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Economists explain why US college students won’t be getting big refunds on spring tuition

a college campus quad
AP Photo/John Raoux
Surveying the field.
Published Last updated This article is more than 2 years old.

University campuses are typically busy, beautiful places this time of year. Carefully manicured quads are primed for students to take a break from their studying and lie sprawled in the sunshine. Amphitheaters are filled with end-of-year improv shows and keg parties. Magnolia trees and lilac bushes are in bloom.

But this year, no students scurry to and from red-brick halls as they prepare for finals week. No sounds of a cappella waft upon spring winds. The coronavirus pandemic has sent students at residential colleges careening back to their families’ homes. And they want their money back.

“Zoom university is not worth 50k a year,” one New York University student declared in a petition for a partial tuition refund that has so far accumulated more than 11,600 signatures.

The NYU appeal is just one among a wave of petitions and lawsuits demanding partial refunds for the spring semester, as students argue that the costs of their education don’t reflect the switch to online classes. Meanwhile, students and parents looking ahead to the possibility that online learning will continue into the fall semester are wondering whether they’ll get their money’s worth from tuition—a question that’s gained urgency as record US unemployment levels force families to reevaluate their spending.

It’s perfectly logical that students are up in arms about tuition. In the US, the average sticker price at a private college is $36,801 per year, while in-state rates for public universities average $10,116 a year. These amounts are meant to reflect the value of what’s being taught, but also students’ ability to experience in-person interactions with their professors and peers, not to mention things like evening programming and extracurricular activities. And research suggests that students tend to learn less from online classes than they do in face-to-face courses.

Even so, economists say that students are unlikely to see big refunds this spring. The cost of the fall semester, however, is another story.

“The shift saved us not one penny”

To understand why students shouldn’t expect big refunds, it’s helpful first to consider colleges’ cost calculations. The NYU petition argues that “the school does not need as much money to run now that everything is remote.” But at most colleges, costs have actually gone up.

“When we had to shift to online education, that shift saved us not one penny in salary costs,” says David Feldman, a professor of economics at The College of William & Mary and co-author of the 2010 book Why Does College Cost So Much?

Faculty salaries and benefits account for nearly a third of expenses at US research schools, according to the National Center for Education Statistics. Amid the pandemic, professors are still teaching the same courses, and their workloads have actually gone up as they’ve rushed to convert their classes to new online formats. Administrative and other non-teaching staff, who make up more than half of college and university employees, are still working too, with many mental-health counselors, admissions officers, and the like shifting their jobs to an online format.

Meanwhile, Feldman says, colleges are spending more money to invest in technology that will allow students and faculty to meet online, and IT workers are putting in overtime to help faculty navigate online-learning tools.

As for the dorms, classrooms, gyms, and other facilities sitting empty, colleges still have to maintain the buildings and their campuses in order to have them ready for students when they do eventually open their doors again.

“It’s not like they’re going to rent out the buildings,” says Sandy Baum, a senior fellow at the Urban Institute and former professor of economics at Skidmore College who authored the 2016 book Student Debt: Rhetoric and Realities of Higher Education Financing. “People have this idea that it must be cheaper to teach online than to teach at a brick-and-mortar school. It’s not cheaper to do high-quality online education.”

A number of colleges have agreed to prorate room and board for the spring semester, as well as to refund student activities fees, acknowledging aspects of higher education which students are clearly unable to participate in from home. But students aren’t likely to recoup tuition, which colleges spend on faculty and administrative salaries and benefits as well as things like dormitories, bookstores, hospital libraries, and computer labs.

Supply and demand

That said, economists say that colleges and universities will likely make another set of calculations for the fall, informed by the familiar model of supply and demand.

The pandemic hasn’t changed the supply of available spots in colleges and universities. But demand for those spots may well drop in the fall over both financial and health concerns.

“A lot of parents will tell kids, ‘We don’t know what health situation is, why live in an infested dorm when you could stay at home and do online classes,’” says Rich Vedder, a professor emeritus of economics at Ohio University and author of the 2019 book Restoring the Promise: Higher Education in America.

In order to cope with the decline in demand, colleges might have to offer some kind of discount in order to entice more students. That likely means bigger scholarships and more financial aid, some of which may be funded by the $14 billion in federal emergency aid given to US higher-education institutions.

“Even though finances are horrible and the schools would love to raise tuition to offset that, it’s not feasible to do so,” Vedder says. “I think there’s going to be a lot of discounting from conventional sticker prices.”

Keeping a higher sticker price while allowing the typical student to pay far less tuition is in line with the broader trend among liberal-arts schools in particular. As of last year, the average private college in the US was offering tuition discounts of close to 50% in the form of grants and scholarships.

Colleges with massive endowments, like Harvard, Yale, Stanford, and the University of Pennsylvania, can afford to offer up big discounts. But many other schools will have to deeply slash their own costs in order to adjust for any decrease in demand, which could mean everything from laying off administrative and support staff and instating hiring freezes to increasing class sizes and faculty teaching loads. For some, all that cost-cutting still won’t be enough.

“A lot of colleges are really totally tuition-dependent,” says Baum. “Some of them are not gonna make it.” Indeed, the pandemic has put an estimated 20% of US colleges and universities in severe financial peril. And if enough schools are forced to shutter their doors because of the pandemic, the supply of higher-education slots available in the US may wind up dwindling after all.

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