Video Transcript Below:
Good afternoon. Today we will be covering some ways higher education business officers Can help support better strategic decisions despite the uncertainty that COVID-19 has brought to us all. We will specifically be focusing on understanding and preparing for the financial impacts of the changing dynamics for international enrollment scenarios.
I'm Kevin Kuhar from our higher education group here at Synario at PFM for over a dozen years our team has worked with colleges and universities of all sizes both public and private modeling strategic alternatives and ultimately lend credibility to support better decisions. Times have certainly changed. and I am now speaking to you from my home instead of the office. I hope some of our experience working with over 75 higher education institutions is helpful.
Current State of COVID-19 for Higher Education
As the situation is changing on literally a daily basis, let's talk about where we are as of Monday morning, March 30th.
We've all been watching events closely as spring breaks were originally extended and then turned into campuses shutting down. Many are moving to online learning for the remainder of the semester. Complicating the matter, is the closing of international borders where many international students may come from and study abroad programs exist.
We've spoken with some clients that have almost a quarter of their undergrad come specifically from china alone. And another client has graduate programs of almost 80% international students. In many cases, net tuition revenues are disproportionately affected by the loss of these international students; as these students are less likely to rely on financial aid and pay full sticker price.
80% of schools are worried that canceling of recruiting events are going to result in enrollment declines for incoming freshman and transfer students. And there is another looming issue right around the corner for many institutions. As the demographic reality of a domestic enrollment cliff in 2025 approaches.
With so many changing factors, its no wonder that only 5% of surveyed colleges and universities have a plan. While 65% are working on a new model. Business officers can use financial modeling and scenario planning to quickly and confidently answer the strategic what-ifs from stakeholders that need to be contemplated to move the institution forward. Having an agile model as a framework can help your institution seize opportunities and avoid threats in any situation. And is particularly valuable when leading through a changing and uncertain environment like we are seeing today. Let's dive into some examples to see how this works.
Higher Education Tuition Revenue Financial Model
So I have set up this slide to do some analysis around net tuition revenue. I have some drivers on the left side including traditional enrollment, international enrollment, and study abroad enrollment. and on the right side I have some outputs.
This slide is designed for me to ask really quick questions and get quick answers to see what the outputs are. As an example, let's say I have some declining enrollment assumptions for my traditional students (meaning my domestic students), to reflect that enrollment cliff we had talked about. But what happens if your institution was considering a decrease in enrollment for the next few years due to COVID-19?
Maybe your students are domestically looking at online schools. What would that mean if you were to see that decrease as I just put in on our outputs here. I can go back and restore these to where I started from to ask other questions if we wanted to run a different scenario.
Perhaps we see a steep decline in my international enrollment. What does that mean to my outputs here? Maybe that decline is expected to stay for the next two years. Maybe we think that there may be a permanent strategy shift at your institution to mean that these international students won't be coming at the same rate they've come before. And also what if there is a decrease in those study abroad programs?
So all of these factors need to be compounded on each other and we really need to think through what the key drivers are that are going to change the way your institution is going to move forward into the future. And these drivers could just be for enrollment but you may have other levers you can pull such as tuition rate increase. Maybe we would - in order to try and balance this out - change tuition rate increase. To try and soften some of those losses. Or maybe even adjust the discount rate.
Some schools want to increase discount rates to be more competitive. And then other schools may want to decrease their discount rate If they thought their students could handle some of that blow. So it could be a really strategic question.
These types of slides that I have here are really great because these strategic questions often need a framework Or they need someone to support the analysis behind them. And you can actually do this in a conference room with the rest of your team and turn those answers around very quickly.
Strategic Meeting Chart - Operational Revenue Scenarios
So on the next slide I am going to layer in some of the other impacts that you may want to consider into your analysis as you're trying to figure out what COVID-19 means. We just looked at net tuition revenues before but as you know things don't happen in a vacuum. There are other impacts that need to be layered onto that analysis.
So on my report here I have a full set of integrated financial statements, in my projection. A couple years of history and then I have 10 years of projections. Let's take a look at the cases we have set up for our enrollment. The first is our base enrollment. This is assuming that historical trends were to continue based on what we have seen over the last few years.
The second is the current expectation, meaning this is the enrollment case we just discussed where we reduced the international enrollment and study abroad for the next two years and it slowly rises back up to pre-COVID levels.
