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Friday, June 14
The Indiana Daily Student

business & economy coronavirus

Will IU Bloomington financially survive the pandemic? A formula says it will. 


A matrix created by a professor at New York University aims to show which colleges will survive the pandemic and which colleges will struggle.

Professor Scott Galloway, a marketing professor at NYU’s Stern School of Business, published the matrix’s initial findings in late July, and more than 400 colleges and universities were given one of four ratings: thrive, survive, struggle or challenged, according to a variety of factors.

What they mean (according to Galloway’s system)

Thrive: Schools in this category boast low vulnerability and high value to their education. Some examples include Harvard University, the University of Michigan and even IUPUI.

Survive: These schools yield high value, but also are vulnerable, usually with a higher population of international students or smaller endowments per student. The University of Kentucky and IU-Bloomington campus are included in this category. 

Struggle: These schools are generally less vulnerable, they also don’t boast high value. Many smaller liberal arts colleges are included in this category. Notable inclusions in this category are Vassar College in New York and Belmont University in Tennessee. 

Challenged: Schools in this category are in the most precarious position, with high vulnerability and smaller value. The dangers include a combination of high admission rates and dependence on international students. 

IU professors' thoughts

The formula is based on factors such as the standing value of a school’s endowment per each student, the number of students at each level of education, the percentage of the student body that lives outside of the U.S., student life grades and rankings from Niche and U.S. News and World Report. 

“While some universities enjoy revenue streams from technology transfer, hospitals, returns on multibillion-dollar endowments and public funding, the bulk of colleges have become tuition dependent,” Galloway said in an article on his website. “If students don’t return in the fall, many colleges will have to take drastic action that could have serious long-term impacts on their ability to fulfill their missions.”

Galloway did not respond to a request for an interview, but Professor Andrew R. Butters, an economics professor in the Kelley School of Business, said the matrix raises important issues.

“The article portrays the huge amount of heterogeneity there is across college campuses in the United States,” Butters said. “You have small liberal arts schools. You have big state universities like Indiana University.”

The COVID-19 recession started earlier this year, and while unemployment is recovering better than economists initially expected, Butters said this recession is different. 

“This isn’t a typical recession,” he said. “This wasn’t created by a financial crisis or credit restraints or some sort of productivity shock. This is a public health-induced recession. It’s certainly going to be hard. Universities have already felt that. But some universities will be better suited than others.”

Kyle Anderson, an economist at IUPUI’s Kelley School of Business, said enrollment is a key issue for IU, especially if colleges continue to stay virtual past this year. 

“There’s risk on the enrollment side,” he said. “If a large number of students just decide that this type of education is not in their best interest, then that’s obviously going to put a big financial crutch on the university.” 

One of the factors Butters said could contribute to a college’s financial success during the recession is the number of professional and graduate programs. 

“It’s a pretty well-established cyclical relationship that as the economy goes into a recession, that’s typically when you see applications for professional and graduate school go up,” he said. “The demand for programs is going to be dictated by what the labor market looks like for individuals in the workforce. If the labor market really deteriorates, that’s going to have an implication for what you can expect in higher education.”

Anderson said state funding will be an important factor as well, especially while the state deals with a potential budget shortfall due to the COVID-19 pandemic. 

“I think the other risk that we are going to see is that all state universities rely on state funding,” Anderson said. “We are going to be in a significant budget crutch in Indiana, like pretty much every other state as well. I would suggest that there’s a good chance the university is going to get state funding compared to what they got in the past.” 

Indiana officials told reporters in August they expect the state to be short by anywhere from $3 billion to $4 billion in its two-year budget. As state governments cut funding for state universities, tuition for students usually increases. 

“The university will have to respond by, perhaps, raising tuition,” Anderson said. “That will obviously affect students. Or they could cut spending, which means they could cut programs. That’s going to happen over the next five years kind of regardless of how the pandemic plays out.” 

There are measures that can be taken to help colleges, Galloway said. 

“State governments desperate for cuts in the face of shrinking tax revenues will need help from the federal government,” he said in his article. “If we can give Kanye $5 million, we can help save Purdue. The [Federal Reserve] just expanded the Main Street Lending Program to nonprofits, including universities. Alumni who have parlayed their education into fortunes should step up and make sure the next generation can follow."

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