January 18, 2021

The Class of Covid Is Getting a Truly Terrible Deal

(Bloomberg Opinion) — At a press conference Wednesday, U.K. Chief Scientific Advisor Patrick Vallance showed a slide that perfectly illustrated the crisis facing universities. Take a look:

Clearly, restrictions are no match for 19-year-old hormones. The Covid problems started almost as soon as universities welcomed kids back. Infection rates ticked up in both the U.K. and U.S., and one campus after another had to shut down in-person learning, often leaving students imprisoned in residence halls.

Whether or not those measures prove effective, universities are not going to come out of this crisis unscathed. The pandemic hasn’t only forced them to find ways to continue education while suppressing virus transmission, it has raised more existential questions: Is our centuries-old model of higher education suited to the needs of today’s young people? Does it still deliver value for students and taxpayers?

These questions have been around for a while, but they now have real urgency. The virus has squeezed university finances and is jeopardizing business models based around large campuses, high-ticket capital expenditure and foreign students.

It’s hard to blame university administrators for imposing rules to protect students, staff and the wider community. But students feel let down. In Britain, they were urged back to campus by the government and their universities (which were worried about mass deferments hitting funding) only to find themselves trapped in expensive housing with no in-person classes. They’re being charged full tuition fees and boarding expenses for isolated days watching Zoom classes — a far cry from the college life they expected.

And young people have already been hit hard by this crisis: Many had internships and jobs cancelled during the summer or will graduate into a bleak labor market with consequences for their life-long earning potential.

As the daughter of two former university professors and the parent of two university students in the U.S. (one studying remotely at home, the other logging into his classes from a solitary dorm room on campus), the crisis has made me rethink a model I once accepted as set in stone. Although remote learning has its drawbacks, it’s not the end of the world. It holds some advantages, including potentially lower costs and greater flexibility.

All of this has renewed the debate over the purpose of higher education, its structure and its funding. In a June column, two Bloomberg Opinion colleagues — Tyler Cowen and Noah Smith, both economists — discussed these issues in terms of the U.S. system. In the U.K., the debate takes on a somewhat different complexion because of the central role of the state in British education.

Tuition for universities in England is capped by the government at 9,250 pounds ($11,967) per year for U.K. and Irish students. Students are entitled to government-subsidized loans, which only become repayable when they’re earning above a certain salary threshold (just over 27,000 pounds from 2021), above which they repay 9% of earnings with all outstanding debt forgiven after 30 years. 

That will sound generous to many American ears, but it’s controversial. In the last election, the Labour Party campaigned to abolish tuition fees entirely, an unaffordable position. Even Conservatives have debated the balance of costs between taxpayers and students. A government report into the sector called for reductions of tuition fees and a lower repayment threshold, along with other reforms. There’s concern about a proliferation of degrees that don’t lead to well-paid jobs.

There’s also a worry that the financial crunch of Covid will shut down universities that have a disproportionately high number of students from lower-income backgrounds. This would limit access to further education, hurt social mobility and crimp Prime Minister Boris Johnson’s agenda to rebalance Britain’s economy.

And how will the broader higher education sector will emerge from this? The pandemic means fewer high-paying Asian and other foreign applicants. Brexit will lead to a decline in applicants from the European Union, whose citizens will have to pay higher international tuition rates from 2021. These changes threaten research funds and recruitment of faculty from outside the U.K. Lower-tier universities also worry they’ll be left with the poorest performing students. Some institutions may fail.

U.K. universities don’t hold large cash reserves. In recent years, they’ve spent a lot on new facilities and refurbishments, partly in the hopes of attracting those international students in a competitive market. Only two U.K. universities (Oxford and Cambridge) hold endowments of more than a billion pounds — nowhere close to the deep pockets of many second-tier U.S. colleges and universities.

The U.K.’s Institute for Fiscal Studies estimates that the pandemic could cost anywhere from 3 billion pounds to 19 billion pounds, or 7.5% of yearly income in the sector. Over half of the losses come from the drop-off in international student enrollment.

Like pretty much every other part of the economy, the short term answer to British universities’ plight has been more state support. So far, though, the government has allocated some new funding and rule changes, but has resisted wider calls to bail out the sector.

That’s probably right. For the most part Britain’s universities are strong and prestigious enough to weather the storm; the crisis should instead force these institutions to get more creative in their offerings.

Meanwhile, the Class of Covid, in Britain as in the U.S., will have to deal with the worst of both worlds: high costs and a much diminished college experience. It’s a reminder that while campuses can provide wonderful coming-of-age opportunities as well as a degree, the two don’t necessarily have to go together.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Therese Raphael is a columnist for Bloomberg Opinion. She was editorial page editor of the Wall Street Journal Europe.

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