University Key Challenges, Business Models and Partnership Case Studies

University Key Challenges, Business Models and Partnership Case Studies

Universities: Key Challenges

Three key challenges for universities in the U.S. right now are (1) that many students are planning to not attend school in the Fall 2020 semester, (2) class action lawsuits are being filed against these universities by students seeking refunds for expenses from the Spring 2020 semester, and (3) there is a widespread dislike of online education among college students and their parents. For this research, we focused on four-year public and private universities and colleges in the U.S., as was requested.

Many Students Planning to Not Attend in Fall 2020

  • A key challenge for U.S. universities is that many students are planning to not attend college or university in the Fall 2020 semester.
  • This key challenge is top-of-mind among presidents of four-year colleges and universities, both public and private, according to survey results from the American Council on Education (ACE).
  • Of the 192 college/university presidents surveyed by ACE, a combined 77% were from public and private four-year colleges/universities (56% private and 21% public).
  • The presidents chose as many as five issues that they consider to be most pressing to them with regard to COVID-19. Enrollment for the Summer 2020 and Fall 2020 terms was the top issue cited by the presidents, as 86% of them identified it. That was true for presidents of both public and private institutions alike.
  • Inside HigherEd published an article on April 29, 2020, titled “Colleges Could Lose 20% of Students.”
  • Several surveys were conducted in March 2020 and polled over “2,000 college-bound high school seniors and current college students.”
  • The survey found that among high school “seniors who had planned to enroll at a four-year college before the COVID-19 outbreak”, 10% have already changed their plans of doing so.
  • Among current college students surveyed in mid-April 2020, 40% “said they were unlikely to return to their current college or university in the fall, or it was ‘too soon to tell.'” That percentage was up drastically since the first survey in March 2020 when just 14% of those students said the same.
  • This key challenge facing universities appears to be even more of an issue among minority students. Among current “minority high school seniors“, 41% responded that they are either likely to not attend college for the Fall 2020 semester “or ‘it’s too soon to say.'” Yet, among seniors in high school who are Caucasian, that number is 24%.
  • Furthermore, among current college students, 32% “of minority students and 22 percent of white college students said it was unlikely they will return to their college this fall or ‘it’s too soon to say.'”
  • A separate survey on this same top was conducted by the Art & Science Group, which surveyed “1,171 high school seniors from April 21-24[, 2020].” The results showed that among “students who’d planned to attend four-year colleges full-time”, approximately 16.6% had changed their plans.
  • We determined that this is a key challenge for U.S. universities right now because it was so identified by college/university presidents and is frequently mentioned in the news.

Class Action Lawsuits Seeking Refunds For Tuition & Expenses

  • A key challenge for U.S. universities right now are the class action lawsuits being filed against them by students who are seeking refunds for everything from room and board, to tuition, and activity fees.
  • A CNBC article published on May 6, 2020, reported that an increasing “number of college students are seeking repayment for tuition, room and board and other expenses amid campus shutdowns due to Covid-19.”
  • Though refunds have been offered by some universities and colleges for “fees and room and board“, tuition has not been reimbursed by the institutions. Yet, the argument being advanced by parents and students is that the value of remote learning is not comparable to in-person learning. That issue is at the epicenter of the class action lawsuits being filed against the universities and colleges.
  • A few examples of prominent universities that these class action lawsuits have been filed against include Boston University, George Washington University, Brown University, Vanderbilt University, University of Miami, and Drexel University.
  • Even more lawsuits are expected to be filed soon against other universities and colleges.
  • This issue poses a major challenge to the already cash-strapped universities and colleges who now face yet another financial hurdle due to these class action lawsuits.
  • Derin Dickerson is an attorney who co-leads the law firm Alston & Bird’s practice for universities and colleges. He commented on the potentially devastating financial impacts these class action lawsuits could have on universities and colleges nationwide in stating the following: “[M]any institutions likely don’t have the financial means to provide any sort of refund. These refund class actions pose significant financial, reputational and legal risks to institutions already under unprecedented stress.”
  • A journalist covering higher education, Jon Marcus, stated that these lawsuits “can only make a bad situation worse for universities and colleges that are already facing really significant financial challenges right now.”
  • We determined that this is a key challenge currently facing U.S. universities because of the serious, financial implications these lawsuits could have on universities/colleges (as stated by experts), the growing number of these cases, and the frequent mention of this issue in the news.

The Widespread Dislike of Online Education

  • Another key challenge presently facing U.S. universities is the popular opinion among college-age students and their parents that online education is of no or little interest to them.
  • A survey conducted by Lipman Hearne polled parents of college-age children and found that 61% are of the opinion that online education, as has been delivered by universities and college thus far, “will reduce the quality of higher education.”
  • Many college-age students also dislike the premise of going to college online, as 60% of them said they “have no interest in” it.
  • The students also shared their opinions about the tuition costs in the event that online learning continues during the following school year. Of those students, 66% believe that tuition for such online learning should be “much less” than on-campus learning.
  • A survey conducted by OneClass polled approximately 1,300 college students and found that over 75% of them “don’t think they’re receiving a quality learning experience” with online education.
  • Another survey of 14,000 students either in college or graduate school found that 67% of them think that online classes are not “as effective as in-person ones.”
  • We determined that this is a key challenge for universities in the U.S. right now because of its widespread impact nationwide, as is reflected by the majority of parents and college students who dislike online learning, which poses a challenge for universities planning or considering offering online courses in the semester(s) ahead.

