The Next 132 Years

Financial resiliency is the greatest challenge to higher education

BY ANAS BEN ADDI

WHILE AMERICAN HIGHER EDUCATION FACES challenges over free speech, academic offerings, and the role of government in managing public universities, the real crisis is financial.

College enrollment dropped 10% nationwide between 2009 and 2020, and during the pandemic universities took another 8% hit as 1.2 million students left college.

Most American universities rely on tuition for significant parts of their operational budgets, and this decline left hundreds of institutions in trouble. That 37 public or private institutions have failed since the pandemic began is often cited as one of COVID’s major impacts, but the problem runs much deeper. Since 2004, 869 institutions have closed, and those failures reached a staggering single-year total of 120 in 2016.

Ironically, COVID probably kept a large number of institutions afloat. Billions in federal relief funding helped beleaguered colleges temporarily balance their budgets, and draconian economy measures like program reductions, hiring freezes, shuttered dorms, and lay-offs lost their stigma, being seen as prudent responses to emergency conditions.

Yet S&P Global Ratings credit analyst Jessica Wood recently noted that “student enrollment has not rebounded to pre-pandemic levels,” while “inflation will continue to be an economic challenge for most higher education providers while revenue recovery, even with tuition increases, is likely not enough to fully offset expense growth.”

Consulting group EY-Parthenon estimates that 10% of the nation’s colleges and universities—over 600 institutions—now face existential financial challenges.

Neither Delaware State University (DSU) nor other institutions in our region have been spared these pressures. At DSU we faced a potential $20 million shortfall upon making the necessary decision to send our students home in March 2020, followed by a fall semester operating at only 85% of residence hall capacity even with expensive COVID protocols in place.

Ironically, we were better positioned than many institutions to weather the storm. Since 2009 our enrollment bucked all national trends, growing from 3,800 to 6,200, We experienced record-breaking private fundraising success in 2020, and acquired Wesley College in the midst of the pandemic.

Consulting group EY-Parthenon estimates that 10% of the nation’s colleges and universities—over 600 institutions—now face existential financial challenges.

Even so, “business as usual” is not an option. This year we raised tuition for the first time since 2017, and our Reach 2026 Strategic Plan focuses on the awareness that we must diversify our student body. Excessive reliance on traditional, residential students left too many institutions financially vulnerable during COVID; we are now recruiting a broader mix of residential, online, international, dual enrollment high school students, graduate students, and non-residential adult learners because this is what it takes to remain financially viable.

We are also evaluating every aspect of our operations to become more efficient and resilient in a changing market and an uncertain economy. The “new normal” after COVID is almost completely different from everything that came before. This is not the first time in 132-years that Delaware State University has faced such a challenge. Since we intend to remain a leader in higher education for at least the next 132 years, we will master it.