Colleges fight to survive as financial losses start piling up

Colleges across the nation are scrambling to close deep budget holes and some have been pushed to the brink of collapse after the coronavirus outbreak triggered financial losses that could total more than $100 million at some institutions. Scores of colleges say they’re taking heavy hits as they refund money to students for housing, dining and parking after campuses closed last month.

Many schools are losing millions more in ticket sales after athletic seasons were cut short, and some say huge shares of their reserves have been wiped out amid wild swings in the stock market.

Yet college leaders say that’s only the start of their troubles: Even if campuses reopen this fall, many worry large numbers of students won’t return. There’s widespread fear that an economic downturn will leave many Americans unable to afford tuition, and universities are forecasting steep drop-offs among international students who may think twice about studying abroad.

“If you play out the scenarios that are out there, it really makes you nervous,” said Mary Papazian, president of San Jose State University, which estimates it will lose $16 million by the end of May. “We may be looking at cutting academic programs if it comes to it. We may be looking at laying off people. It’s a dire situation if the worst comes to pass.”

Dozens of colleges have instituted hiring freezes, and many are halting construction projects so they have enough money to pay employees. But university presidents say the savings will only stretch so far, and many are asking the federal government for a second stimulus package to avoid deeper cuts.

The $2 trillion rescue bill signed by President Donald Trump last month provides $14 billion for higher education. The American Council on Education, an association of college presidents, had requested $50 billion and called the package “woefully inadequate.”

“This crisis is causing massive disruption to students, institutional operations and institutional finances. On some campuses, it is creating an existential threat, potentially resulting in closures,” Ted Mitchell, the group’s president, wrote in a letter to Education Secretary Betsy DeVos.

Even colleges with deep reserves are expecting a painful financial blow from the pandemic. Brown University was among the first to announce a hiring freeze, citing “dramatic reductions in revenue.”

Yale University followed on March 31, asking departments to update budgets in preparation of a “significant loss” in revenue.

The University of California, Berkeley, and the University of Wisconsin, Madison, each expect losses of about $100 million, and that’s assuming campuses reopen by this fall.

It leaves some colleges wondering if they can meet demand for financial aid, which is expected to surge as millions of Americans lose their jobs. Many schools draw from their endowments to pay for scholarships, faculty jobs and campus operations, but those reserves have taken deep losses as markets fall.

Bucknell University in Pennsylvania says it has lost $150 million from its endowment after recent investment losses. At the College of the Holy Cross in Massachusetts, the endowment has dropped by 15%.

“Financial aid is going to be a bigger hit this year,” said Rev. Philip Boroughs, president of Holy Cross. “We’re going to be looking at all current expenditures and going through them with a fine-tooth comb.”

Mississippi’s Millsaps College, which has fought to maintain enrollment in recent years, expects to refund $1 million in housing fees out of $33 million in yearly revenue. Amid uncertainty around the fall, the school’s faculty and staff have been making daily calls to help attract prospective students.

Other colleges face more pressing threats to their survival. At Central Washington University, a public university of 12,000 students, the school’s governing board has declared a “state of financial exigency” authorizing the school’s president to take any action to stay afloat, including faculty layoffs.