AuthorBeckmann, Klaus S.


When classes were moved online in the middle of March 2020, many universities were burdened with refunds for dorms and meal plans. Luckily for them, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 provided needed relief funding. Total allocations ranged from a few thousand dollars to several tenths of millions of dollars for individual universities with about half of these funds awarded for emergency financial aid grants to students (U.S. Department of Education, 2020).

However, many students were generally dissatisfied with online (remote) instruction for the final six weeks of the spring semester resulting in several lawsuits targeting universities for tuition refunds (Wright, 2020; Griffin, 2020). Revenue and enrollment projections for fall 2020 are low for most universities. Summarizing results of high school student surveys, Lapovsky (2020) predicts that "four-year schools are going to experience undergraduate enrollment declines of 15% to 40% and net undergraduate student revenue declines of 20% to more than 50%". Given these significant budget challenges and facing uncertainty regarding tuition revenues from offering classes exclusively online, many universities are planning for face-to-face class offerings in the fall 2020 semester.

However, fall 2020 term has been shortened for many universities either resulting in early semester starts and face-to-face instruction ending before Thanksgiving or late semester starts with face-to-face instruction ending before Thanksgiving and resuming online at the end of November until mid-December. Furthermore, in many cases fall holidays have become class days to limit student travel. Despite planning for short semesters, the spread of the coronavirus will dictate if face-to-face instruction is feasible for the entire academic year.

If a second wave of infections occurs on a major scale during fall, winter and spring, universities may be facing the refund and other cash flow problems again. With infections raging in many states, some parents may hold back their children for a semester or two (Poliakoff, 2020). Students may not sign up to go to expensive name-brand schools without the prospect of on-campus and networking experiences. Anxiety related to the virus may force students to choose schools that are in-state or closer to home. International students may not enroll due to travel restrictions and exorbitant price tags putting additional pressure on universities that are heavily depending on tuition from out-of-state students. Struck (November, 2020) reported that new international student enrollment declined 43 percent in the US for fall 2020 due to the pandemic.

All of these difficulties regarding cash inflows put extraordinary challenges on university budgets and leaders. This study summarizes cash flow issues under four categories including short-term and long-term cash inflow increases and short-term and long-term cash inflow decreases. Cash inflow decreases and cash outflow increases are also briefly discussed. Finally, the study offers insights to the cash flow problems faced by university leaders and discusses cash flow management opportunities that can provide some relief to colleges during times of forced shutdowns.


Short-term Increase in Cash Inflows

When universities are required to seize face-to-face instruction and provide immediate refunds for dorms and meal plans, they may face short-term cash outflows and deficits. To provide short-term relief, universities may need to exploit alternatives and support coinciding with given conditions. Table 1 presents a summary of potential cash inflow increases and cash inflow decreases in the short and long-run.

As many managers are working from home due to Coronavirus Disease (COVID-19), universities may offer additional 6-week or 8-week online courses as executive education. While not full-time degrees, managers can enroll in these programs with 4 to 6 hours of course work during a week. Often these programs offer in-demand classes on leadership or strategy that are needed for individual development. Furthermore, universities may offer 4-to-8-week programs on hot topics such as machine learning, data mining, artificial intelligence, and business analytics to all interested students who wish to widen horizons and bring better applications to the workplace. Many universities including Stanford, Harvard, Villanova, MIT and others offer classes in these areas and certificates if a student takes 3 or 4 of them in a series.

When the economy is in a recession, enrollments in online MBA, MPA and other programs may go up. Barrow and Davis (2012) found that two-year, four-year public and four-year private college enrollment increased in the beginning of the Great Recession of 2007/08. While this may not include face-to-face enrollment during the pandemic, it may provide a golden opportunity for universities to place themselves strategically. Schools should make a serious effort in advertising their online degree programs such as MBA, MPA, MSBA and others. Moreover, many introductory classes such as psychology, accounting, finance and marketing are already offered online, universities may start to advertise these to non-traditional, non-degree seeking students. Some of these potential students may stay home for a semester or two because of COVID-19 and they may find these classes useful.

The CARES Act (2020) provided significant short-term relief to universities. In fact, a total amount of $14 billion was allotted to higher education to meet short-term COVID-19 related costs (U.S. Department of Education) with universities able to apply by September 30, 2020. Another funding program that is also available to universities and that may provide some short-term aid is provided by the Federal Emergency Management Agency (FEMA) to universities that are located in hot...

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