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United States: Financial model pessimism

Almost half of financial planning staff at US universities believes that the current business model at their institution is “not sustainable for the next five to ten years”, according to new research. A survey of 183 US higher education professionals involved in financial planning and budgeting at their institutions found that 47 percent of respondents thought their business model is unsustainable.

This figure rises to more than 50 percent when just based on respondents from two-year community colleges and for-profit universities, and drops to about 45 percent for respondents from both public and non-profit private four-year universities, according to Tony Ard, vice-president of higher education software at the Chicago-based management consulting firm Kaufman Hall, which conducted the study.

Meanwhile, two-thirds of respondents (66 percent) say that they are not able to respond quickly to changing financial circumstances or are unsure if they could, based on existing tools and processes at their institution. A similar proportion (64 percent) believes that higher education is behind most other industries in terms of “adopting modern financial planning practices and tools”. The survey was conducted in August and September 2017.

According to Ard, the findings confirm there’s “growing acceptance from people within higher education, and specifically in finance offices, that at the micro-level we probably can’t grow our way out of these financial challenges”. Ard says that the unsustainability of universities’ business models was because of “flat demographic trends around high school graduates”, a drop in state appropriations to public universities and the “challenges with growing tuition revenue”. “There has been a lot of scrutiny on published tuition rates” and there have been questions over the “average family’s ability and willingness to pay what it perceives as a high tuition rate,” says Ard.

He adds that it’s “not that easy” for universities to “influence their costs in the short run because it’s pretty much tied up in people and facilities”. He believes while institutions with “very strong brand names will be fine”, there are risks that more universities will close or merge as a result of financial challenges.

29 Views  | Posted on: 5 Jan,2018 Add Comment  Show Comments (0)