NEW YORK: Some of the richest US universities are scrambling to come up with a new and once inconceivable calculus: how much money to refund students.
Harvard College, Princeton University and the Massachusetts Institute of Technology are among a handful of schools that plan to prorate room and board costs as the coronavirus has forced them to send students home.
The spread of the virus and responses to it are causing havoc across the economy, with companies scrapping earnings projections, markets in free fall and lawmakers squabbling about how best to address what increasingly looks like a recession this year.
While higher education has been less exposed to broader financial trends, this time these institutions may not be exempt.
For students and their parents, it will be a breather from the spiralling cost of higher education, even if it’s for less than a quarter of the school year.
The givebacks could mean a financial squeeze for schools, especially those that increasingly rely on student revenue to pay some of their operating expenses.
“One could imagine it costing schools something like US$2,000 per student,” said Phillip Levine, a professor of economics at Wellesley College.
“At a school of 2,000 students, that’s US$4 million.”
At Harvard, room and board for this academic year is almost US$18,000. The college has agreed to prorate those expenses as of March 15, the deadline by which students must leave their housing.
Brown, Columbia and Yale universities also announced plans this week to offer prorated refunds or credits.
The schools are still formulating the plans and have provided few details, largely because they need to be individualised. At Harvard, for example, more than half of the undergraduate students receive some financial aid.
Also, in some cases, those who live off campus may need to negotiate with their landlords.
“Most schools will have difficulty offering rebates,” said Ron Ehrenberg, a professor at Cornell who directs the Cornell Higher Education Research Institute.
“They depend upon revenue from room and board to fund the housing and dining facilities. What will they do with the fixed costs, things that they can’t vary?”
Schools with large endowments, like Harvard at US$41 billion, have the financial cushion to bear the expense. That’s not so for smaller colleges or those run by a state.
“Public universities are going to be much harder hit,” said David Feldman, a professor of economics at William and Mary.
“The only way they can deal with that is with layoffs.”
Even so, “all institutions are going to take a closer look at their refund policy”, said Brad Farnsworth, a vice president at the American Council on Education, a higher education trade group.
“Everybody wants to do right by their students. It’s an absolutely unprecedented situation.”