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Colleges plead for bailout amid coronavirus losses

Without aid, they warn, many schools are likely to collapse

As her father David Shofi packed the car, Emerson College sophomore Mallory Shofi, 19, prepared to take a bin back to the dorm for a second car load earlier this week.  Amid concerns about the coronavirus, Emerson students moved out of the dorms on Boylston Street.
As her father David Shofi packed the car, Emerson College sophomore Mallory Shofi, 19, prepared to take a bin back to the dorm for a second car load earlier this week. Amid concerns about the coronavirus, Emerson students moved out of the dorms on Boylston Street.Pat Greenhouse/Globe Staff

Empty dormitories, canceled recruiting tours, cratering endowment investments — the coronavirus has turned college campuses into ghost towns and sent a financial tremor throughout the industry.

On Thursday, colleges and their lobbying groups urged Congress to include an estimated $50 billion in any federal coronavirus stimulus package for higher education institutions and their students. Many schools are likely to collapse without a federal bailout, colleges warned.

“Most colleges and universities are facing an immediate cash flow crisis," said Terry Hartle, a senior vice president of government affairs at the American Council on Education, a Washington, D.C.-based trade group.

Many higher education institutions are digging into their reserves to pay off millions of dollars in room and board refunds to students who have been forced off campus and ordered to study online in an effort to contain the spread of the virus. They’ve suddenly had to invest in online classes and additional cleaning services to ensure that dorm rooms are disinfected. Many are also facing a potentially disastrous fall, uncertain whether the public health crisis will continue and students, particularly those from abroad, will stay away from campus.

This week, Chartwells, the food service company, laid off dining hall workers at several institutions, including Northeastern University, where dorms were closed. At other colleges, such as Tufts and Harvard universities, workers will be paid at least for a few weeks.

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“We regret to have to make this decision and understand the impact this will have on our associates and their families,” said Meredith Rosenberg, a spokeswoman for the company. “Our hope, along with the rest of country, is that this is temporary and we will return to normal service as soon as possible."

Earlier this week, the bond-rating firm Moody’s Investors Services warned that the outlook for higher education had deteriorated from stable to negative. According to Moody’s 30 percent of universities were in a weak financial position before the coronavirus upended life; now the fight for survival has become even tougher.

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A federal bailout for all colleges is crucial, Hartle said. But whether the Republican-controlled Senate and President Trump, who have been hostile to private, elite universities, would agree to a relief package that could benefit them as well, remains an open question.

“The future is not what is used to be,” said Lee Pelton, the president of Emerson College. “A microscopic but very deadly virus has dealt a body blow to higher education.”

Pelton established an economic recovery team at Emerson this week, tasked with addressing the financial effects of the virus. The college is leaning toward offering most students who left campus due to the virus a financial credit instead of an actual refund on their room and dining costs. The decision could be unpopular with families. But that option could allow colleges to spread out the losses over several semesters instead of taking the hit all this school year, Pelton said.

“I’ve been a college president for more than two decades. This crisis is different than any other I’ve encountered," he said.

For small, private colleges, particularly in New England, the coronavirus couldn’t have come at a worse time. Many of them have closed or merged in recent years as their enrollments have dropped and their finances were squeezed. Others struggle every year.

Barbara Brittingham, president of the New England Commission of Higher Education, the primary accreditor for colleges and universities in the region, said she worries that the virus could precipitate the closure of some institutions.

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Many schools rely on room and dining fees to help balance their budgets, Brittingham said. Tuition, on the other hand, can be a less consistent revenue stream because colleges often offer discounts on their sticker price through grants and financial aid to lure students to campus.

Now, many are refunding a portion of room and board, even as they aren’t sure how many students will enroll next year or if revenue-generating summer programs can still go on.

After experiencing the disruption caused by the coronavirus, some students from out of state may want to study closer to home in the fall. Parents may have lost their jobs due to shutdowns and can no longer afford to pay for their children to return to the same pricey college they left this spring, experts said.

“Predicting enrollment is somewhere between difficult and impossible,” Brittingham said.

Colleges are already freezing hires and pausing their planned capital projects and will likely have to lay off workers, said Susan Fitzgerald, an associate managing director at Moody’s.

Some colleges may face even more pressure to offer students bigger financial aid packages to ensure that they enroll, adding to their budget woes, Fitzgerald said.

Colleges send out their admissions notices to incoming freshmen in late March, and the gap between the institutions with healthy endowments and secure finances and those on shaky ground will become clearer, said Todd Weaver, a Boston-area admissions counselor with Strategies for College.

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“You’ll see the have and have-nots separate rapidly this month,” Weaver said. “Colleges that are perceived to be highly desirable will likely stick with the initial aid offer and the May 1 deposit date. Other colleges that are a bit more challenged in filling their seats each year, may be more willing to extend the deadline to June 1, and give a little extra aid.”

That means, for example, Harvard — with $41 billion endowment — is far more likely to emerge relatively unscathed than the region’s myriad small colleges with dramatically smaller financial cushions.

The coronavirus could dramatically change higher education, experts said.

Many, for example, point out that faculty and some institutions were reluctant to adopt online or remote learning models, but now many are racing to do so. One unnamed New England college with a costume design program even sent students home with sewing machines to ensure that they could continue with their education, Brittingham said.

Still, how deep the ultimate financial impact will be on colleges and universities depends on how long the public health crisis lasts and when students will return. But the financial repercussions are likely to be felt for years, Hartle said.

Even if universities get some federal relief in the short term, many states are likely to make budget cuts, including to public college funding, because of a decline in tax revenue, Hartle said.

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“We have a short-term emergency but we’re not looking at a sunrise down the road,” he said.


Deirdre Fernandes can be reached at deirdre.fernandes@globe.com. Follow her on Twitter @fernandesglobe.