United States / Analyst Insights
The Tenuous State of Higher Education

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by Cecilia Fernandez, Lead Industry Research Analyst
Jul 20 2020

In the middle of spring semester, most colleges and universities across the country closed their campuses and sent students home as a result of the coronavirus pandemic and to comply with government regulations. Online education has become the new norm in 2020 and since the job market is slowing, a rise in demand for educational services may stem from younger demographics that were looking to return to school or keep studying. IBISWorld estimates that the number of college students will only increase 0.1% in 2020, but these trends could push the growth rate upwards as more people have time to go back to school.

The shift to online learning 

As colleges and universities move to online teaching, some industry operators have had to upgrade their internet and technological infrastructure to accommodate students to their best capabilities. As a result, industry operators needed more funding from the government in other to implement these changes as quickly as possible. By the end of March, the current administration signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which includes the Education Stabilization Fund, providing the education system with $30.0 billion. The higher education system received $14.0 billion directly under the Higher Education Emergency Relief Fund and $3.0 billion through Governor's Emergency Education Relief Fund. Course materials, technology and healthcare, among others, can be covered with these funds, helping industry operators’ transition toward a remote learning environment.

Demand for online education is expected to rise 

Since the fall semester is just two months away, many parents and students have been complaining that colleges and universities have not lowered their full tuition even though some universities are only offering online classes. Students across the nation have signed petitions in order to receive a partial refund for the expenses they did not incur staying at home and the opportunities they are missing, such as learning in a hands-on biology laboratory, taking in-person acting lessons or even the overall networking system of teachers and students. Still, as the national unemployment rate spiked, many students that are not able to get a job will turn to online industry operators. As a result, IBISWorld anticipates that revenue for the For-Profit Universities (IBISWorld report 61131b) industry will increase 16.4% in 2020 alone.

 

 

International students

On the other hand, foreign students almost faced deportation with the now-reversed policy that if they did not have an in-person class on campus they had to leave the country. Colleges and universities are on a constant debate whether they should open the campus in fall or keep remote learning. This policy and the loss of international students would have been harmful for industry operators, costing them millions of dollars in tuition. According to the New York Times, about 1 million international students enroll in universities in the United States and provide $41 billion to the economy while supporting more than 458,000 jobs every year. College towns and small business owners around campus are also heavily dependent on international students as they come here for the experience and typically spend more than an average American student. Still, students that do not believe they are receiving the education they are paying for could take a gap year, but the current job market makes it harder to find a temporary job, forcing students to be stuck with expensive bills in order to continue their degree at home.