Tag: alarm

  • OfS continues to sound the alarm on the financial sustainability of English higher education

    OfS continues to sound the alarm on the financial sustainability of English higher education

    For the third year in a row, the English higher education sector’s collective financial performance is in decline.

    That is the conclusion of the latest annual assessment of the sector’s financial sustainability from the Office for Students (OfS), based on finance returns for 2023-24.

    Overall, after stiff warnings this time last year about the risks of system-wide provider deficits if projected student number growth failed to materialise, OfS says that many providers are taking steps to manage their finances, by reducing costs and downgrading recruitment growth projections. It remains unlikely, says OfS, that a large provider will become insolvent in the coming financial year.

    But 43 per cent of providers are forecasting a deficit for the current financial year 2024–25, and there is an overall decline in overall surplus and liquidity – albeit with the expectation of growth in the years ahead. While larger teaching-intensive and medium sized providers were more likely to report a deficit, there is also quite a lot of variation between providers in different groups – meaning that institution type is not a reliable guide to financial circumstances.

    Recruitment woes

    Student recruitment is the most material driver of financial pressure, specifically, a home and international student market that appears insufficient to fill the number of places institutions aspire to offer. The broad trend of institutions forecasting student number growth in hopes of offsetting rising costs – including national insurance and pension contributions – makes it unlikely that all will achieve their ambitions. There’s evidence that the sector has scaled back its expectations, with aggregate forecast growth until 2027–28 lower than previous forecasts. But OfS warns that the aggregate estimate of an increase of 26 per cent in UK entrants and 19.5 per cent in non-UK entrants between 2023–24 and 2027–28 remains too optimistic.

    Questioned further on this phenomenon, OfS Director of Regulation Philippa Pickford noted that there is significant variation in forecasts between different providers, and that given the wider volatility in student recruitment it can be really quite difficult to project future numbers. The important thing, she stressed, is that providers plan for a range of possible scenarios, and have a mitigation plan in place if projections are not achieved. She added that OfS is considering whether it might give more information to providers upfront about the range of scenarios it expects to see evidence of having been considered.

    Storing up trouble

    While the focus of the financial sustainability is always going to be on the institutional failure scenario, arguably an equally significant concern is the accumulation of underlying structural weaknesses caused by year-on-year financial pressures. OfS identifies risks around deferral of estates maintenance, suspension of planned physical or digital infrastructure investments, and a significant increase in subcontractual (franchising) arrangements that require robust governance.

    All this is manifesting in some low-key emergency finance measures such as relying on lending to support operating cashflow where there is low liquidity at points in the year, selling assets, renegotiation of terms of covenants with lenders, or seeking injections of cash from donors, benefactors or principal shareholders. Generally, and understandably, the finance lending terms available to the sector are much more limited than they have been in the past and the cost of borrowing has risen. The general increases in uncertainty are manifest in the increased work auditors are doing to be able to confirm that institutions remain a “going concern.” Such measures can address short-term financial challenges but in most cases they are not a viable long term strategy for sustainability.

    OfS reiterates the message that providers are obligated to be financially sustainable while delivering a high quality student learning experience and following through on all commitments made to students – but it’s clear that frontline services are in the frame for cuts and/or that there is a limit to the ability to reduce day-to-day spending or close courses even when they are loss-making if there is likely to be an impact on institutional mission and reputation. Discussions between OfS and directors of finance point to a range of wider challenges around increased need for student support, the difficulty of recruiting and retaining staff, the increasing costs of conducting research, and shifts in the student accommodation rental market. Some even pointed to the cost of investment in AI-detection software.

    The future is murky

    The bigger picture points to long term (albeit unpredictable) shifts in the underlying financial model for HE. Philippa Pickford’s view is that institutions may need to shift from taking a short-term view of financial risks to a longer-term horizon, and will need to grapple with what a sustainable long term future for the institution looks like if the market looks different from what they have been used to. Deferral of capital investment, for example, may keep things going for a year or two but it can’t be put off indefinitely. There’s a hint in the report that some institutions may need to invest in greater skills, expertise and capacity to understand and navigate this complicated financial territory – and OfS is taking an increased interest in multi-year trends in financial performance, estates data and capital investment horizons in its discussions with providers.

    The situation remains, however, that OfS is primarily empowered to monitor, discuss, convene and, if necessary, issue directives relating to student protection. Activity of this nature has ramped up considerably in the past year, but financial sustainability remains, at base, individual providers’ responsibility – and system-level intervention on things like changing patterns of provision, or management of the wider impact of institutional insolvency, nobody in particular’s. Government is, of course, aware of the problem but has not yet given a steer on whether its upcoming HE reform measures, expected to be published in the summer after the spending review, will grasp the nettle in delivering the support for transformation the sector hopes to see.

    OfS has now said that it is talking to government to put forward the view that there should be a special administration regime for higher education. This signals that while the immediate risks of institutional closure or “disorderly market exit” are low, the pressures on a small number of institutions remain considerable. On the assumption of little or very modest changes in the funding model in the upcoming spending review, and ongoing competitive pressures, there will almost inevitably be losers.

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  • ‘Turbulence’ and ‘confusion’: Groups raise alarm over Trump’s push to kill the Education Department

    ‘Turbulence’ and ‘confusion’: Groups raise alarm over Trump’s push to kill the Education Department

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    President Donald Trump and Republicans promised to shutter the U.S. Department of Education on the 2024 campaign trail, a goal of many conservatives going back decades. 