Universities: Changing Business Models

Three insights regarding how the business models of U.S. universities are changing and are expected to change in the near future (within 3-5 years) are the push for adoption of what is called the HyFlex Model, significantly reduced budgets for both the present and near future, and reducing the quantity of colleges (i.e. College of Business) in operation within a single, academic institution.

HyFlex Model

  • One way in which the business model of U.S. universities is expected to change in the near future is through adoption and implementation of the HyFlex Model.
  • Under the HyFlex model, “courses are delivered both in person and online at the same time by the same faculty member.”
  • The HyFlex model is wholly distinct from the already-used blended learning offerings (a combination of in-person and online) in that the version of the course must be the same for both those attending in-person and those attending online, thereby resulting in “the same learning outcomes” for students irrespective of where they attend.
  • This model is being seriously discussed more and more, as universities consider what to do for the Fall 2020 semester, given all the uncertainties that loom due to COVID-19. Inside Higher Ed recently reported that “[i]f there was one scenario — besides being back to normal or fully remote in the fall — that we hear more about than others, it would be a HyFlex Model.”
  • Flexibility is the hallmark of this business model for universities, as students would have the ability to choose whether they will attend online or in-person for each class session. Thus, that decision does not have to be for the entire semester.
  • This business model would also help universities retain international students, while also accommodating the desire of many students to have face-to-face learning, whether in-person or online. Said another way, the “HyFlex Model holds the potential of maximizing the opportunity to participate in a face-to-face learning experience under conditions of social distancing.”
  • In an article dated May 10, 2020, Inside Higher Ed summarized the promise of this business model for universities in stating the following: “In an environment of both a strong (almost existential) desire to resume residential educational operations, combined with an almost total lack of certainty around what the public health situation will look like in the fall, a HyFlex approach holds out the promise of resuming classroom teaching and learning, while also being flexible enough to accommodate the full range of synchronous and asynchronous online learning modalities.”
  • Another driving factor behind the momentum for this new business model is that “[e]ducational interruptions are likely to be an increasing factor of the future, be they hurricanes or forest fires or, of course, pandemics.”

Reduced Budgets

  • Another way that the business models of U.S. universities are changing and will likely continue to change is that operating budgets are being heavily slashed in a host of ways.
  • S&P Global reported that many nonprofit U.S. universities and colleges “have implemented material expense cuts, including deferring capital expenditures, and imposing furloughs and layoffs, in some cases, with plans to continue to ramp up cost containment under various fall scenarios.”
  • S&P Global further opined that “[f]or fiscal 2020, and likely fiscal 2021, we believe margins will be further compressed and will be negative at some institutions, potentially weighing on their financial performance assessments.”
  • We found specific examples of how prominent universities in the U.S. are reducing their budgets, as part of their changing business models, which are described below.
  • Baylor University has formulated a goal to reduce costs from its 2020-2021 budget of $750 million by “$65 million to $80 million.” The university plans to achieve those cost reductions through the areas of contractual obligations, utilities, and employee compensation.
  • Ohio State University has asked all of its “colleges, earnings units and support units . . . to prepare three budget scenarios for FY21: budgets that assume 5%, 10% and 20% reductions in spending.”
  • Northwestern University in Evanston, Illinois, has enacted several cost-reduction measures, which include halting most of its facilities projects, a widespread hiring freeze for staff members, “[s]ignificantly slowing academic hiring and retentions“, keeping 2021 salaries the same as they were in 2020, and postponing discretionary spending within its units and schools.
  • Wake Forest University has also implemented similar measures.
  • Other academic institutions are reducing expenses in the area of athletics, such as Western Michigan University which plans to reduce such expenses by 20% ($6 million).

Fewer Intra-University Colleges (i.e. College of Business)

  • A unique example we found of how one U.S. university is changing its business model involves the University of Akron in Ohio.
  • At the direction of the President of the university (Gary Miller), the university is reducing “the number of colleges” it operates on campus (i.e. College of Business, College of Medicine) from 11 down to just five.
  • President Miller commented on that reduction in stating that “[o]ne area receiving a great deal of attention is the reorganization and staffing of our colleges. I called for a dramatic reduction in the number of colleges to reduce costs.”
  • The university has not yet announced which six colleges will be eliminated.
  • President Miller explained that the move is being made as part of “a full reorganization of the academic division that reduces the number of colleges and the number of programs while fine-tuning our traditional strength area.”

