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Press release

Bain & Company predicts concerning macroeconomic environment for higher education, calls pandemic-era financial health an anomaly

Bain & Company predicts concerning macroeconomic environment for higher education, calls pandemic-era financial health an anomaly

Top private institutions are relatively well positioned to weather the storm, but others may need to take more dramatic actions to get on solid financial footing, Bain finds

  • mayo 22, 2023
  • min read

Press release

Bain & Company predicts concerning macroeconomic environment for higher education, calls pandemic-era financial health an anomaly

BOSTONMay 22, 2023— Higher education’s financial stability is expected to fall below pre-pandemic levels within the next three years, making for a concerning macroeconomic environment for colleges and universities within the US, according to new research by Bain & Company. For its report: “The Financially Resilient University,” Bain analyzed data from more than 1,500 higher ed institutions and found that the increased financial health that institutions experienced between 2020 and 2021 was an anomaly that’s not expected to last. Instead, if they wish to flourish or even survive, Bain says institutions should be preparing for new risks brought on by macroeconomic challenges, industry trends, and the end to one-time circumstances that propped them up during the Covid-19 period.

“Everyone expected the pandemic to be the death knell for higher education, but it actually turned out to be a lifeline for colleges and universities,”  said Jeff Denneen, global head of Bain’s Higher Education practice. “An influx of federal aid, a booming stock market, and dramatically lower operating costs enabled institutions to be much more resilient than expected.  But looking ahead, institutions can’t rely on the largesse of the federal government and stock market returns to drive their financial sustainability.  There are real structural market challenges that need to be taken head-on to ensure that institutions can continue to grow revenue, manage costs, and create a sustainable financial model to deliver their mission well into the future.  Our research provides a clear path for how to achieve that.”

Identifying financial risk factors

Bain analyzed a number of risk indicators, including low national rankings; low yields on accepted students; and a declining number of applications, tuition revenue and non-endowment assets. The study found that the more risk indicators a college or university has, the weaker its financial resilience is likely to be. Those institutions who face four or more risk indicators are three times as likely to have low resilience when compared to institutions who face just one risk indicator.

Bain also found that resilience varies by segment. Top private institutions are typically quite resilient to potential shocks due to strong enrollment growth, healthier net margins and larger endowments. In contrast, smaller private and regional public universities, which have historically shown weaker margins, face greater challenges.

“Two things matter as college leaders look for a sustainable model—market position and financial position—and they need to pull levers on both simultaneously,” said Jeffrey Selingo, report co-author and a higher-education strategist and special advisor at Arizona State University. “Institutions will need to do more than tweak around the edges with their strategy. Rather, most will need to set themselves apart as whole institutions by developing distinctive pathways for learners that boost demand, cut costs, and increase revenue.”

Steps to ensure resiliency

While the coming years are expected to be economically challenging for higher education, institutions can take certain steps to strengthen their resiliency and minimize impact. Beyond creating more efficient and effective administrative operations and finding new revenue streams, this includes deeply understanding the needs of an evolving target student population, simplifying their missions to support those needs, and innovating their academic offerings to grow student demand.

 Media contacts

 To arrange an interview or for any questions, please contact:

Katie Ware (New York) — Email: katie.ware@bain.com

Acerca de Bain & Company

Bain & Company es una consultora global que ayuda a los generadores de cambio más ambiciosos del mundo a definir el futuro. A través de 65 oficinas en 40 países, trabajamos como un solo equipo junto a nuestros clientes para lograr resultados extraordinarios, superar a la competencia y redefinir las industrias. En 2022, cumplimos 25 años en América del Sur, trabajando en estrecha colaboración con empresas líderes en múltiples industrias, experiencia integrada y personalizada que complementamos con un vibrante ecosistema de innovación digital para ofrecer mejores resultados, más rápidos y duraderos.

Como una empresa consciente de los desafíos globales actuales, tenemos como compromiso a 10 años invertir más de 1.000 millones de dólares en servicios pro-bono para llevar nuestro talento, experiencia y conocimiento a las organizaciones que abordan en materia de educación, equidad racial, justicia social, desarrollo económico y medio ambiente. Desde nuestra fundación en 1973, hemos medido nuestro éxito a través del éxito de nuestros clientes, y nosotros orgullosamente mantenemos el nivel más alto de respaldo en la industria.