Fitch: Latest relief aid ‘will not be sufficient’ for colleges

Dive Brief:

  • The latest federal coronavirus relief package “will not be sufficient” to offset pandemic-related budget woes, Fitch Ratings said in a statement Thursday.
  • Its commentary echoes a common refrain across higher education following the legislation’s passage last month. It allocated $23 billion to colleges and universities.
  • The American Council on Education, the sector’s top lobbying group, has said colleges need at least $120 billion to address lost revenue and new expenses from the health crisis. 

Dive Insight:

The federal funding will only address “a portion of short-term needs,” Fitch analysts wrote. 

Colleges will continue to face pandemic-related expenses and offer students more financial aid, they added. The relief package also didn’t give direct aid to states, which may further reduce support to public colleges. 

Those trends could result in more cuts to “programs, staff, capital and other discretionary items,” they wrote. Reductions were ongoing before Congress approved the aid package, and they are expected to continue. 

New flexibility in how colleges can spend their relief money could help, Fitch notes. Schools can use the funds to offset pandemic-related expenses such as lost revenue, technology costs and faculty training. The requirements around how schools can spend their aid are “less stringent” than prior limits, according to the National Association of College and University Business Officers. 

Distributing the funds based on full-time equivalent enrollment and headcount will help schools that serve high shares of part-time students. The first round of coronavirus relief aid, which was passed in March and allocated colleges $14 billion, used only FTE.

Some of the wealthiest schools, however, will have their allocations cut in half in the latest package. Several of those schools did not claim their shares last year after facing pressure from President Donald Trump and Education Secretary Betsy DeVos, who resigned this week.

Meanwhile, historically Black colleges and other minority-serving institutions will benefit from $1.7 billion in funding in the latest package. HBCUs will also have $1.3 billion in federal loans forgiven. Fitch wrote that the funds “could provide a material boost” to HBCUs’ budgets, citing their smaller size and “weaker financial profiles” compared to other schools.

Coronavirus aid is expected to be an immediate priority of the Biden administration. An ACE representative told Higher Ed Dive earlier this month that it would continue to ask Congress for more relief.

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