The challenges facing higher education institutions are monumental. It is clear that academic business models are struggling to keep up with the enrollment declines and cost escalations that have resulted in severe financial pressures. The global pandemic has just made underlying cracks in the models into crevasses.
With the passage of the CARES Act ($40 Billion of aid to colleges and universities) and the apparent reprieve in cuts from state governments (again thanks largely to the CARES Act), the prospects for AY 21 and AY 22 are beginning to look less bleak. Recently, Moody’s raised their higher education outlook from negative to stable, but they noted that revenue is unlikely to recover to post-pandemic levels in the near future. Furthermore, higher education is still recovering from AY20 when about half of all institutions experienced net revenue losses.
The COVID pandemic has created an existential challenge to higher education in the United States. As we have argued in earlier blogs, however, the cracks in the higher education business model were evident long before any of us had heard of the coronavirus. Demographic and financial challenges to the long-term growth and profitability of colleges and universities, especially for small private colleges in the northeast, were well known if not well understood.
In a blog last spring, I argued that universities needed to respond to the uncertainties created by the COVID pandemic by utilizing scenario planning to identify possible futures for their institutions and to develop strategic and operational responses to those futures. I described a six-step process for identifying possible scenarios and planning organizational responses for each.
In April 2019, I published an article with ESI attempting a prognostication on the future of US higher education. Little did I know that 2020 would be the most dramatic and unpredictable year ever in higher education. That said, I was pleasantly surprised when I reread my 2019 article this week that despite the upheavals in higher education and the world, my predictions were reasonably accurate. It does make sense, however, to revisit these predictions as a way of assessing what has and has not changed in this momentous year.