The coronavirus pandemic has drastically changed the world. Higher education has been one of the most affected spheres so far. While some see the pandemic as a chance for a revolution long-awaited in the academic sphere, others focus their attention on immediate challenges and threats it has brought with it which put a lot of pressure to higher education institutions pushing them on the brink of survival. There are several financial trends to be considered in global higher education during the pandemic.
On the one hand, there are negative consequences like short-term cost increase due to extra-spending and extra-investments. The university administrations have to increase spending on healthcare and student aid fund alongside with the transferring process to online teaching platforms, subsequent training for academic staff and investment on software and other necessities. Due to circumstance that caused by the pandemic many international universities face an unprecedented reduction in revenues, as the number of international students declines sharply. For instance, The American Council on Education predicts that the number of international students in the US will decrease by 25% next year, resulting in a revenue loss for institutions of $23 billion [Hess, 2020]. Moreover, for universities shrinking of such spheres as housing and event hosting in the times of pandemic also contributes heavily to the fall in revenues.
Therefore, many universities have already acknowledged the inevitability of temporal and permanent layoffs and other forms of financial conservation. One such example is Stanford University, which has already announced workforce reduction due to financial challenges [Tessier-Lavigne, 2020]. As the wealthiest universities have to implement some program reductions, it is no surprise that numerous smaller schools and colleges have already been closing permanently, even in such a country like the U.S., where the government was able to allocate billions to support the educational system [McLaughlin, 2020].
On the other hand, some believe that the pandemic is a long-awaited chance to address the financial troubles of both universities and students, adopting a more flexible and cost-efficient model in the long-run [Rosensweig, LeBlanc, 2020]. Despite initial cost increases, a 2013 study headed by William Bowen found that for instructor compensation alone the hybrid (online+offline) model saved 36% to 57% over traditional courses enrolling about 40 students per section, and 19% over the large-lecture model [Casement, 2013]. Moreover, there is some evidence supporting the point of view that colleges with a higher share of online students charge lower tuition prices on average, therefore partially transferring the savings created by the model to the students [Deming, Goldin, Katz, Yuchtman, 2015]. However, most online universities support lower tuition costs because they have less property and supporting staff to manage, dramatically lowering their maintenance costs. Besides, such universities don’t have some physical barriers in education, for instance, they are not constrained by the audience sizes for their classes. This model is not an option for most of the current traditional universities, possessing large campuses, land, and supporting specialists. The traditional role of such assets together with the uncertainty about the end of the corona crisis make any decision altering their usage unlikely. It is almost impossible to imagine most of the traditional universities, especially the bigger ones, abandoning or reinventing the use of their buildings and land, permanently laying off most of their supporting staff. Therefore, it is rational to expect that most of the traditional universities will only temporarily switch to an online model or create some sort of a hybrid model, with low chances for a significant cost-reduction, as these universities will carry the additional costs, while experiencing the revenue drop, with almost no permanent cost-cutting. Nevertheless, it is to remember that such factors as the longevity of the pandemic, effectiveness of a vaccine, and the changes in the behavior of students (i.e., mass switch of purchasing patterns from offline to online) may trigger the wider scale changes.
Are these conclusions and this situation relevant to local Kazakhstani higher education institutions?
In terms of revenue loss, the situation for local universities doesn’t seem to be as dramatic as in the case of some international ones. Firstly, there are far fewer international students studying in Kazakhstan, only about 4% (or approximately 25.000 people) of all students are foreign, and their partial abundance will not be as impactful. Moreover, almost three times more Kazakhstani students study abroad, therefore higher education in Kazakhstan can even gain from the switch to local [Markova, 2019]. Secondly, some of the activities of international universities, such as paid event hosting, are not that relevant for the local market and their impact on revenue is therefore limited. At the moment the amount of economic losses of local universities is unknown as the information published on that topic is traditionally limited. Nevertheless, there is no reason to think that the cost increase due to extra-spending and extra-investments will not affect the local higher education institutions, triggering financial challenges for them.
