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Colleges and Universities React to the Economic Crisis: Gnash Teeth, Wring Hands…and Repeat

In a pair of pieces appearing this past weekend in the New York Times and the Los Angeles Times, two journalists illustrate that this admissions season perhaps will be the wackiest ever.

Not only are students sweating over whether they will be accepted or rejected, colleges are facing the same anxieties: will enough students say yes to their offers, thereby helping to make their financial targets for the year.

“Financial targets,” you ask? “You mean to say, Mark, that this admissions process is largely about making budget?”

Um, yeah.

You see, most colleges and universities, both public and private, are tuition-driven. That is, each year’s expenses must be paid by the tuition revenue collected that same year. Hand-to-mouth. Year-to-year.

Only a handful of really wealthy, heavily endowed universities are immune to the fact that tuition revenues keep the doors open. And with the financial crisis affecting everything in our economy, colleges and universities are finding it difficult to plan–at the very least.

And a few, like the College of Santa Fe, may actually shrivel up and die.

A while back I prognosticated some of the potential effects of the financial crisis on higher education. It’s too early to tell whether any of my predictions will come true.

But one thing is indisputable: most colleges are worried about their yield rates and their budgets.  (Skeptical?  Read the article from the New York Times here and the Los Angeles Times here.)

So here is a refined set of prognostications for how college and university admissions and financial aid offices will likely react to tough economic times.

  1. More students will be placed on waiting lists. And the students most likely to be pulled off waiting lists will be those able to pay the entire cost of tuition.
  2. More colleges may be unable to meet the full financial need of those students they admit. And those colleges that do not meet full demonstrated need will meet a lower percentage of that need than in the past.
  3. Admissions offices will have a keen eye cocked on persistence rates: are current students leaving because they can no longer afford to pay tuition?
  4. Transfer students with ability to pay full freight may have better chances at some selective colleges this year, especially if persistence rates drop due to financial difficulties (see above).
  5. Colleges will do everything they can to maintain levels of financial aid at past levels–in the aggregate. But in practice admissions and financial aid may be more stingy in doling out the merit aid this year.
  6. Whatever the impact the economic crisis has on admissions, there is little doubt that students will see an impact on their experience in college. Announcements of hiring freezes mean larger average class sizes. Some campuses are eliminating competitive sports. Student services may be cut back commensurate with staffing cuts.

Only a few short weeks (days, even!) until colleges and universities send out their admissions decisions and financial aid offers.  And then another 30 days of anxious waiting as students make their decisions about which college will earn their loyalty…and their money.

Mark Montgomery
College Consultant



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