The financial model that held up many of the world’s largest universities is under threat. The pandemic has put the fees associated with university degrees in question. Online courses are a far less attractive – and less value for money – alternative to in-person tuition. Many students may simply no longer afford the cost of a degree if the pandemic has a long-term negative economic impact.
Universities who relied upon the funds that came with foreign students are in even more of a tail-spin. In Victoria, Australia, foreign student fees provided one in three dollars of its higher education institutions’ income. Australia’s universities have enrolled 210,000 fewer international students this year than expected, with the loss of AU$1.8 billion (US$1.4 billion) in student fees. More than 17,000 jobs have already disappeared from campuses across the higher education sector. Research by The Sunday Age newspaper shows that these student losses as a result of strict border closures will punch an $18 billion hole in the economy.
Source: The Age
Hot on the press at the moment is news that at least four more Australian universities (Central Queensland, Curtin, Griffith and Murdoch) fell into deficit last year as a result of the pandemic. Much of the revenue was from international students. Central Queensland University, for instance, had a U$34 million deficit in 2020, mostly due to a drop in its international education revenue. The Vice Chancellor said it had cut about 290 positions, closed one campus and two study centres, frozen salaries, reduced executive pay and rationalised its operational divisions from seven to four.
Australia isn’t the only one suffering. Germany’s international student visa applications were also found to have dropped by 40%. Canada suffered a year-on-year drop of between 20% and 30% in international student enrolment between the 2019-20 and 2020-21 academic years because of the COVID crisis. Part of the problem falling out of the pandemic, according to Denise Amyot, the chief executive officer of Colleges and Institutes Canada, is that enforced hotel quarantines are too expensive for visiting students. A $2,000 hotel bill is the cost of half of a semester for many students, she explained.
The lack of government support is adding to the financial squeeze being felt in the higher education sector. Last May, British universities requested a multi-million pound bail out from the government but were refused; the Institute for Fiscal Studies calculated that 13 universities were at risk of going bankrupt.
As students can no longer afford the fees, enrolments have plummeted in many countries and dropouts sharply risen. The Indonesian Private University Association estimates that almost half of private universities have seen a decline of at least 50% in the number of new students, with smaller universities hit the worst; 12 private universities had already closed by February this year.
The same is seen in Latin America, where the Inter-American Development Bank projects that millions of university students will drop out because they cannot longer afford tuition fees. In Colombia, enrolment in universities in the second half of 2020 decreased by 13% according to ASCUN, mainly because students and parents cannot longer afford tuition fees, despite financial support from the government. Other countries in the region have struggled with providing support. In Chile, a bill proposed a reduction of 42 billion pesos to state and traditional private institutions. In Ecuador, the government announced a $100 million cut in the higher education budget last May.
Universities are caught between their immediate and long-term financial priorities: cut fees and keep students or maintain them and risk staff? Last year, for instance, many universities in Dubai, where purse strings were less tight to begin with, cut fees to ease financial pressures on students and their families. Middlesex University Dubai recently announced a 15% discount for all high-school leavers in the United Arab Emirates, rising to 50% cuts for high achieving applicants. Universidad de los Andes, one of the biggest universities in Colombia, created a direct line of credit to finance 90% of tuition fees up to two semesters for students affected by Covid-19.
Others are looking into the future. The University of Queensland in Australia has put hundreds of millions of dollars aside into its Future Fund, saving up for future shocks given the experience of COVID-19. This is not short-sighted. Aland Tudge, Australia’s Minister for Education and Youth, believes it is unlikely foreign students will be allowed to return in large numbers until 2022. He admitted that the past trend of relying upon increasing numbers of foreign students was unsustainable and urged universities to ‘rethink the on-campus business model of international education’. His model involved innovative online and hybrid courses, with discounted online courses offered. Currently, over half of foreign students going to Australia come from just India and China. The Minister suggested migration incentives for students wanting to study particular subjects.
In Indonesia, discourse is also heating up on what other business models could keep private universities afloat. The Secretary of the Indonesian Private University Association argued that they ‘should set up business enterprises that can generate money’. Finding a successful new business model, however, under such short notice and under such high pressure might be hard.
Perhaps, therefore, the real hope is in the vaccine. It may be part of the reason that universities are rushing to make it compulsory for students to be vaccinated before the autumn term, as we noted in a blog earlier this week. A bigger support base for the vaccine and making universities safe learning spaces where in-person tuition can spark up again unhindered will pay off substantially in the future. And while we wait for crowd immunity, a new way of working will emerge, which will hopefully be more sustainable and inclusive. Sadly, a realignment almost always results in some being lost along the way. Universities are no exception to that rule.