(Bloomberg Opinion) -- As the coronavirus pandemic continues, Bloomberg Opinion will be running a series of features by our columnists that consider the long-term consequences of the crisis. This column is part of a package on transformations in the way in which education is structured and delivered. For more, see Joe Nocera on the future of college sports, Clara Ferreira Marques on the promise of online learning and Michael Petrilli on how high schoolers can benefit from reduced schedules.
The Covid-19 pandemic has forced American colleges and universities to shut dormitories, cancel sporting events, halt graduation ceremonies and shift lectures and classroom instruction online. This has caused unprecedented disruption to institutions that are averse to change in the best of times. As the economic crisis deepens, higher education will face even more serious problems, which are likely to persist even after the worst of the public health dangers has passed.
The vast majority of colleges and universities, both public and private, will soon face a shortage of two key sources of revenue: foreign students and students paying high out-of-state tuition rates. The crisis thus threatens the financial model that has sustained many schools and will force some to downsize, cut programs or go out of business altogether. These developments will be bad news for American research and development, and also for the many towns and cities that rely on universities as engines of economic growth.
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To understand the dynamic that will be set in motion, let’s start with parents. Most still wish to send their kids to college, and indeed they will. But consider their calculus in more detail. At this point, we cannot be sure whether there will be a true fall semester in the traditional sense. Even if face-to-face classes are held, will the school of your choice still offer exciting dorm life and that wonderful football team? Maybe not.
Incoming students are required to leave deposits for tuition and dorm room and board in advance, sometimes as early as May 1. It’s already the case that most schools have kept room and board (and tuition checks) for the spring semester and not issued refunds. As a paying customer, why take this chance again? We should expect to see an abnormally high number of students take a gap year, which will deprive colleges of tuition revenue. And that’s happening when higher education was financially ailing to begin with.
The decisions of American families also will choke off out-of-state tuition revenue. Note that about three-quarters of America’s higher education sector, by enrollment, is state schools. The out-of-state tuition rate is the real cash cow of American higher education, and sometimes it can approach three times the in-state rate. Schools’ reliance on out-of-state revenue is going to take a big hit, as it was premised on a degree of individual geographic mobility that simply does not exist right now and may not be restored anytime soon.
I suspect many parents will, whether it is rational or not, prefer to keep their children closer to home. Let’s say you live in New Jersey, and you and your kid are deciding between Rutgers (in-state tuition) and University of Colorado, Boulder (out-of-state tuition), the latter being, until now, a more attractive and exotic option. Many more families in that position will opt for Rutgers, perhaps even having their children live at home and commute. The smaller local expenditure will provide a degree of protection if the semester has to be put on ice again, and of course many families will have lower incomes too.
The most vulnerable state schools will be those in underpopulated states and far from population centers. The University of Vermont, with about three-quarters out-of-state students, ought to worry.
Another problem will be the plummeting enrollment of foreign students, who typically are paying out-of-state tuition rates. An increasing number of U.S. colleges and universities have relied on Chinese and other foreign students to balance their books, and this revenue stream is about to dry up. It seems unlikely that immigration and student visas will, by the fall, be at anything close to a normal level, and in any case travel and study plans need to be made well in advance. Even Singapore and Taiwan, which have done some of the best jobs combating the virus, are mostly keeping their borders closed. The foreign students already here will remain (though some will not be able to continue to pay tuition), but the incoming flow is likely to turn into a trickle. Once the cohorts are broken up, and foreign students opt for alternatives closer to home, the future might evolve along those lines. The University of Rochester, with about 27% foreign students, will find this adjustment especially difficult.
As the quantity of available students declines, so will their overall quality. Schools will try to cannibalize students from other schools, in part by lowering standards. Recently the University of California announced it would process admissions without requiring their usual standards of testing and grades. That was presented as an act of great generosity, to ease the work burden on applicants, and indeed it is. At the same time, it likely will pull many students away from lower-tiered schools. Maybe a year ago you could not have entered the U.C. system, but now you can. So why not take advantage of this upgrade in your options?
The relaxed standards will allow some U.C. schools to admit more students than they otherwise would have, and the accompanying tuition revenue will help keep those schools afloat. We might expect a lowering of standards in the classroom, to accommodate students who otherwise would not have made the admissions cut. This isn’t necessarily bad: More diverse student bodies will create more opportunities for American upward mobility, and maybe classroom practices will adjust just fine. That said, quality problems are likely to arise somewhere in the higher education chain. For instance, if the newly absorbed students into the U.C. system do great, that means the schools who otherwise would have enrolled those students will take a quality hit of their own.