University Partnerships: Case Studies

Three case studies of universities in the U.S. that are partnering with financial institutions are the University of Montevallo Stephens College of Business (public), Rider University (private), and the University of Delaware (both private and public, since it’s assisted by the state, yet privately governed). Since quantitative metrics of success metrics were not found for the partnerships, we provided qualitative metrics of success (statements from individuals) in lieu thereof.

Central State Bank & University of Montevallo Stephens College of Business

  • The first partnership we found is between Central State Bank, which has six locations (all in Alabama), and the University of Montevallo Stephens College of Business (located in Montevallo, Alabama).
  • The purpose of the partnership is two-fold: For Central State Bank, it receives help with its marketing efforts from the students, specifically regarding the bank’s efforts in attracting younger customers. For the College of Business, its students are given “real-world experiential learning opportunities” pertaining to marketing.
  • The idea for the partnership evolved organically through a conversation between the bank’s CEO (Mitt Schroeder) and the College of Business’s Dean (Stephen Craft). The conversation between the men pertained to “how the bank provided practical examples of problems that students were learning about in the classroom and that the input of students could be very valuable as the bank attempts to compete for younger clients.”
  • Dean Stephen Craft further commented on the mutual benefits from the partnership to both the College of Business and Central State Bank in stating the following: “It became clear that Central State Bank faces many of the challenges our students discuss in the classroom. This partnership allowed CSB to get real-time research and answers to their problems. The partnership allows students to interact with a live client in the classroom where the students are able to provide novel ideas that might never have occurred in a bank.”
  • Due to the real-world nature of the partnership, students are provided with the valuable experience of “working with a client while in an academic environment.”
  • The bank’s COO, George Henry, commented on the benefits of the partnership in stating the following: “We have gained new awareness into the services and delivery methods we should strongly consider. With the overall pace of technological change affecting Banking more quickly than in years past, the bank is using this information to modify strategic goals.”
  • As of May 2019, the partnership had already been in existence for over one year.
  • Danielle Roberts is a student from the College of Business who interned with the bank through the partnership. She explained that she learned new things about marketing fundamentals that she had studied and noted that the internship experience was among the most-valuable experiences she had throughout her studies at the University of Montevallo. As Danielle said, “I cannot imagine another university which strives so earnestly to support the success of its students in such a personalized way.”

Rider University & Bank of America

  • The second partnership we found is between Rider University (a private institution) and Bank of America (BofA).
  • The purpose of the partnership is two-fold: For employees of Bank of America, they can earn their MBA degree in an affordable manner. For Bank of America, it can develop data analytics knowledge among its workforce and hopefully then retain those employees.
  • The partnership is part of Bank of America’s initiative called “Within Your Reach.”
  • Through the partnership, employees can attend classes either at the university’s campus in Lawrenceville, New Jersey, the company’s corporate campus that’s located in Hopewell, New Jersey, or online.
  • The academic program is personalized for each employee.
  • Employees “must hold a bachelor’s degree from an accredited university in the United States or a foreign degree equivalent to a U.S. bachelor’s degree”, in order to participate in the MBA program.
  • Through the partnership, the cost of one credit hour is $800. However, Bank of America offers a “tuition Reimbursement Benefit Program” to qualifying students, through which some educational expenses can be covered.
  • With regard to success metrics, the first person to earn an MBA through the partnership was Medeeha Khan in 2015 who stated the following about her positive experience with the program: “I learned different techniques that challenge the way I typically look at financial data in my day-to-day job. After starting these course, I began looking for more patterns and nuances, as discussed in all four of the business analytics classes I took. In the future, I look forward to further honing these skills and implementing new ways to look at and analyze data at work.”
  • Medeeha also said “[t]hroughout the program, I enjoyed learning about relevant topics to today’s economy” and that she was “very happy” that she completed “the new Business Analytics Graduate Certificate program.”

University of Delaware & Discover Bank

  • The third partnership we found been is between the University of Delaware and Discover Bank, along with Delaware Technology Park.
  • The partnership was announced in November 2019.
  • Discover Bank provided funding, in the form of “a favorable below-market interest rate loan“, to construct “a new building” specifically dedicated to fintech on the university’s “Science Technology and Advanced Research (STAR) Campus.”
  • The overall purpose of the partnership is to “bring various facets of an industry together under one roof, in this case the academic, business and governmental segments of the financial world.”
  • The Governor of Delaware, John Carney, said the following about the partnership: “I am really pleased to see this kind of collaboration between the private sector and the University of Delaware. This partnership at the STAR Campus will help create a pipeline of skilled local talent, support our entrepreneurs, build on our strength in financial technology, and strengthen our economy over the long term.”
  • The building that was funded by Discover Bank through the partnership will span “100,000 square feet” and will rise six stories.
  • Construction for the fintech building funded through the partnership commenced in April 2020.
  • With regard to a success metric, the Delaware Technology Park (which will be home to the new fintech building) has “helped create 16,000 jobs through the 25 companies that have graduated from the park” since it first opened in 1992. This new partnership is hoped to further build on that success in the fintech space.

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