Universities Dealing with a Decrease in Tuition Revenue

Poor enrollment has had many schools, both public and private; see an unprecedented decrease in their net tuition revenue. The latest Moody’s Investor Service survey reveals that universities’ tuition revenue cannot keep up with inflation.

The economic recession is only now showing how deeply it has affected higher education. Before the recession, most universities would easily achieve an up to 8% increase in net tuition revenue annually, but today, half of the universities surveyed are struggling with more than 5% decrease in their net tuition revenue. For 2014, it is estimated that 6 in 10 universities will have to deal with a 2% and up decrease in their net tuition revenue, a hard-to-ignore tuition crunch.

The combination of a smaller family income and the still high-priced tuition fees are two reasons why more than 4 out of 10 universities won’t achieve a net tuition revenue above 2% which is this year’s inflation rate. Universities both public and private are facing a worrisome reality as they witness their primary revenue source constantly shriveling. Many universities are having up to 28% drop in tuition revenue, something no university was ever adequately prepared for.

The tuition crunch comes with its own set of implications, first for the universities and then for the wider society. Decreasing revenue, means professors’ salaries will freeze or be further reduced, research will suffer from budget cuts and investments in facilities, programs, and innovation will also suffer greatly. While some high-status universities manage to counterbalance this tuition revenue loss by focusing on robust online learning offerings and overseas student markets, other universities are still at loss for how to put a halt to this downward spiral.

Is it possible for smaller universities to counter the decrease in revenue by increasing their online learning footprint and investing more in distance education?