The impact of the crisis on graduate education will have painful consequences for the vitality of the U.S. economy. Especially in STEM subjects, graduate programs are extremely dependent on foreign students, especially from China and India. Again, with immigration and student visa processes on hold, those graduate programs may not have enough students to stay up and running. It doesn’t make sense to offer a first-year graduate sequence if only three people are in the classroom, all the more so during financially troubled times.
The cessation or significant diminution of many graduate programs will damage American research and development efforts. America’s most successful research professors work with graduate students, enjoy doing so and learn a great deal for those students, and of course use them as research assistants and co-authors. Paring down graduate programs will cut significantly into our ability to mobilize academic talent, most of all for the greater public good in bio-medicine, AI and other frontier areas. Research universities also play a key role in catalyzing regional economic growth, as students and professors parlay their discoveries into businesses that boost employment. Especially in struggling communities, the potential loss of this economic activity could be catastrophic.
Freezing or stopping these programs also will increase the disparities across schools. Harvard and MIT won’t have to shut down many graduate programs, so there will be a growing distinction between “schools where you can work with graduate students” and “schools where you cannot.” Many of the lower tier research institutions, which in the past have had many graduate students, may emphasize undergraduate teaching more. The distinction between “research universities” and “teaching schools” will sharpen, and there will be fewer of the former.
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Given the scale of the problems facing higher education, how should policy makers and colleges themselves respond?
First, we should accept that debates over higher education will never be the same again. Only a few months ago, the idea of making four-year college free for all was a major idea in the Democratic Party, endorsed most prominently by Bernie Sanders and Elizabeth Warren. The notion was that state governments would step up and fill in the revenue gaps from the loss of tuition revenue. I don’t think that was ever a practical vision, but it is now beyond the pale, given all the pressures on state budgets. It is a bit like arguing that restaurants should move to zero prices, and we will make up for the revenue difference by having a more active fiscal and loan policy from the federal government.
Instead of debating free college, the federal government should grant a new round of stimulus to state and local governments, as that at least will tide over many colleges and universities and give them time to adjust to the new circumstances. Those funds cannot make up for lower tuition revenue for more than a few years, but they can allow for an orderly shrinkage of many institutions.
As for how campuses operate going forward, most schools will try a hybrid model of mixed in-person and online options. If a student doesn’t want to come to class, he or she can do all of the work remotely. Older faculty will be given the option of paid leave, but having to teach more in the future, or teaching online. The creation of more online sections and classes will drain students away from the classroom and allow for a reasonable degree of spacing and social distancing. Some classes will be held outside in tents or under the trees. The dorms will be largely empty, though some foreign students may have no other choice. Many more students will have to live off campus and also bring their lunches. The level of stress will be high at first, but humans are capable of adjusting to many strange situations. The students who most want to learn will respond by working harder on their own.
Professors like me will need to adapt as well. My fall semester teaching was assigned to be online even before Covid-19 came along. The enrollment for that class – Principles of Economics – will be much larger, with hundreds more students, but with some assistance, I expect to handle it. Students will have the flexibility of doing the work and listening to the videos when they choose, and not having to show up in class. As for meeting with students, there is Zoom and also the 10-foot distance across a long park bench, at least until the cold of December rolls around.
In the longer run, the induced restructurings might give higher education some new pathways forward, including with virtual options, as we already are seeing. Schools will have to learn how to market such offerings to large public audiences, much as they currently do with their athletic events. That will mean truly global competition in the higher education arena, as networks of learning and instruction, as well as seminars, are opened up to everyone, or at least to paying customers. In the longer run, that could help boost scientific progress and also upward economic mobility, at least if we can address a deeper underlying digital divide in this country.
U.S. schools, and elite schools in the U.K., also will need to respond by treating foreign competitors more like peers and as less of a feeder system. Foreign schools, especially in China and India, really will become more significant independent sources of innovation, as they keep many of their best national students within their home countries.
The crisis facing institutions of higher learning may well spark needed innovation more broadly. But the ones that survive and thrive in the post-pandemic era will be those who learn how to make do with less.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include "Big Business: A Love Letter to an American Anti-Hero."
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