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College Finances

Harvard University Quad
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Kerby Andersonnever miss viewpoints

Many colleges in America face a bleak financial future. They may have survived campus riots and protests in the past, but they may not weather the financial challenges they will face starting this fall.

The virus pandemic has already altered university education, and that trend is likely to continue for the near future. College campuses are empty as more and more students are learning over the Internet. When colleges open again, will all of the 20 million college students return to the campus? A sizable number of those students may decide to take a year off rather than pay nearly $50,000 a year to take a limited number of classes online. Some colleges have indicated that they might not open in the fall.

Either or both of those scenarios could spell financial disaster for colleges. Charles Fain Lehman explains in a recent column that universities have four sources of income: tuition, public funding, on-campus fees, and endowments. Tuition income drops when students decide to take a break from college. Fewer students impact on-campus fees like housing and food service. And financially strapped states may not be able to provide as much public funding for colleges.

A few select universities will benefit from the generous endowments they have put away. Those funds are not equally distributed. One expert estimated that half of the value of all college endowments is held by just 3 percent of the schools.

Small liberal arts colleges might not have survived even without the current economic downturn. This will merely accelerate their departure. But even the state schools will face an uncertain future. If these colleges experience a 20 to 30 percent drop in revenue, many of them will face a financial crisis. We will see a significant change in the college landscape over the next few years.

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