US universities confront significant financial challenges during the global pandemic

US universities face higher demand of financial aids during the coronavirus pandemic. (credit: Bing Xiao)

As a financial analyst with three years of experience at a major international insurance firm, Houhua Wang thought it was time to pursue his goal to obtain a Master of Business Administration degree at New York University.

“I had prepared for my application over a year, but I decided to keep my job this year rather than study further,” said Wang, who works in Shanghai at China-based AIA Group, a major publicly listed pan-Asian life insurance company. “It’s a devastating time for every applicant.”

Wang and other Chinese applicant are required to take standardized tests, such as GMAT and TOEFL, for their applications. However, since the coronavirus outbroke in China and then ramped up around the globe, standardized tests, including IELTS, TOEFL, GMAT and GRE, have been canceled or suspended.

Wang had registered to take the GMAT test in February in Kuala Lumpur, Malaysia, but testing centers were closed there. As a result, he lost the chance to obtain the prerequisite scores he needed for his application. He still wants to attend NYU, but the testing issue forced a delay for at least a year.

“I know some Chinese applicants who have gotten offers cannot make an appointment for the visa,” said Wang. “The website shows the earliest available appointments you can make will be in October.”

“There is a significant level of tuition uncertainty, particularly for students that are from international locations may not be able to get to the campus due to challenges with their visa status,” said Scott Strobel, who became Provost of Yale University early this year. Strobel and Peter Salovey, the president of Yale, discussed prospects for the coming year in a recent online Town Hall meeting.

Universities in the United States could be facing significant budget shortfalls with the potential loss of international students for the coming year. Many are not yet certain about the details as they analyze how long the corona virus will be affecting their operations. At Northwestern University, for example, changes among international students won’t be known until data will be released this fall, according to Jon Yates, director of Media Relations at Northwestern University.

Many universities have not made changes to their admission policies, but are extending their deadlines and accepting GMAT and GRE scores from virtual testing. Some, meanwhile, such as the Kellogg School of Management at Northwestern University, will offer some test waivers for standardized tests for MBA applicants.

While Northwestern University anticipated a total shortfall of about $90 million of the 2020 fiscal budget, Yale University released an estimate on financial impact, factoring in the potential loss of tuition from the international students.

“We are likely to see a significant shortfall in the 2021 fiscal year as well, perhaps as great as or greater than what we are experiencing this year,” Northwestern University President Morton Shapiro said in a letter.

Strobel said that Yale was expecting a budget hit of approximately $200 million. He said that figure included both reduced income and housing reimbursements for students during the COVID crisis.

Financial aid is another burden for universities. “As we begin consideration of the next fiscal year budget, we can already see there will be a greater need for financial aid for our students,” said Strobel.

According to a report from Pew Research Center in 2016, 20% of undergraduates in the U.S. were from underprivileged families and got financial support from their parents, an increase from 12% of 1996. Given the poverty rate stayed flat at about 12% at the same time, it indicates that more poor students are engaging in high education than before. Most of them rely on financial aid to complete their studies.

“Our commitment to our need-based financial aid policies is unwavering,” said Salovey, the Yale president. “We need to protect the financial support that we provide to students, especially those from the least affluent families.

 “A substantial reduction in our revenue hits directly to our bottom line,” Strobel said.

Fortunately, he said, Yale University has sufficient reserves to manage this one-time shock. But in the long term, Yale has decided to impose a 5% cut in expenditures across the university. This 5% reduction will largely be achieved by a pause in hiring, a salary freeze for the next year, and suspension of building projects for the next two years.

President Salovey said Yale University was receiving fewer endowments this year. At Northwestern, President Shapiro, according to spokesman Yates, had suspended fundraising due to the coronavirus crisis, and instead asked alumni and friends to support local communities by “lending a hand to a neighbor, giving blood, donating supplies or supporting local charities that are serving the most vulnerable among us.”

Meanwhile, Northwestern “did not apply nor accept any CARES Act funding from the federal government,” said Yates. Previously, President Trump had criticized other institutions, including Harvard University, for receiving emergency funds, but Harvard denied it had done so.

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