Looking Ahead for Higher Education

Feb. 17, 2021

Planning for 2022 – and beyond

Given all the uncertainties of a post-pandemic reality, and knowing that higher education had challenges even prior to the pandemic, what does 2022 and beyond look like? More importantly, what can we do today to plan for this future?

To begin with, the data.

Economy – At a macro level, the $1.9 trillion stimulus package proposed by the Biden administration includes $35 billion for higher education, with half of this amount expected to go to colleges. While still twice the rate in December 2019, national unemployment rate fell to 6.3% in January 2021, compared to 14.7% in April 2020.

Looking ahead, data from the Budget and Economic Outlook 2021-31 released by the Congressional Budget Office estimates the following:

  • Federal debt held by the public—which stood at 100 percent of GDP at the end of fiscal year 2020—is projected to reach 102 percent of GDP at the end of 2021, dip slightly for a few years, and then rise further. By 2031, debt would equal 107 percent of GDP, the highest in the nation’s history.
  • Inflation-adjusted GDP is expected to grow by 3.7 percent in 2021, and is expected to revert to the prepandemic level by the middle of the year. GDP growth is expected to average 2.6 percent over the 2021–2025 period, similar to the average growth during 2010-20.

Higher Education Sector – What is the prognosis for higher education? It’s not that good. In an article dated February 5, 2021, Paul Friga, writing for The Chronicle of Higher Education, notes that when the decline in tuition revenue, the additional COVID-related expenses, and the anticipated future decreases in state funding are all considered, the total impact on over 100 institutions of higher education he surveyed was a “whopping $183 billion.” The authors of this survey estimate $85 billion in lost revenues, $24 billion for Covid-related expenses, and $74 billion in anticipated future decreases in state funding.

In their December 2020 Outlook for Higher Education, Moody’s Investors Service continues with their negative outlook noting that operating revenue for the higher education sector is expected to decline by 5-10% sector wide, with 60% of public universities facing enrollment declines and a reduction in auxiliary revenue associated with housing, parking, and athletics. In addition, the stress on state funds driven by high unemployment and lack of tax revenues will continue to exert a downward push on state appropriations to public universities.

They note that “high fixed costs and varied working assumptions about the duration of the pandemic restrain universities’ ability to quickly adjust expenses on a one-to-one basis.” Let’s unpack this. As we know, fixed costs have to do with costs that must be incurred no matter the scale of operations, while variable costs can decline as we do less. For instance, while faculty compensation is considered a fixed cost, travel and dining are variable costs that have declined, as we traveled and entertained less during the pandemic. In the long run, as economists will tell us, all costs are variable as we have the ability to change our scale of operations. The decision to change scale must be carefully considered, and the resulting action plan must address structural changes that are expected to last. For instance, one might ask how long the pandemic-driven changes (online modalities for instruction and events, socially distanced everything, and student choices, attendance, and participation in general) will continue. Are some of these changes here to stay? What will the permanent (i.e. structural) changes look like?

What will learning experiences look like going forward? What about other campus experiences like orientation or advising? Will freshmen students coming from far-flung states like California prefer to attend a virtual ‘Summer Welcome’ event and choose to arrive on campus just in time for the start of classes? More importantly, will freshmen coming from states and areas that are closer to Columbia prefer a virtual welcome, so as to save on travel costs going forward? If such a shift lasts, how might we modify our enrollment management practices for the long haul?

As Sarah Butrymowicz and Pete D’Amato, writing for the August 4, 2020 edition of the Hechinger report, note, the problems for higher education predate the pandemic. Nationwide, 500 institutions of higher education show signs of stress in at least two of the four metrics – enrollment, tuition revenue, public funding, and endowment health. At the onset of the pandemic, as Jeff Selingo notes, between March and May 2020, job postings for jobs requiring a bachelor’s degree declined by 40%, compared to the decline in demand for jobs requiring a high school diploma, which declined by 25%. Entry-level jobs that required a bachelor’s degree were the most negatively impacted. Given these numbers, what is the value of a bachelor’s degree as a means to creating a career pathway? Are we enabling our learners to graduate with more career options, compared to when they enrolled as freshmen? How do we create curriculum that values career skills? Do we map career skills into learning goals? Do we include learning goals when we develop new programs? Do we track data to determine when to sunset programs that have weak enrollment? Rather than using credit hours, semesters, and learning goals, can we translate our curriculum into skillsets that are in demand and for which our graduates are recruited? What criteria should be used to launch, continue, support and grow a program? A November 2020 report from Burning Glass finds that of all new programs launched after the 2008 financial crisis, two-thirds were graduating 10 students by 2018. Do we accurately estimate the cost of launching a new program? Data from EAB suggests that on average it costs $2.2 million over six years to offer a new program. This average belies the significant start-up costs that are be required in certain areas. Compared to the failure rate of new lines of business in industry, where it is on average 75%, academia looks like a bright spot. But this forces us to ask, how often do we track the data and determine the opportunity costs? Too often we use a simplistic gauge to measure success of a program – research, teaching, and service. Knowing that research is expensive, and that funded research does not pay for itself, should we not focus on a finite list of research areas, while at the same time continuing to invest in all other areas as opportunities for instruction and learning that will pay for research? The pandemic may have only accelerated the day of reckoning when higher education moves from the ‘if we offer it, they will come’ mindset to one that considers the institutional mission and comparative advantage in structuring its portfolio of programs.

What should we do – How do we reframe the models of research and teaching? The good news is that the current workforce in the US is around 157 million, of which less than 34% have a college degree, leaving open the possibility for educating more than 100 million people. While their preference for traditional modalities of instruction may be weak, this group (the adult learner market) offers vast potential for higher education. The pandemic has allowed us to embrace hybrid and online pedagogies and learn from these in ways that a non-pandemic reality would not have done.

In summary, the last year has done two things – it has made a budget crisis very real for many universities, and it has challenged our thinking on how we deliver instruction. When combined with the demographic changes that we expected to challenge academia even prior to the pandemic, we have an opportunity to make real change. We can start by asking what areas should we focus on.

Email me your suggestions.