The State of Higher Education Finances in 2021
Americans hate wasting money on subpar products. Our society is built on competition, which motivates companies to cut costs and improve their products. Failure to do so leads to decreases in revenue and eventual bankruptcy. This means that consumers, ultimately, hold the power to determine which companies succeed and which ones fail.
Higher education, however, has failed to embrace this model. Universities across the country sharply raise the cost of attendance every year, all without improving the quality of education that they provide to students. College leadership has gotten away with this for decades, but the balance was precarious. One small shock could break the entire system.
COVID-19 has provided the disturbance that will pressure universities to change their structure. Edmit, a Boston college advising company, has found that one-third of schools are in “low financial health,” meaning that “their combined revenue and unrestricted assets will no longer cover operating expenses within six years.”
You may be asking: How can institutions be vulnerable when the cost of attendance continues to reach new heights each year? Higher education has long spent with reckless abandon. Universities could raise tuition without stiff resistance from their students, and leadership shifted funds toward new buildings, increasing salaries, and expanding research. Shiny, new buildings and higher-paid professors, however, do not improve the quality of education.
The University of Southern California (USC) is a prime example of a large institution that should have profuse riches due to its large student body and sky-high tuition costs. Nevertheless, the school finds itself in dire straits. USC has publicly stated that it will raise tuition by 3.5% next year, regardless of whether students are taking classes on campus or online. It does not take much investigation to realize that an “operating finance shortfall of $300 million to $500 million” might be responsible for the increase.
Any reasonable non-education company in USC’s shoes would be constrained to cut the bloated spending. Universities, however, continue to raise their tuition without limiting their spending. There is only one way to fix the rising rates of tuition occurring in higher education: to remind its consumers—students and their families—to vote with their feet.
The disruption of education caused by COVID-19 has served as a wake-up call. Colleges and universities forced students to finish their spring 2020 semester in the confines of their homes, all while continuing to charge tens of thousands of dollars to attend these “elite” schools. Students across the country have started to question why they are paying exorbitant amounts for a Zoom class that could be had for a fraction of the cost at another institution.
And now, universities can no longer ignore their combined voices. There have been a staggering 100 class-action lawsuits filed by students against numerous colleges and universities. Each institution must justify how every professor salary increase from $100,000 to $120,000 is necessary to ensure high-quality education. If consumers are unsatisfied with education costs, then universities will have to slash their budgets or cease to exist.
Covid-19 will continue to be a significant factor in the upcoming academic year. College students will be subjugated to the same poorly designed online classes that they endured during the spring. Why should incoming freshmen pay $20,000 more to attend the “best” universities when the quality of education is the same as online-only institutions? Colleges are increasingly worried about rising attendance at online institutions. Lower enrolment caused by the class of 2024 seeking alternatives to the traditional college experience will place at-risk institutions in even more dire straits. The possibility of students forgoing higher education altogether is coercing many universities to freeze tuition for the upcoming academic year. For anyone who has taken a basic economics class, it comes as no surprise that lower demand decreases the price, and for the first time in recent memory, universities across the nation must face this reality.
The tuition freezes are a tangible result of growing consumer unrest and the start of a shift in higher education toward a more competitive environment. The coronavirus pandemic provided the initial awakening that many students and families needed. It is up to consumers to pressure our colleges and universities to lower tuition and reverse the decades of bloated spending.
Packard Otto is a development intern at ACTA and a rising senior at Grinnell College.
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