Students, parents, and higher education leaders alike have spent much of the spring wondering if college and university campuses will reopen in the fall of 2020. If so, how many students will attend? Will an in-person fall semester even be possible due to the continued impact of COVID-19?
While administrators struggle with many competing issues, fall enrollment is top of mind for most because tuition accounts for nearly 50% of revenue.1 And unlike many other forms of revenue, tuition is the least-restricted funding source.
Budgets that had been carefully prepared over many months with input from schools and departments are now irrelevant. Leaders are scrambling to create budgets that incorporate new forecasts for tuition and fee revenue based on new state mandates for caps and the ever-changing COVID-19 environment. However, it’s difficult to predict tuition and fee revenue with so many unknowns that lead to myriad scenarios with enrollment numbers, enrollment mix, and the associated fee revenue.
Dynamic tuition planning brings clarity to revenue models and scenario planning, so administrators can model contingencies based on available data.
Why tuition planning is critical
Tuition and fees represent the largest revenue category for most colleges and universities and are the most flexible in terms of where and how they can be deployed. State appropriations are often earmarked for specific projects, and funding from the 2020-2021 academic year will probably be considerably lower given the economic turmoil. Endowment money is mainly encumbered except for (perhaps) interest income, but that diminished when the stock market dropped, and the future remains volatile. Grants and contracts are tied to specific initiatives, and auxiliary income from the bookstore and similar operations tends to be break-even for most institutions.
Accurately predicting tuition revenue can be a dynamic indicator of financial health. But the manual tuition analysis that many institutions perform fails to create dynamic what-if scenarios or compare two (or more) plans with different assumptions — these processes simply aren’t robust enough to provide actionable insights.
Institutions without tuition planning software likely use Excel spreadsheets, which makes human error more likely, limits comparison, causes version confusion, and leaves leaders with low confidence in the accuracy of data used in calculations.
Tuition planning factors to consider
For colleges and universities, budgeting uncertainty won’t magically dissipate once the fall semester begins, as COVID-19 is expected to roil enrollment numbers for the foreseeable future.
Before formulating contingency plans, leaders must make projections regarding enrollment and funding sources. On the enrollment side, the volume factors to consider include:
- Returning students: Will seniors years stay in school an additional year for the job market to get better?
- Freshmen: Will they be taking a gap year?
- On-campus versus off-campus: Will housing needs change? Will the enrollment for online classes increase?
- Undergraduate/graduate: Are graduate students facing different pressures than undergraduates? Will international students move to PhD programs? Can graduate programs like MBA programs stagger opening of fall and spring classes?
- In-state versus out-of-state students: Will non-resident students be able to return to school if their state is still under lockdown?
- International students: What are the visa situations in their respective countries based on COVID-19 in their country?
- Transfer students: Will the students stay in community colleges as they face uncertain financial futures?
The assumptions that finance leaders make will depend on historic data regarding student body composition and past student behavior patterns regarding enrollment. Universities that have greater percentages of out-of-state and/or international students, for example, likely will need to lower projections for the fall as more students will likely stay closer to home.
Because of expected flat-to-lower state appropriations for public institutions, officials may need to consider a wide array of tuition and fee scenarios to align budgets to projected enrollment. Those factors include:
- Base tuition
- Base fees
- Program fees for specialty programs
- Tuition adjustments between in-class and online instruction
Dozens of colleges and universities have already taken steps to stabilize enrollment by freezing or reducing tuition or reducing out-of-state tuition. Several state/regional funding authorities or university governing boards also have frozen tuition, leaving administrators with tough choices between attracting and retaining students and balancing their budgets.
How tuition planning software can help
Given the varying student and tuition/fee factors, creating a working budget for fall 2020 (or beyond) becomes a challenge. Compounding matters is that fact that just half of budget and finance leaders at colleges and universities say they have an adequate solution for tuition planning.2
A single contingency plan can’t address all the unknowns moving forward. Possible scenarios include a “normal” fall semester based on historic student numbers/demographics; another with reduced numbers of in-state, out-of-state, or international students; and a third with online-only instruction. Of course, there are innumerable possible scenarios, based on an institution’s unique combination of tuition, fees, student composition, and budgeting goals.
That’s the value of a tuition planning solution — the ability to easily model different scenarios by tweaking a few parameters and comparing plans side by side. Building consensus requires faith in the underlying data and the ability to see how different scenarios impact budgets.
Institutions that are the most dependent on tuition might reforecast a budget after the drop date for that term to allow better planning for the next term. During the COVID-19 outbreak and the post-pandemic period, tuition planning might need to be forecast monthly, based on how a state or region deals with the pandemic and as more information about student behavior regarding higher education becomes available.
No one yet knows what the new normal in higher education — or any industry — will look like. A robust tuition planning software solution can help finance leaders understand the current data so they can model likely scenarios and make better, data-driven decisions.