The problem of being over-reliant on one revenue stream

By, Karthik Manickam is a Research Scholar at the Centre for Economic Studies and Planning at Jawaharlal Nehru University working on Higher Education Financing and the Privatisation of Universities

Context

* The U.S. Immigration and Customs Enforcement’s regulations regarding student visas have thrown U.S.-based international students into turmoil.

* The regulation adds a new dimension to the pandemic-riddled academic year by denying entry to students enrolled in fully online programmes and requiring existing students to either switch to campuses with at least one in-person course or risk deportation.

* As disruptive an impact as this may have for students, there is another potentially larger impact that warrants inspection: the impact on university finances.

Withdrawal of public funds

* The past several decades have seen an ever-increasing relative withdrawal of public funds from universities globally, even as demand for higher education access has grown.

* The perception of college as a means to higher income, combined with the emphasis on competition-driven efficiency, has meant a global trend of replacing college grants with loans and tuition fees, or other private forms of funding.

* Proponents of this process have also argued that this helps increase the autonomy of universities.

* This phenomenon has been particularly pronounced in the U.S. — tuition costs have been steadily rising and a greater share of the cost of education is placed on students and their families with some supplementation by federal, state or private loans.

* Unlike domestic students, international students (with a few exceptions) are not eligible for federal college loans and rely on payment either out of pocket or from private loans.

* There is also less domestic pressure to reduce tuition rates or provide concessions for them, and the risk of advocacy from the students themselves is somewhat less given their precarious visa status.

* In a normal year, the pool of international college applicants for a given school is much larger than the number of positions available, so a rise in tuition cost will still likely see all these seats filled.

* Finally, the college route has proven highly popular for those seeking to eventually immigrate.

* The ultimate outcome of these factors is that international students can in general be relied on to pay much more than their domestic counterparts, making them attractive for universities looking to boost their revenue streams.

* Indeed, the U.S. Department of Commerce estimated that international students contributed about $44.7 billion in 2018 to the U.S. economy (including tuition, housing, and other private consumption).

* The shuttering of campuses and restricted international travel have made the fall semester a less attractive prospect for both returning and new students uninterested in paying the full price for a curtailed college experience.

* By adding additional visa-related questions over and above everything else, universities find themselves in an even more uncertain position.

* Committing to an online-only model risks reducing international student intake even further.

* Conversely, having in-person classes to secure revenue streams puts students at risk and could anyway lead to potentially costly shutdowns mid-semester.

* There will also likely be increased friction between university administrations and campus unions.

Limited solutions

* There are also limitations for university administrations seeking to find solutions beyond tuition revenue.

* Additional public funds seem exceedingly unlikely, and existing relief via the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) has fallen short.

* Private research grants are another potential source, but these funds are themselves likely to be diminished due to the pandemic.

* Some universities possess endowments, i.e. large sums of money that are invested and then used as an income source, but these are also unlikely to be of much help — the fluctuating markets have severely impacted most endowments’ investment incomes, and the underlying capital cannot easily be touched due to both university policy and potential restrictions that donors have attached to their usage.

* In short, universities with already limited fiscal space will now find themselves even further squeezed by the ICE regulations affecting an important revenue source.

* Larger colleges have already begun to push back — the Massachusetts Institute of Technology and Harvard University have filed a lawsuit against the U.S. Department of Homeland Security and the ICE.

* There are discussions being held in other schools about using loopholes to offer in-person courses without requiring students to actually turn up to campus.

* In the event that these efforts fail, however, the economic pressures will be large, particularly for smaller schools with less clout.

Way ahead

* Going forward, there is a need for U.S. universities to reflect on the vulnerabilities created by a system over-reliant on any one revenue stream, and in the long term reconsider the legitimacy of the steady privatisation of higher education.