Universities and Coronavirus: revenues will fall, costs rise, liabilities increase

David Hume is, for me, the finest of English-speaking philosophers and at the heart of his philosophy lay the problem of induction. Nicely summarised by saying the chicken emerges from the coop morning after morning to be fed by the farmer, until one day he wrings its neck. Hume was rejected for a post, at the height of his fame, by the University of Edinburgh, because of their own philosophical myopia (he was a religious sceptic).

I fear that the Global University system has been similarly myopic regarding online learning. Now that almost every academic is using the University of Zoom and kids are puzzled as their parents demand they have hours and hours of screen time, one wonders why online hasn’t been a mainstream form of delivery in education. In truth, then system sees teaching as a poor relation to research. Lecturing is easy to deliver, teaching is hard.

But first, what are the fiscal challenges for HE? Many institutions may not have the financial strength and liquidity to do what has to be done. Business as usual may not may not be as 'usual' come September, and for years to come, for the following reasons:

1.     Student revenue is under threat both from national and international students.

2.     Student numbers from China, Far East and rest of the world will drop. 

3.     Increased online capacity (using AI) within China, along with changed attitudes.

4.     Global recession will mean less money around for funding expensive foreign education.

5.     Endowments will fall as economy is now in recession.

6.     Contract revenues will fall as economy is now in recession.

7.     Research grants will fall as economy is now in recession.

8.     Move to online will require initial and on-going costs.

9.     All new students will have gone through online learning during crisis, changing expectations.

10.   Liabilities on accommodation and building programmes, may come home to roost.

11.   Investment losses are already, and will be substantial.

12.   Students will be faced, possibly for years to come, with a difficult job market.

13.   Student loan defaults will balloon.

14.   Markets falls will put massive strain on pension funds (they were under severe strain before crisis).

15.   Add to this the idea that you need a degree to get a good job was waning as large global organisations started to drop the ‘graduate’ requirement. 

16.   People are also getting sceptical about value, (see Caplan) given the huge rise in costs.

17.   Some institutions were in deficit before this crisis (around 1 in 4) – this will accelerate, with government unable to save some.

18.   Academic conferences no longer sensible or viable on pre-virus scale.

19.  Massive and expensive schemes, like Erasmus, viewed as out of tune with climate change and budget restraints.

20.  Renewed interest in vocational learning, science, healthcare etc., as they are the people who were seen to really run society and solve our critical problems.
21.  Students have begun to ask for refunds (class actions in US).
22.  Students know that online is cheaper and will want reduced fees in future.

What to do?

Public spending will be tight. Banks will be reluctant to give huge loans as it is not clear that the education market (and it is a market) will ever return to pre-virus levels. Governments may be reluctant to bail out institutions and see some consolidation as necessary. Healthcare, rightly, will receive more attention than Higher Education. This will mean contraction. Actions that have to be taken include:

Cut back on conference attendance - get virtual.

In Europe, a serious rethink needed on the €30 billion funding for Erasmus. That money should be spent on online alternatives.

Stop capital spend now. Building more buildings is not the answer. That money needs to be spent on online learning, at least a mixture of offline and online for all courses.