There has been no greater impact on higher education than COVID-19.
It’s transformed how colleges and universities provide education overnight, creating significant financial distress and uncertainty across the sector.
COVID-19 isn’t the only challenge that schools face.
There has been extensive pressure due to declining enrollment. Lower high school graduation rates, attractive alternatives to higher education, and sky rocketing education costs have all driven down enrollment.
In addition to COVID-19 and declining enrollment, higher education faces numerous other challenges.
Underutilized, fixed assets are reducing EBITDA and cash flow, resulting in debt and covenant defaults. Traditional lenders are looking to exit the sector while non-traditional lenders are slowly entering, bringing a higher cost of capital with them.
Other challenges include…
- Virtual courses are changing education delivery and stealing market share from campus-based schools.
- Schools with high-discount rates and smaller endowments can’t compete with larger, more well-funded schools when it comes to an overall student experience.
- There is also increased regulatory scrutiny throughout the sector.
What can higher education institutions do?
- Managing, preserving and improving liquidity is critical.
- Address near-term and long-term financial and operational challenges right now.
- Develop a sustainable, bottoms-up financial plan.
- Create a process to engage all stakeholders (administration, faculty, students, parents, alumni/donors) in structuring a plan towards success and profitability.
- Financial planning and cost mitigation plans are a necessity since budget shortfalls are already happening.