SPY328.73+5.23 1.62%
DIA271.70+3.60 1.34%
IXIC10,913.56+241.30 2.26%

The Financial Impact For Families If Colleges Close Due To COVID-19

Students, armed with masks and hand sanitizer, have started pouring onto college campuses. What happens if more colleges close their physical campuses this year? 

· 09/04/2020 15:00

Students, armed with masks and hand sanitizer, have started pouring onto college campuses. What happens if more colleges close their physical campuses this year? 

The likelihood of a shift back to online learning seems rather high, though there's a clear silver lining, according to Kevin Walker, CEO and publisher of College Finance.

"It's shown how Zoom can be leveraged in a compelling way to more people and it's a viable experience. It's pushed colleges to invest more into it," says Walker. "On the other hand, it's revealed the shortcomings of a fully online experience and it's made people realize how important the residential experience is for young people.

"There's truly a collaborative, personal part of college education that is important. People will come away from 2020 knowing that online college can work and also, by the way, online delivery of college isn't the solution here. Residential college is important." 

Families should keep other financial considerations at the kitchen table, including room and board, tuition discounts, university solvency and more.

What Happens To Room And Board Money If Colleges Close Again?

Most schools have been very specific about their handwashing policies, mask requirements, they'll even give metrics for what's happening on campus. 

However, most schools will not specify what they'll do with tuition changes and room and board refunds.

"Schools don't want to put it in writing because it gives them the flexibility of what they'll do and what's beneficial for them in that situation. It's based on what they did in the past and not what they'll do moving forward," says Walker.

Walker says most colleges will likely revert to what they did when closures occurred in the spring. Some colleges provided full or partial refunds for on-campus housing and meal plans, while others credited student accounts.

"Most schools have indicated that they would not refund, they would give a credit for the prorated amount for room and board. Refunds will be very scarce," says Walker. "If you were a graduating senior, in most cases, you would get a refund from your college." 

What's Possible? Tuition Discount Or Other Options?

While some schools have cut tuition, students should not expect a sweeping cut across the country. 

However, a school that goes remotely or not during the semester will not impact students' eligibility for financial aid. However, your cost of attendance may change if you're not living on campus. Cost of attendance impacts the total amount of federal loans students can borrow. If your school switches to remote you can still use loan money to help pay for living expenses. 

Some schools have also not been flexible with deferrals or gap years for students. "No deferrals, you're enrolled, you paid your deposit, you're coming. There's some exceptions," says Walker.

Worried About University Solvency?

COVID-19 exacerbated many colleges' already-tenuous existence. Walker says there's plenty of anecdotal evidence that many schools were already trying to figure out how to be viable — and then got hit with the COVID-19 crisis and lasting economic crisis. 

"With the coronavirus causing worldwide disruption, schools may not be receiving the tuition or alumni money they expect or need. Admissions teams don't often talk about their school's financial health, but the last thing a student wants is to invest their academic future in a school that is in financial trouble," says Elizabeth Venturini, college career strategist at CollegeCareerResults. 

She cautions families who are looking at small private schools to realize they are not government-funded and are dependent on enrolled students, alumni and alumni donations. 

However, Venturini says state schools are also not immune to financial problems, even though they are funded by taxpayers.

"State schools may have to merge their campuses. There may be fewer teachers, classes, activities and support services. A student may not graduate in four years, and may have to stay in school longer. This will cost more money. The worst-case scenario is the school abruptly closes and a student is halfway through a program." 

Aaron Simmons, founder of Test Prep Genie, agrees that state and local governments are facing major budget shortfalls.

"This means major cuts to school budgets. Nonetheless, the government still provides aid and funding to some students in lower selective institutions given that the set of criteria is met by these students. One option being given by the government is the Free Application for Federal Student Aid," he says. "Though there are financial aids being offered by the government, there is still a risk for students who are about to enter such institutions as the fund being offered is limited due to the crisis."

Walker says a lack of international students can also hurt college campuses because these students disproportionately contribute to financial aid by paying full tuition.

"This trend started last year with the visa changes, and this year it's very unclear how international student enrollment will be," he says. "Many colleges rely on that portion of their population."

The bottom line is grim for some colleges.

"I think there will be 200 fewer colleges over the next five years as a result of this crisis," says Walker.

To find out the financial status of a school, ask to see the school's annual report. Go to the school's website and research its advancement team and read any news on fundraising and endowments. 

Three good sources of information to check for the financial health of a college or university:

  • U.S. News and World Report 
  • Forbes Magazine Annual Report College Financial Health Grade
  • National Association of College and University Business Officers

Can Students Get More Financial Aid Due To COVID-19 Financial Hardship?

Students' whose family financial situation changed as a result of the pandemic could potentially get more financial aid. However, student loans won't get rebated, according to Walker. Students should contact their school's financial aid office to appeal their award amount. 

"If Mom or Dad has had a change in their income because of the crisis, contact the school. "Do it constructively and don't do it in a confrontational way. It's in the school's best interest to keep you enrolled. Don't be shy. You should be willing to make the ask if you need a relook at your financial aid package," Walker says.

Other Money Outcomes

It's an entirely different experience for job recruiting and processes for colleges online. The question of what hiring is like for graduates in this economy is also a concern. Seniors who normally take advantage of on-campus recruiting may suffer.

However, silver linings abound. Walker says that transfers may find opportunities.

"It's an interesting strategy that some enterprising students may be able to game. The class of 2024 is going to be a little under-enrolled," he says. "You could transfer into your dream school if you're wanting to take advantage of that."

The main bit of advice? According to Walker, it doesn't hurt to ask your child's college for help and consider other ways you can automate your money or use an installment plan