The coronavirus pandemic has created a perfect storm in the higher education industry. How an institution responds now, in the weeks and months ahead, will establish the course of their future. Some have very few options for survival where others, if they set the right bearing, can position themselves to not only weather the storm but also flourish in the long term.
This is the fourth, and next to final, in a series of posts that are focused on mitigating the financial hardships that you may be facing, both short and long term. The final post will be limited to subscribers of this publication. It will offer our perspective on priorities and timelines associated with the topics and recommendations made in this series. It will also make a very exciting announcement. Like you, we have been working diligently to reimagine what our business will look like in the future and are very excited to announce a paradigm shift in how we will price, package, and deliver consulting services to our clients. We will be making the announcement in MMC Insights so that our clients and subscribers are the first to see it and have the first opportunity to take advantage of it.
In this post, we recognize two things that are simultaneously a challenge and an unprecedented opportunity for higher-ed. The challenge is that the cost of education has been increasing at a pace much faster than household income. As a result, universities and colleges have often been trying to capture the enrollment revenue they need through program expansion and increased market-spend, awarding, and overall discount rates. All of which erode net-tuition revenue. The opportunity, and most likely a necessity now, is to transform the cost structure of the institution, enhance online education, and expand the market-centricity of the institution’s offerings. The Covid-19 pandemic has accelerated what higher-ed has been facing for over a decade.
Every year a few colleges and universities are forced to close their doors, and their students must then find somewhere new that will accept their credits and finish their education. Now, due to the financial strain associated with the pandemic, the number of colleges and universities that face financial failure will increase significantly. Some may not survive FA20. Others will sustain for a while, but only those that respond appropriately will enjoy long-term success. The good news is that those colleges and universities that respond effectively now, will at long-last be able to enroll more students at a lower cost.
Take a look at the following realities:
FAFSA renewals are down five percent for continuing students, and FAFSA completions are down nearly three percent for new incoming students. These statistics vary by household income, but this certainly suggests that fewer students than expected will enroll in FA20.
Online or virtual learning looks to be a significant part of higher-ed’s future. Even with universities and colleges reopening this fall, surveys are showing that twenty percent of students may opt to attend college virtually. Further, many of those students perceive that the quality of the online program at their traditional residential college is lacking or doesn’t warrant its price point. In many cases those students have plans to shift to a different online institution.
The collapse in the job market has resulted in a massive decline in summer-job opportunities or, at a minimum, in a postponement of start dates. In some cases, summer internships have gone virtual. This, of course, is of concern to students and families that are investing toward a desired outcome.
Increased pricing pressures may be on the horizon. Those colleges that have restructured (lowered) their costs through effective use of technology, will be able to enroll students at a lower price. This will eventually lead to increased price-pressure for institutions that have not adequately lowered their costs.
All of this puts current statistical admissions models at risk - starting with FA20. Where institutions have relied on historical yield statistics, they need to be recalculated incorporating regional survey data pertaining to FAFSA applications, online enrollment, pricing pressures, student satisfaction, outcome potential, and more. Developing a new, reliable, predicitive model requires expertise that we can provide. Contact us if you would like to discuss how we can help you be more confident in what to expect for enrollment revenue.
We are confident that many colleges will find a way through the present crisis. The question is for how long? Surviving FA20 is only one hurdle. It is our opinion that higher-ed will undergo a macro-level of change. Long-term survival will require changing the cost curve, which will entail freeing up space by taking advantage of remote-work opportunities, leveraging technology to serve students with fewer staff and associated resources, establishing excellence in online education, and partnering effectively with the workplace to ensure successful outcomes for graduates.
Remote Work:
Many of the functions of an institution can be accomplished remotely. While this might feel counter-cultural to the inter-personal legacy of the institution, technology and management models are readily available that enable this to work quite nicely without compromising the institution’s DNA. Though there may be some necessary investment in technology and equipment, the return on that investment is substantial in freeing up physical square footage. That space can be reallocated into additional classrooms to increase social distancing, or perhaps more imperatively, can be consolidated and leased out for a steady flow of income.
Leveraging Technology:
Colleges and universities that have adopted technology and automation, and adjusted their payroll and expense structures accordingly, will enroll more students at a lower price. That will eventually increase pricing-pressure on colleges and universities that have not effectively done the same. The temptation is to think that the technology implementations already made are sufficient. In some cases they may be, but it would not be prudent to assume so. Most enterprise systems serve the staff rather than the student. They make staff more productive but they don’t change the overall cost structure. Technologies such as artificial intelligence, integrated mobile services, virtual one-stop-shops, automated self-service, predictive modelling, and more are not the norm. Yet these solutions are entirely possible and essential for long-term sustainability.
Online Education:
Currently online learning is viewed as a lower quality education than campus learning – not only by the market but by the institution itself. Certainly this past semester created several concerns for students and educators alike. Erratic attendance, unreliable network connections, and distractions from phones, computers, and things going on at home accentuated issues that would give any faculty professional reason for concern. Conversely, as has been demonstrated by several lawsuits from students who are pursuing refunds due to the lower quality of education they received online this past semester, either the quality of online education must improve or the price must be lowered. With some concern over a second round of virus-outbreaks in the fall and winter, there is a segment of the population that intends to enroll online or defer their education until sometime in the future. It behooves the institution to diligently pursue excellence in online education, even if that means partnering with other institutions or service providers. If that is not possible in the short term, then price must be addressed. With the shrinking population of college-aged students, this is a crucial strategy not just for traditional programs but also for non-traditional programs.
Workplace Partnerships:
We’ve advocated for a long time that outcomes are a reality for colleges. Though most institutions prefer to be educators only, the marketplace is increasingly selecting programs that will best achieve their desired outcomes. Outcomes is now one of the top two selection criteria. In the past, corporate partnerships could be limited to curriculum-based internships. However, to truly partner with a company, what we call “marketplace internships” are a necessity. These are essentially part-time, paid jobs that give the student real-life experience but also give the company an opportunity to try-before-they-buy. It is highly attractive for a business to be able to collaborate with an institution to hire students part-time or on a temporary basis at low (student wage) prices and evaluate the capabilities of the students before they decide to hire them permanently. By working in partnership with companies this way, the university not only serves the student but also the workplace. There are institutions that do this very well and the results have been stellar in terms of both new enrollment and retention. This also has a nice side-effect in that it provides the institution with insights about which industries are hiring and which degrees are in demand.
Each college will be affected differently by what everyone is now calling the “new normal.” Some institutions will be farther along the curve to long-term success than others. As a result, priorities will be different for different institutions. That’s why we provide two comprehensive assessments that evaluate your specific situation and provide recommendations to optimize your cost structure and increase your enrollment. Please contact us if you would like more information about these services, which we can deliver remotely, if needed.
If you are a subscriber, please keep an eye out for our next issue as it will provide insights on timelines and priorities, as well as some significant opportunities for services in the future. If you would like more information prior to the final post being published, don’t hesitate to contact us. You can email us at: MMC@MikeMoroney.com