleges will accrue. For current college students taking out loans, they should remain in contact with the financial aid office about potential changes, when possible. For now, refinancing could be a major step in the right direction.