And finally the extreme worst case. This is where we assume the international enrollment and study abroad both go away completely. So what we can do is layer in to this student analysis and I can say what happens if I decide to do an online learning expansion. I can layer that in or look at a difference report. What does that mean for my financials here? This becomes really valuable when you start to prioritize different projects or different strategic items that you may be considering.
So I can turn on that online learning expansion. And I can also see what happens if we decide a capital project like The Center for Science. And I have a couple options that I can turn on or off here. Or maybe we want to do an expense reduction to try and offset the losses we may be experiencing due to our enrollment. And then finally we may want to see different versions of what endowment could look like. What is that all going to mean?
So we are able to really quickly answer these questions and look at any combination of these different impacts we could have. Now you are probably asking yourself, "How do we come up with these impacts?" Or, "How do we make those assumptions?" Those assumptions are done right here at the top of the screen. Where we have the different expense impacts that we have here. Like an auxiliary expense reduction. Hooked it up with the initiative link, meaning the toggle on the report. And then I'm determining where I'm sending it to.
Now here are my simple expense impacts. But we have other very structured environments to make other types of impacts you may want to look at as an example, capital impacts. And we can see what that would look like. Maybe see some capital impacts for the Center for Science That I have assumed. Maybe $50 million dollars. And these are completely adjustable by you so if you wanted to change assumptions you can just click on these and type over those if you wanted to change some of the values.
So there are a lot of moving parts going on in these scenarios and analyses that I've done so its really important to be able to visually represent these in a way that your audience will be able to understand. So I have here on a simple chart some of the different drivers that I was changing before. But I want to combine them all together to be able to look at new scenarios and compare them.
One of my drivers I have a utility expense increase and decrease. I can change this percentage driver and see what that means on my output. As you can start to see, where I started from on the dotted line, my updated assumptions because I've lowered that utility increase which has actually increased my bottom line.
And another example is my salary increase. Then I also have my different student assumptions, different projects, and initiatives that I have turned on here. And I can layer these on to see the combined impact and what they mean to my projection. And I am doing this really quickly but on my count I have 14,000 different answers I can get from this single chart.And this is really important for when new questions come up to be able to turn these questions around very quickly. It helps the finance team really drive the strategic decision- making process. And also gain confidence in the next move the institution is going to deal with.
As an example, a lot of our clients are really trying to get comfortable with the uncertainty that is happening in the financial market right now. So they may want to look at different versions of the endowment return all the way from the worst case back up to the expected case. And what does that mean on the bottom line for the institution moving forward.
The take-away for your enrollment analysis is to identify where your students are coming from and think about which demographics will be impacted by the COVID pandemic. You want to create flexible strategies for overcoming lost revenues through pricing and discounting to reflect your institutional priorities. There are an infinite number of future landscapes that could possible turn into reality. So make sure your institution is able to thrive in whichever future DOES in-fact occur.
So we really believe that having a financial model can help put your institution in the best position to succeed in these challenging times and help you react swiftly when the next COVID-like experience, next challenge, or next opportunity arises. When you have the ability to answer these questions quickly you can spend less time using outdated tools and more time communicating and analyzing the best path forward.
Upcoming Higher Education Coronavirus Scenario Model Videos
Keep an eye out for upcoming videos in different areas of higher education that are being heavily impacted by the Coronavirus. We are here to answer any questions you might have and discuss how financial modeling might work at your institution. Coronavirus does not look to be slowing here in the US just yet. And the quarantine and economic impact could very likely last into the fall and certainly into the summer semesters.
And for years to come there are also going to be impacts when you consider your first year enrollment impacts for next year. Those students will likely have been matriculating for the next 4 years. So if there are enrollment impacts next year, maybe additional discounting or a change to your tuition rate, these impacts are going to last for multiple years. Right into that fiscal year 2025 cliff so it is really important to get a handle on what is going on with your institution and start to do some reliable projections. And in particular do some reliable scenario analysis.
The good news is that financial modeling doesn't have to be hard or time consuming. You can get a Synario model up and running in just 30 days.
We really appreciate you taking a look at the video and we hope you are able to see some of the next videos that will be coming up.
Feel free to reach out to me directly at my contact info here on the screen.
Or you can reach out to us on our website at
Thanks for your time and stay safe!