Enrollment at American colleges and universities could drop up to 20% this fall. The findings come from credit ratings agency Fitch Ratings in an attempt to predict financial toll potentially placed on colleges and universities from the impacts of the coronavirus pandemic.
Both declining enrollment — and the financial impact it has on colleges and universities — won’t be spread evenly across institutions.
“Enrollment pressures, particularly related to declines of international students and incoming freshmen, will not affect institutions equally,” the report says. “Private colleges in competitive regions with challenging demographics, such as the Northeast, and/or an already vulnerable demand profile, will be most affected. Those with a wider geographic draw, high selectivity, strong matriculation and revenue diversity are less vulnerable.”
TUITION DECLINES COULD IMPACT PRIVATE COLLEGES MORE THAN PUBLIC UNIVERSITIES
Fitch Ratings, which is one of the “Big 3” credit ratings agencies along with Moody’s and S&P, predicts college enrollment to drop anywhere between 5% and 20% for colleges and universities across the nation. Tuition and student fees make up about 82% of revenue at private colleges and 38% of revenue at public universities, the study says.
“Tuition constraints will exacerbate the financial effects of enrollment declines,” the report says. “The economic downturn could weaken expected family contributions, increase financial aid needs and undermine enrollment decisions.”
Colleges are expected to increase discounts to both attract and retain students concerned by affording school. In Fitch’s portfolio of private colleges, the average discount rate is 35%, but the range is anywhere between 10% and 60%. “The national average discount rate of about 40% is even higher for entering freshman and is viewed by Fitch as unsustainable,” the report says.
MORE STUDENTS CONSIDERING A GAP YEAR OR CHEAPER COLLEGE OPTION
According to recent LendEDU data, a sizeable portion of high school students not already committed to starting at a university this fall are considering various ways of avoiding the traditional college path. What’s more, the research says, at least some students currently enrolled are considering taking a year off or dropping out of their current college to attend a cheaper option like a community college, public university closer to home, or online college.
“Over half of all college students now believe it will take them longer to graduate because of the coronavirus pandemic,” that report says. “On top of the mental impact this reality has, the financial impact could be crushing as this could mean taking on even more student loan debt to cover an extra semester or two.
“But ultimately, the data from this survey seems to indicate that the colleges and universities themselves stand to lose the most in the wake of the pandemic as less traditional higher education options, like online college, become more competitive in attracting students.”