As parents consider the high cost of a college education, many also wonder if the institution in which they invest their hard-earned money will survive the current economic environment.
Scott Galloway, bestselling author and professor of marketing at NYU Stern recently analyzed more than 400 colleges and universities, evaluating their response to the pandemic. Institutitutions were ranked into four quadrants of sustainability - thrive, survive, struggle, and perish. His report made headlines and garnered some criticism with its prediction of the demise of several institutions. In response to pushback to his original post, Galloway the revised the fourth quadrant from "perish" to "challenged."
Moody's Michael Osborn of the US Public Finance team recently summarized the overall economic and credit impact for the higher ed sector more favorably.
“Colleges and universities that enter the pandemic from a position of strength will manage through this environment fine, they’ll exit the pandemic maintaining their key market distinction. Colleges and institutions that entered the pandemic already facing challenges have done a good job of cutting budgets and expenses where necessary and doing what they need to do to manage a very challenging operating environment. We’re not expecting a massive fallout because of the pandemic.”
Sign up for a free account to listen to the entire “Moody’s Talks” podcast with Susan Fitzgerald and Michael Osborn. They discuss the financial difficulties US universities face as the coronavirus crisis hurts multiple revenue streams.
Put Your College to the Test
It’s a relief to know that the higher ed sector will survive as a whole. But as a parent on the verge of investing a substantial sum of money in my own child’s education, I want to know how specific colleges are fairing. The fine folk at the Hechinger Report have created a “financial stress test” that assesses the financial fitness of the nation’s public institutions and four-year nonprofit colleges and universities. The assessment is based on methodology laid out in "The College Stress Test" and uses metrics that include enrollment, tuition revenue, public funding, and endowment health. Read more about the metrics behind the tracker and put your student’s college to the test HERE. Simply type in the name of the college. For a more visual representation of the data, access the Stress Test here.
Final thoughts: Some colleges may go out of business in the coming years. But many more will shift their mission and strategy and accelerate their use of technological delivery models. Some institutions may develop low residency models; two or three-year degrees; or short-term, credential programs. With different delivery models, greater differentiation in price points may arise. However, if we've learned anything in recent weeks it's that students value the on-campus collegiate experience. The residential model will live on.
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