The State of Higher Education Finances in 2021
COVID-19 has upended every sector of the American economy, further degraded an already toxic public discourse, and disrupted virtually every aspect of American society. But it would be hard to identify any major institution that will be more adversely affected than U.S. colleges and universities. Institutional budgets were shredded in the spring semester, when courses were abruptly moved online and colleges were forced to issue refunds for room and board. And there is much worse yet to come: Enrollments are expected to plummet in the fall, endowments are likely to underperform, philanthropic giving will slow, medical center and NCAA athletics revenue have collapsed, and state appropriations for higher education are sure to contract substantially. A number of universities will fail or be absorbed by larger and stronger institutions—a few already have. For those that survive, the financial toll will reverberate for years to come.
The college campus is also one of the spaces that will be hardest to return to something resembling normalcy. Residential campuses are built to facilitate the continual engagement of dense and overlapping networks of students—studying, eating, sleeping, and recreating together in generally compact geographical spaces. They live and attend class alongside faculty, many of whom are in higher risk groups, as well as thousands of staff members who commute to campus from every neighborhood and walk of life. Few places are more susceptible to an initial outbreak, and fewer still present bigger challenges when it comes to mitigating the virus’s spread once community members start testing positive.
That leaves the sector facing “an unprecedented financial crisis,” a point acknowledged from the outset by Critical Care, a new report by the National Association of Scholars (NAS). The study also acknowledges that some kind of “bailout will be necessary”—words it cannot have been easy for NAS to write. American taxpayers have already provided $14 billion to higher education through the CARES Act, and Congress is working on new relief programs that are likely to include additional funding for the sector. NAS’s message for lawmakers, distilled to its essentials, is simple and compelling: If universities expect public money, they should concern themselves with advancing the public good.
Higher education leaders will grimace when they read those words, but concern for the common good was once a cornerstone priority graven into the mission statement of virtually every U.S. university. Peruse the founding charters of our oldest colleges, or the inaugural addresses of early presidents, and you will notice a well-nigh ubiquitous dedication to fostering civic-mindedness and developing public leaders. Many institutions, even elite privates, saw themselves (for most of their history, in fact) as essentially concerned with contributing to the betterment of country and community.
At their best, our universities advance some of our most important public goods: They cultivate a sense of common purpose among the citizenry by educating students about our country, its principles and history, and by acquainting them with our civilizational inheritance; they are centers of free thought and intellectual vitality, places that cultivate in graduates curiosity, viewpoint tolerance, and intellectual humility; and they drive the advancement of learning which supports the kind of economic growth and prosperity that made the American Century possible. Unfortunately, most universities abandoned these concerns decades ago—for reasons that NAS has labored to chronicle in several other volumes.
Critical Care is not just calling on American universities to do better. (That would be like trying to herd cats with a feather). Rather, it is pointing legislators to an opportunity hiding in the COVID-19 crisis: With so many institutions teetering on the brink of insolvency, now is the moment to force the higher education sector to renew its commitment to core educative and research functions. By tying eligibility for public funding to the adoption of practices and policies that force campuses to deliver a better education at a better price—and in an environment that fosters intellectual vitality—the U.S. higher education system can restore its standing as the best in the world.
Most of NAS’s recommendations are unobjectionable and long overdue. Absolutely, the next bailout should exclude institutions with endowments valued at more than $600 million. As the report notes, stimulus checks for American workers were means-tested. So why should Harvard University, with an endowment larger than many national economies ($40 billion equates to about $1.6 million per student!) be eligible for a bailout funded by taxpayers (and taxpayers yet to be born)—many of whom cannot even dream of sending their children to study in Cambridge? That it took several days of withering public criticism before Harvard’s leadership relented and announced the university would forego its $8.6 million share of the CARES Act bailout tells you everything you need to know about Harvard’s real priorities. It is no longer an institution dedicated to the education and character development of young people, but a corporation with corporate interests: to amass all the wealth, power, prestige, and influence it can.
