Pandemic, downturn could force hundreds of colleges to close

Martyna Malecka, a criminology student at Stonehill College, can't wait for classes to restart in August. Her campus in Easton, Mass., "feels like a village." She judges time spent there less of a coronavirus risk than staying at home in Chicago.

Universities everywhere have made valiant efforts to function remotely. A few, such as California State University, said they will continue teaching only online next year.

Whether or not universities get back quickly, many are likely to suffer. Stonehill is private and Catholic, with 2,500 students and a $200 million endowment. It looks in good shape, but many similar liberal arts colleges, especially in the northeast and Midwest, are not.

Their problems are long-standing. Nathan Grawe of Carleton College in Northfield, who researches demography and higher education, said the core difficulty is the slipping fertility rate. Overall enrollment has fallen over the past few years.

This squeezes smaller colleges hardest. A study by EY-Parthenon, an education consultancy, of more than 2,000 colleges suggested 800 are so small or inefficient that they may go bust. Around one-fifth run budget deficits. Others pile up debts, fail to build sufficient endowments or sustain student numbers only by agreeing to painfully big discounts on fees. Grawe points out that eight colleges were already closing each year before the pandemic.

Those that fail are usually small, among the 40% of higher-education institutions with fewer than 1,000 students. In the past decade these have seen enrollments slip faster than medium-size ones. Of the 72 colleges EY-Parthenon found had shut since 2007, almost every one was small. They are vulnerable because they depend most on revenue from students; others find ways to hire out campuses for conferences, raise research money, earn bequests and the like.

Robert Zemsky of the University of Pennsylvania, who co-wrote a recent book on the growing woes of universities, expects a "collapse, lots of closures" of smaller colleges, notably in the Midwest. He blames both demography and teaching methods that do not suit some students, noting how, at many universities, more than a quarter of freshmen quit in their first year. Curricula, he said, are outdated, faculty members are out of touch and four-year degrees should be cut to three to save costs and force a rethink of higher education.

Among the most vulnerable colleges are those that cater mostly to nonwhite students. "African-Americans are more than two times as likely to attend an institution at risk, compared with whites and Hispanics," he said. Crystal Nix-Hines, a lawyer in Los Angeles who specializes in the education sector, also expects an "enormous winnowing" of historically black colleges.

Consolidation of higher education is overdue. Students increasingly prefer bigger and more urban institutions, so some smaller, rural ones will go. How many? Just before the pandemic, Zemsky and his co-authors suggested that 10% of colleges would eventually close. He now expects 20% to shut or merge with others.

The pandemic further dims their prospects. Efforts to recruit foreign students, who typically pay full fees, have slid for each of the past three years. Travel bans and concern that the U.S. has bungled the coronavirus will only put off more.

The economic slump means some poorer families will not send youngsters to study. Others will delay. Funding from states for public universities is certain to fall.

Finally, many universities face legal trouble. Nix-Hines counted 134 lawsuits, mostly class-action ones, against colleges as students sought the return of tuition fees.

Copyright 2020 The Economist Newspaper Limited, London. All Rights Reserved. Reprinted with permission.