05/22/2023 | Press release | Distributed by Public on 05/22/2023 05:58
BOSTON-May 22, 2023- Higher education's financial stability is expected to fall below pre-pandemic levels within the next three years, making for a concerning macroeconomic environment for colleges and universities within the US, according to new research by Bain & Company. For its report: "The Financially Resilient University," Bain analyzed data from more than 1,500 higher ed institutions and found that the increased financial health that institutions experienced between 2020 and 2021 was an anomaly that's not expected to last. Instead, if they wish to flourish or even survive, Bain says institutions should be preparing for new risks brought on by macroeconomic challenges, industry trends, and the end to one-time circumstances that propped them up during the Covid-19 period.
"Everyone expected the pandemic to be the death knell for higher education, but it actually turned out to be a lifeline for colleges and universities," said Jeff Denneen, global head of Bain's Higher Education practice. "An influx of federal aid, a booming stock market, and dramatically lower operating costs enabled institutions to be much more resilient than expected. But looking ahead, institutions can't rely on the largesse of the federal government and stock market returns to drive their financial sustainability. There are real structural market challenges that need to be taken head-on to ensure that institutions can continue to grow revenue, manage costs, and create a sustainable financial model to deliver their mission well into the future. Our research provides a clear path for how to achieve that."
Identifying financial risk factors
Bain analyzed a number of risk indicators, including low national rankings; low yields on accepted students; and a declining number of applications, tuition revenue and non-endowment assets. The study found that the more risk indicators a college or university has, the weaker its financial resilience is likely to be. Those institutions who face four or more risk indicators are three times as likely to have low resilience when compared to institutions who face just one risk indicator.
Bain also found that resilience varies by segment. Top private institutions are typically quite resilient to potential shocks due to strong enrollment growth, healthier net margins and larger endowments. In contrast, smaller private and regional public universities, which have historically shown weaker margins, face greater challenges.
"Two things matter as college leaders look for a sustainable model-market position and financial position-and they need to pull levers on both simultaneously," said Jeffrey Selingo, report co-author and a higher-education strategist and special advisor at Arizona State University. "Institutions will need to do more than tweak around the edges with their strategy. Rather, most will need to set themselves apart as whole institutions by developing distinctive pathways for learners that boost demand, cut costs, and increase revenue."
Steps to ensure resiliency
While the coming years are expected to be economically challenging for higher education, institutions can take certain steps to strengthen their resiliency and minimize impact. Beyond creating more efficient and effective administrative operations and finding new revenue streams, this includes deeply understanding the needs of an evolving target student population, simplifying their missions to support those needs, and innovating their academic offerings to grow student demand.
To arrange an interview or for any questions, please contact:
Katie Ware (New York) - Email: [email protected]