For Minnesota colleges, pandemic brings financial reckoning and an uncertain fall semester

Minnesota colleges are facing a pandemic-induced reckoning.

Their campuses are deserted. Their summer and fall enrollments are down. And their budgets are being pounded.

The worst may be yet to come.

Every institution is planning for the daunting possibility that they may not reopen this fall. The financial toll could be devastating. Colleges in Minnesota could collectively lose more than half a billion dollars if the pandemic keeps campuses shuttered through the fall.

"The longer this goes, the deeper the hole," Minnesota Higher Education Commissioner Dennis Olson said. "We may never go back to traditional higher-ed models as we know them today."

The University of Minnesota has frozen tuition for the next academic year in hopes of attracting a large freshman class during the pandemic. As of last week, fall freshman enrollment was trending nearly 10% behind where it was this time last year.

The Minnesota State colleges and universities system took a $17 million hit from room-and-board refunds and could lose up to $13 million more this spring from canceled events, summer camps, travel and trainings.

The University of St. Thomas, Minnesota's largest private college, has already lost $8 million and won't get to replenish with revenue from marquee events such as the Special Olympics.

Public and private institutions are mapping out sobering scenarios that foretell steep revenue and enrollment losses. They are planning for a fall semester that might look anything but normal; some colleges envision a mix of online and in-person instruction, while others may delay the start of the semester until students can enjoy a traditional campus experience.

Students are anxious about whether they should return to campuses where social distancing is difficult. They also question if online classes are worth their tuition dollars.

A decline in applications for federal aid among Minnesota students could fuel fears of enrollment woes. Data from the Minnesota Office of Higher Education show there were 19% fewer FAFSA applications filed by new students from Feb. 1 to April 10 compared with the same span last year. There was also a 7% drop in applications from current students.

"We think that uncertainty about the future will act as a brake on decisions to enroll in postsecondary education," said Terry Hartle, senior vice president of government and public affairs at the American Council on Education. The Washington, D.C.-based trade group predicts U.S. college enrollment will drop 15% in the fall and result in $23 billion in lost revenue — even if campuses reopen.

No school will go unharmed by the pandemic, but the impact will vary. Large universities with robust reserves and endowments should weather the financial drubbing. For cash-strapped colleges, the pandemic could accelerate an existential crisis.

The University of Minnesota took an immediate loss of nearly $35 million when it issued room-and-board refunds to students who had to move off campus. Early projections show the U could lose up to $315 million in revenue if the pandemic lasts into fall.

President Joan Gabel and members of her cabinet have taken a voluntary 10% pay cut, and hiring and salary increases have been frozen.

Minnesota's land-grant institution should be able to withstand even the worst hit, thanks to deep reserves, a strong credit rating and manageable debt levels.

"We have some ability to make decisions that can help us work into a new reality," said Brian Burnett, the U's senior vice president for finance and operations.

Minnesota State's 37 colleges and universities face a grimmer outlook. The state college system was already wrestling with how to fill a $31 million gap that came from having more expenses than revenue.

A fall enrollment decrease of 5% to 20% could cost Minnesota State $75 million to $280 million, officials say.

Systemwide enrollment for the fall was down more than 20% as of last week. Such a steep enrollment plummet would be "unprecedented for the system" and "extremely difficult to manage," said Roger Moe, vice chairman of Minnesota State's board of trustees.

"The impact I think is going to be greater in greater Minnesota simply because they've faced some challenges prior to all of this," Moe said.

Minnesota State University Moorhead had to make wrenching decisions regardless of the pandemic. Facing a projected $6 million budget shortfall for fiscal year 2022, the school announced this month it would cut 66.5 jobs — 11% of its full-time positions — and close or suspend 10 majors.

While the disruptions from COVID-19 won't make the budget picture "any rosier," President Anne Blackhurst hopes her campus will reopen in some form in the fall. She's already heard from many students who are not fond of distance learning and might sit out the fall semester if online classes are the only option.

"We will be ready for the fall semester no matter what form fall semester takes," she said.

Minnesota colleges are thinking creatively about what the fall semester might look like.

Faculty at the University of St. Thomas are studying a hybrid model in which students could take a class in person, tune in live via video conference or work at their own pace online.

President Julie Sullivan said she wants this option, known as "hybrid-flexible," to be available for as many classes as possible. Social distancing could still be feasible this way for the few who choose to learn in the classroom.

"We do believe this kind of coming back [to campus] that will happen will not be a light switch. It will be gradual," Sullivan said.

Macalester College President Brian Rosenberg said hybrid classes would be a last resort for his school. He wants Macalester students to enjoy the full campus experience, even if it means pushing back the start of the school year from the first week of September to October, November or even January.

By cutting winter break in half and pushing graduation back a month, the school year could still come close to finishing on time, Rosenberg said. "That is our strongly preferred option."

The University of Minnesota is mulling a scenario where students would start the fall with hybrid course offerings and transition back to campus if the virus began to dissipate. Campus residence halls could potentially open halfway into the semester, Burnett said.

The decision to reopen college dormitories won't be taken lightly. Multiple students often live in these cramped spaces and may not have access to their own restrooms. Social distancing would be difficult without restrictions.

University of Minnesota sophomore Riley Fletcher may take the fall semester off if classes are offered only online. The 20-year-old political science and global studies major thinks an internship might be more worthwhile than online classes that feel "very artificial."

"With the price I'm paying, I want to be able to get the full experience that I had planned for going into college," Fletcher said.

The extent to which COVID-19 will affect higher education is still unclear.

Historically, college enrollment has swelled during economic downturns because people go back to school to learn new skills. That might not be the case this time, said Hartle, of the American Council on Education.

"We've never had a situation in the past when student safety was a consideration in the decision about going to college," he said.

Colleges and universities are likely to change in many other ways. The rapid shift to online learning could very well stick and result in more virtual and blended course offerings, Hartle said.

University of Kentucky Prof. John Thelin said the pandemic is likely to force a reckoning for colleges that continue to build new facilities and create programs instead of living within their means.

"Can they flatten their spending curve?" posed Thelin, author of "A History of American Higher Education." "This kind of arms race has got to stop."

Ryan Faircloth • 612-673-4234