While the social and economic impacts of the growing coronavirus outbreak have dominated the news cycle, the larger implications for higher education have largely gone unnoticed. With the WHO recently declaring the coronavirus a global pandemic, colleges and universities across the country have been forced to grapple with the long-term consequences of declining international enrollment, suspended study abroad or foreign exchange student programs, and an overhaul of distance educational technology. Though the trajectory of the current outbreak is impossible to predict, institutions should make responsible financial planning a priority in the event of revenue loss.
COVID-19 Impacts International Student Ratios Due to Immobility
With the U.S. serving as the top destination for foreign students, many colleges and universities have come to rely heavily on revenue generated from international tuition. However, as governments around the world enact coronavirus-related restrictions, U.S. universities are facing a significant drop in overseas recruitment and admissions, which may impact their ability to maintain balanced budgets. International cohorts currently comprise about one million out of the nation’s 19 million higher education students, with China sending more students to the U.S. than any other country. Other coronavirus-affected countries, including South Korea, Japan and Iran, also contribute greatly to the number of study abroad participants. According to a recent study conducted by the Beijing Overseas Study Service Association (BOSSA), approximately 36% of Chinese students are altering their plans to study overseas because of the coronavirus outbreak.Additionally, some countries, including China and Iran, have postponed TOEFL and GRE entrance exams required for international education, which could disrupt planned enrollment numbers for the upcoming academic year. Many university expenditures are relatively fixed and cannot be altered on short notice, meaning a sudden drop in tuition revenue could have profound impacts on operating margins.
The interruption to international student mobility represents a loss not only to the financial stability and cultural vibrancy of U.S. institutions, but to the national economy as a whole. Foreign students studying at U.S. colleges and universities contribute close to $41 billion to the U.S. economy and support more than 450,000 jobs. With the flow of international students coming to a halt, big losses to the nation’s economic growth could be in store.
Study Abroad Programs Come to a Halt
Many U.S. students also participate in international education programs, with one in 10 studying abroad during their undergraduate career. Due to the scale of the coronavirus outbreak, the Centers for Disease Control (CDC) recently suggested that universities should consider postponing or canceling upcoming foreign exchange or study abroad programs, and ask current program participants to return to their home country. With Italy ranking as the second most popular destination for U.S. students, the cancellation of international travel programs is likely to impact thousands, likely leading to lost revenue.
e-Learning as an Interim Solution
As the coronavirus spreads in the U.S., many universities have moved classes online to prevent further transmission of the virus. Forgoing in-person instruction and relying entirely on remote learning, however, can stress institutions’ existing technology, making it important to plan for contingencies. Even in the short term, disruptions to academic continuity can have prolonged impacts on revenue streams, especially when considering canceled semesters, meal plans and housing contracts.
Modeling Through Black Swan Events and Mega-Catastrophes
Confronting a black swan event like the coronavirus requires universities to be exceptionally nimble in their response, both to minimize disruptions to students and to avoid major dents to operating revenue. Considering the economic impact of lost tuition revenue, study abroad program cancellations, and investment in online learning technology necessitates a modeling tool capable of providing dynamic analysis. Prioritizing long term financial modeling can help minimize uncertainty and enable universities to avoid severe financial hits as the coronavirus outbreak continues to unfold.