Overall, it can be concluded that the scale of problems associated with the cost
increase is unclear so far, yet local higher education institutions have some advantages in terms of sources of their revenue. Furthermore, traditionally high levels of government participation in the market (in 2017/18 46% of students were studying in state universities) can prevent wide-scale bankruptcies.
Regarding the cost of education in Kazakhstan, it is important to mention that the current situation in the country is concerning. In 2018 around 52.000 Kazakhstani students dropped out of their universities and the main reason for that (25% of cases) was the financial one. Furthermore, according to the Statistical Committee 2018 survey, only 23,7% of citizens are completely satisfied with the prices for higher education in the country [Kursiv.kz, 2019]. Therefore, the decrease in prices in the higher education sphere is relevant and necessary for Kazakhstan. However, it is extremely unlikely that higher education institutions of Kazakhstan will be able to effectively switch to an online-centered model anytime soon due to the same reasons like the above mentioned international universities. In addition to that it would be quite difficult to switch to online education for local universities due to lack of infrastructure, bureaucracy, financial capabilities [Weko, 2017].
The situation and perspectives for local higher education institutions are twofold. On the one side, due to the existing revenue models and governmental participation it is unlikely that the system will face severe consequences of financially turbulent times with mass permanent closure of universities. On the other side, the perspectives for the necessary long-awaited educational revolution in local higher education are gloomy unless structural changes from top to bottom according to international benchmarks are initiated.
References:
Casement W. (2013). Will online learning lower the price of college? Retrieved from https://files.eric.ed.gov/fulltext/EJ1011796.pdf. Accessed on 14.07.2020.
Deming D., Goldin C., Katz L., Yuchtman N. (2015). Can online learning bend the Higher Education cost curve? Retrieved from https://www.aeaweb.org/articles?id=10.1257/aer.p20151024. Accessed on 16.07.2020.
Hess A. (2020). 7 ways the coronavirus pandemic could change college this fall and forever. Retrieved from https://www.cnbc.com/2020/06/19/7-ways-coronavirus-pandemic-may-change-college-t his-fall-and-forever.html. Accessed on 15.07.2020.
Kursiv.kz (2019). Uchebu v Kazakhstanskih vuzakh brosili 52 tys chelovek (52000 dropped out of Kazakhstani HEI). Retrieved from https://kursiv.kz/news/obschestvo/2019-06/uchebu-v-kazakhstanskikh-vuzakh-brosili-52 -tys-chelovek. Accessed on 16.07.2020.
Markova A. (2019). Kolichesto inostrannykh studentov v Kazakhstanskih vuzakh uvelichilos (The number of foreign students in Kazakhstani HEI has grown). Retrieved from: https://kursiv.kz/news/obrazovanie/2019-11/kolichestvo-inostrannykh-studentov-v-kazak hstanskikh-vuzakh-uvelichilos. Accessed on 15.07.2020.
McLaughlin K. (2020). The coronavirus could force smaller liberal arts and state colleges to close forever. Retrieved from: https://www.insider.com/smaller-colleges-may-never-reopen-because-of-the-coronaviru s-2020-4. Accessed on 16.07.2020.
Rosensweig D., Le Blanc P. (2020). COVID-19: Why higher education in the US must embrace digital. Retrieved from: https://www.weforum.org/agenda/2020/07/covid19-higher-education-universities-digitali zation/. Accessed on: 15.07.2020.
Tessier-Lavigne M. (2020). A message from President Marc Tessier-Lavigne: Our financial future. Retrieved from https://healthalerts.stanford.edu/covid-19/2020/05/27/a-message-from-president-marc-t essier-lavigne-our-financial-future. Accessed on 15.07.2020.
Weko T. (2017). Higher education in Kazakhstan 2017. Retrieved from https://www.oecd.org/countries/kazakhstan/higher-education-in-kazakhstan-2017-97892 64268531-en.htm. Accessed on 16.07.2020.
Note: The views expressed in this blog are the author’s own and do not necessarily reflect the Institute’s editorial policy.