Another leading reason for declining confidence in higher education is that students are paying more every year, but, by all indications, they are learning less. One of the biggest drivers of rising costs is growth in administrative spending categories. NAS is right to suggest limiting eligibility for bailout funds to institutions that cut administrative spending dramatically. Their target is 50% for large colleges and universities, with “bonus relief funds” for institutions that “submit budget plans to reduce their administrative expenses by 70% or more.” Tracking this will not be easy. But it is worth the effort. ACTA’s HowCollegesSpendMoney.com, which aggregates federal data on higher education spending by functional category, is a good place to get a glimpse of the problem’s scope. Let us hope that the Department of Education is already working to formulate an ironclad definition of administrative expenses that creates incentives for higher education leaders to take a chainsaw to the bloated centers and offices that have overgrown the modern multiversity, so many of which are utterly extraneous to the university’s core purpose: the creation and dissemination of knowledge.
Eligibility for relief funds can also be tied to academic rigor. NAS suggests institutions that provide academic credit for remedial courses need not apply. But they also suggest providing funds for community colleges, including “support for liberal arts instruction, which was never meant to be reserved for a wealthy elite.” That is an outstanding idea—reminiscent of the rationale for resisting pressures to turn historically black colleges and universities into narrow vocational training centers—and highly relevant to preparing students for a suddenly ultra-competitive labor market. Surveys of employers routinely show that the skills and abilities prized above all—clear and precise prose, a keen analytic mind, and the ability to learn new skills that bring value to the organization—are precisely those refined by a traditional liberal arts education. Unfortunately, precious few institutions deliver a rigorous and coherent collegiate education grounded in the traditional arts and sciences, a fact that the American Council of Trustees and Alumni underlines every year in our annual study of general education programs at over 1,100 U.S. colleges and universities.
Requiring institutions that take bailout funds to absorb 30% of the value of defaulted student loans would force them to take responsibility for what they are teaching. This is a long overdue reform, even if it will take years to implement in practice. The cohort default rate for 2016 graduates ranges from 1–2% to over 30% at the worst performing universities. Institutions graduating students who cannot pay back their loans are admitting applicants who are clearly not college-ready, forcing them to take on too much debt relative to the education they provide, or offering academic programs that are not aligned to labor market demand (and in some cases, all of the above). Universities with a financial stake in graduates’ workforce success (or failure) will pay more attention to revising their program portfolios—and to raising admission and academic standards—so that they are educating students for rewarding careers and to succeed in a challenging job market.
The third section of the report focuses on academic freedom and intellectual diversity. NAS puts it baldly: “Bailout funds should only go to colleges and universities that have incorporated strong new protections for intellectual freedom, due process rights, and intellectual diversity.” The reforms they propose are simple and straightforward: tie bailout eligibility to the incorporation of principles of academic freedom into governing bylaws; strict adherence to due process standards, including the presumption of innocence, in all adjudication processes; and the establishment of “procedures and institutions to encourage intellectual diversity.” The report also calls for governing boards to play an active role in certifying institutional compliance—a measure that just might prompt trustees and regents to exercise leadership and oversight.
The reforms that NAS proposes will strike most readers as about as controversial as requiring a middle school cafeteria to serve milk. But then, those who have not spent significant time on a college campus in recent years would be surprised to learn how far the academy has drifted from the kind of commitments that were long considered bedrock priorities of any university worth its salt. Tying financial incentives to the adoption of better policies—whether the money is coming from donors and alumni, an emergency government bailout, or families seeking a rigorous education at a fair price—is probably the only way to begin to restore norms of academic freedom and free expression at today’s academy. Adopting these recommendations will not transform campus culture overnight. But provided the policies are implemented with due consideration for mission-oriented institutions (many of them, religiously affiliated), they will at least set universities on the road to rebuilding free and open marketplaces of ideas.
Critical Care sets out an ambitious vision for higher education reform, one that would force colleges and universities to recommit to basic tenets of the academy’s mission in exchange for an infusion of public funds. Taxpayers deserve at least that much. Federal lawmakers should take note of NAS’s bold vision and begin working on ways to implement the group’s policy proposals. Governing boards should also pay attention to the report and make it a priority to adopt many of the recommendations—even if federal funds are not ultimately attached. If only a small fraction of the ideas set forth in Critical Care are implemented in the coming months and years, U.S. colleges and universities will emerge from the pandemic truer to their guiding purposes and better prepared to weather a financial environment that will remain challenging for years to come.
Jonathan Pidluzny, Ph.D., is Vice President of Academic Affairs at the American Council of Trustees and Alumni.
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