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Struggling Colleges Face Financial Nightmare With Students And Classes Off Campus

The library at Hampshire College in Amherst, Massachusetts.
Creative Commons
The library at Hampshire College in Amherst, Massachusetts.

Over the past few weeks, Hampshire College President Ed Wingenbach has been working remotely from home, occasionally going into his office on the ghostlike campus in Amherst.

“It is not like ‘The Shining,’” he said. “But it is very quiet.”

Even before the pandemic, many small private schools like Hampshire were facing a financial situation reminiscent of the nightmare in the Stanley Kubrick film. Wingenbach said the college had figured out how to survive, launching a $60 million fundraising campaign led by Hampshire alum Ken Burns, the documentary filmmaker.

“It was just a question of being really disciplined about how much we spend and how we allocate our resources,” Wingenbach said.

But the pandemic has shaken the financial stability of most private and public colleges. Collectively, they owe graduating students millions of dollars in refunds for room and board — returning students are being offered credit toward next year's housing instead of a refund, to cushion the blow of the losses. The outlook is so bleak that Moody's Investors Service changed the credit rating for higher education from stable to negative a few weeks ago.

Many colleges that were already operating on the brink, like Hampshire, worry about enrollment declining this fall and their ability to continue to pay staff and faculty. If the pandemic drags on into the summer and fall, more colleges could order layoffs — or even go out of business. A survey of college presidents conducted for Inside Higher Ed found that about four in 10 didn't predict that in-person classes will resume by the fall semester.

“I think schools are staring down a situation where they need to retain cash, frankly, to remain solvent,” said Michael Horn, co-founder of The Clayton Christensen Institute, which studies innovation in higher education.

Hampshire is on the hook for about $900,000 in room and board refunds, according to Wigenbach. If current students are reluctant to leave home, or families can’t afford to pay, Hampshire will take another unexpected hit this fall with the loss of housing and tuition payments.

“We just had 10 million people file for unemployment over the last two weeks,” Wigenbach said. “If the government doesn’t pass the kind of legislation and support necessary to get the economy back in business, that’s something that would impact everybody.”

Even before the current crisis, Horn aggressively forecast a dreary future for many colleges, predicting a quarter of them would go out of business in the next decade.

“I think this accelerates it for many of them,” he said. “I think we’ll see several closures.”

Horn said families are entitled to refunds on room and board since those services are no longer being used, but there’s an outstanding question about tuition refunds as teaching migrates online and the quality of education is questionable.

“Schools are going to do everything that they can to serve students and families on the academic fronts so that they don’t have to visit the issue of tuition reimbursements as well, because that could be crippling,” Horn said.

Specifically, Horn said he thinks the pandemic and economic downturn will hurt a lot of small private colleges in the Northeast, which were already facing a declining number of high school graduates and a market oversaturated with private schools.

Public schools could be in trouble, too, though. Last month, in the Northwest, Central Washington Universitydeclared bankruptcy. If a loss of tax revenue leads to less funding for public universities, others could follow suit, allowing them to layoff even tenured professors.

To help stop the bleeding, Congress passed a coronavirus relief bill late last month that includes about $14 billion for colleges. Advocates had asked for $50 billion and say that the lower amount is not enough.

“I don’t think anyone alive can compare what we’re looking at now to anything that we have seen in our lifetimes,” said Terry Hartle, senior vice president for government and public affairs at the American Council on Education, an umbrella organization that represents hundreds of colleges on Capitol Hill.

“I suppose you could go back to the Great Pandemic [of 1918], but at that point, there weren’t very many colleges and universities, and the federal government wasn’t involved in financing them the way they are at the present time,” Hartle said. He added that the federal aid won’t cover refunds and other costs associated with moving courses online, deep cleaning campuses and halting research not related to COVID-19.

After telling students to go home and migrating teaching online, University of Massachusetts President Marty Meehan said the five-campus system is looking at making about $70 million in room and board refunds, so it desperately needs more federal funding.

“I think Congress is aware of the losses that we’re suffering and is also aware of just how much the nation’s colleges and universities are stepping up and continuing to provide educational programs that are critical to this country’s future,” Meehan told WGBH News.

Under the relief bill, UMass will receive about $46 million. Meehan, a former House member, said he is confident Congress will pass additional aid for colleges.

Under the law President Donald Trump signed on March 27, Hampshire College will get about $1.2 million. Wingenbach said that will make up the amount going out in refunds. “Right now, it looks like it’s kind of a wash,” he said.

Still, looking forward, Wigenbach said he is worried about future enrollment.

“Depending on how long this goes, there may be shifts in first-year students and their interests in coming to college in the fall,” he said.

If the Amherst campus is still empty and off-limits to students come September, Wingenbach said Hampshire will need to deliver better online learning.

This report was originally published by WGBH.

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