How to help higher ed (and students) stay solvent

One idea: Congress should establish a fund to reimburse colleges and universities directly for the refunds they issue to students due to COVID-19
By: | April 24, 2020
(Photo by Maxwell Nelson on Unsplash)(Photo by Maxwell Nelson on Unsplash)
Jonathan Krasno is a professor of political science at Binghamton University State University of New York.

Jonathan Krasno is a professor of political science at Binghamton University State University of New York.

America’s campuses are empty—their courses having moved online with mixed success and satisfaction. While much attention has rightly focused on helping students most at risk from this sudden transition, almost every student is due some financial rebate for services they have paid for but cannot use from home.

Here is an idea to make sure they have that money: Congress should establish a fund to reimburse colleges and universities directly for the refunds they issue to students due to COVID-19. This would speed the process of returning funds to students while helping to keep their schools solvent.


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It is easy to think of universities as just classrooms and labs, but they are also dorms, dining halls, gyms, parking lots and clinics. Those services are costly to provide, and many universities charge fees for them. Students can continue their classes from home, but they cannot use these other services they have purchased.

Considering refunds

That means they are entitled to refunds, but it is not that simple. To begin, the amount of money involved is enormous. At Binghamton University State University of New York, for example, refunds for unused services will cost the university about $26 million or 6.5% of its yearly budget.

Almost all of that money is already spent to build dorm rooms, buy gym equipment, or remove winter’s snow from parking lots, for instance. Binghamton was not irresponsible to have spent it. Refunding the money owed students means finding it elsewhere in its budget.

That is not easy. The vast majority of colleges and universities are nonprofits that operate at close to the break-even point. Few have contingency funds to cover that sort of payout. Some have endowments, but even if they can be liquidated (near the bottom of the market) to pay for refunds, doing so will cost them dearly in future revenue.

This plan will help millions of students and thousands of universities, but it won’t save anyone. Students and their families will still face enormous economic stresses, and some universities will not survive the pandemic. But this is a reasonable first step.

What universities generally can do is access the money held by various units within it, such as a construction fund or a department’s bank account. They can use that money now for refunds, but they still have to pay it back to its owners. That internal debt cannot be ignored.

Complicating matters, COVID-19 has wrecked every revenue stream in higher ed. Tuition and fees will be decimated if students are not able to return to campuses this fall, including international students who pay more than Americans. Donations and endowment income will sink with the stock market. Revenue from events—from sports to employment fairs, for instance—is gone. State budgets have been ravaged by the declining economy and public systems are bracing for deep cuts.


Read: State funding cuts hit as higher ed pushes for more stimulus


Even if the U.S. is quickly able to get the virus under control, develop new therapies, expand testing, and begin to return to normal, many billions have been lost.

This puts colleges and universities in a terrible bind. Some do not have funds on campus to pay their students. Many that do are looking at a situation in which refunds alone will create the sort of dramatic pressure that will lead to larger classes, fewer services and less research. Students who return to campus in September might find a diminished educational experience.

As a result, many institutions have been slow to commit to refunding money to their students. That is regrettable—a situation that hurts families who have their own pressing financial needs from COVID-19. Still it is hard to blame universities for being reluctant to refund fees for March and April if it risks their ability to function or even open in September.

Creating a government-supported fund

That is why creating a fund to reimburse colleges and universities for their COVID-19 refunds makes sense. Students and their families would get the money they are entitled to and universities can do the right thing without hobbling themselves. Ideally, this should be folded into the next version of the coronavirus relief bill—for the longer Congress waits, the longer students, their families, and many colleges and universities are left in limbo.

The price is worth it. The cost of dorm refunds alone for a quarter of the year would run around $5 billion for all colleges and universities. Extrapolating from Binghamton’s experience, refunding additional services would add another $3.5 billion. That seems like a lot of money–except in the context of the trillions of dollars being spent to address the COVID-19 emergency.

This plan will help millions of students and thousands of universities, but it won’t save anyone. Students and their families will still face enormous economic stresses, and some universities will not survive the pandemic. But this is a reasonable first step to get money flowing quickly where it should go and help America’s universities weather the COVID-19 storm in shape to continue providing world-class education and research for tomorrow’s doctors, nurses, engineers and English majors.


Jonathan Krasno is a professor of political science at Binghamton University State University of New York.


UB’s coronavirus page offers complete coverage of the impacts on higher ed.