    The department — created by statute in 1979 — legally cannot be eliminated without congressional approval and a president’s signature. Such a move would have to pass the 60-vote threshold for overcoming a filibuster in the Senate, which could partly explain why past efforts to nix the department have not gotten far.

    But on Thursday, Trump threw the department’s fate into deep uncertainty after he signed an executive order directing U.S. Secretary of Education Linda McMahon “to the maximum extent appropriate and permitted by law, take all necessary steps to facilitate the closure of the Department of Education“ and turn its authority over to states. 

    The order came just over a week after the department announced massive layoffs that cut its workforce in half.

    Thursday’s order provided for the “effective and uninterrupted delivery of [Education Department] services, programs, and benefits on which Americans rely,” but it offered few details on how the Trump administration plans to restructure or distribute the agency’s functions.

    Those include managing and distributing billions in Pell Grants and student loans every year, as well as enforcing civil rights laws related to education on college campuses, among other functions.

    A statement from McMahon similarly offered scant details on what the shuttering would mean in practical terms.

    “We’re going to follow the law and eliminate the bureaucracy responsibly by working through Congress to ensure a lawful and orderly transition,” McMahon said.

    On Friday, Trump told media that the Education Department’s management of student loans would be moved to the Small Business Administration. “That’s coming out of the Department of Education immediately,” he said. The announcement came as the SBA said it will cut 43% of its staff. 

    While much remains uncertain about the ultimate effects of Trump’s order, higher education groups panned the order and raised alarms over what Trump’s unilateral attempt to shutter the agency will mean for students and institutions.

    “This is political theater, not serious public policy,” American Council on Education President Ted Mitchell said in a statement Thursday. “To dismantle any cabinet-level federal agency requires congressional approval, and we urge lawmakers to reject misleading rhetoric in favor of what is in the best interests of students and their families.”

    Kara Freeman, president and CEO of the National Association of College and University Business Officers, said that Trump’s order “adds to the turbulence colleges and universities are experiencing and the uncertainty students and families are facing at this critical time in the academic year.”

    Freeman voiced concerns around key functions of the department, including federal student aid processing, aid to institutions and data tracking “that is so important to institutional decision-making.”

    “Most troubling is that these collective actions involving the department could cause enough confusion to discourage students and families from considering a path to college,” Freeman said. 

    Congressional Democrats were sharper in their criticism. In a letter to McMahon, Rep. Bobby Scott, ranking member of the House Committee on Education and Workforce, and Rep. Gerald Connolly, ranking member of the Committee on Oversight and Government Reform, described both the Thursday order and the Department’s mass layoffs as illegal moves to “usurp Congress’s authority.”

    Scott is leading an effort within the House to open an inquiry into the effort to dismantle the department. 

    He and Connolly also noted in their letter that the Trump administration’s efforts to shutter the agency run “counter to the will of the American people, the majority of whom oppose efforts to close the Department.”

    To their point, recent nationally representative surveys have found fairly wide support for the department. A March poll from Quinnipiac University found 60% of those surveyed opposed Trump’s plan to close the Education Department, while only 33% supported it. 

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  • ‘Self-inflicted wound’: Widespread alarm as Trump administration slashes NIH funding

    ‘Self-inflicted wound’: Widespread alarm as Trump administration slashes NIH funding

    UPDATE: Feb. 11, 2025: A federal judge late Monday barred the National Institutes of Health from enforcing massive cuts to grant funding for researchers’ indirect costs, a move widely decried by universities and other research institutions. 

    U.S. District Judge Angel Kelley issued restraining orders in two separate cases filed earlier Monday against NIH, including one by 22 state attorneys general and another by the Association of American Medical Colleges and other groups. A third lawsuit — brought by the Association of Public and Land-grant Universities, the American Council on Education and the Association of American Universities — was also filed late Monday. 

    Regarding the AAMC case, Kelley wrote that plaintiffs would “sustain immediate and irreparable injury” without a restraining order against the NIH funding cap. Along with restraining orders, Kelley required NIH to provide biweekly status reports confirming regular disbursements.

    Dive Brief:

    • A coalition of 22 attorneys general filed a lawsuit in federal court on Monday seeking to block the National Institutes of Health’s newly announced research funding cuts.
    • NIH announced Friday it would cut roughly $4 billion a year worth of funding for indirect research costs such as administration and facilities — by capping reimbursement for these expenses at 15% for current and new grants. 
    • Research institutions have previously negotiated individual indirect cost rates, with an average of 27% to 28%, NIH said. Organizations, universities and researchers quickly raised alarms about the cuts, warning they could hurt important medical research and the economy.

    Dive Insight:

    NIH framed its unilateral decision to cut indirect costs as bringing them in line with practices at nonprofits such as the Gates Foundation, which caps indirect costs at 10% for higher education institutions, and the Rockefeller Foundation, which sets a 15% ceiling for colleges and universities.

    In a Friday memo outlining the new policy, the agency said the new cap would “allow grant recipients a reasonable and realistic recovery of indirect costs while helping NIH ensure that grant funds are, to the maximum extent possible, spent on furthering its mission.”

    The same day, the agency flagged on the social media platform X the “old” indirect cost rates negotiated by Harvard University, Yale University and Johns Hopkins University — which are all between 63.7% and 69% — as well as those institutions’ endowments ranging from $13 billion to $53 billion. 

    NIH noted that of the $35 billion it spent on grants in fiscal 2023 to universities, medical schools and other research institutions, about $26 billion went to direct research and $9 billion went to overhead in the form of indirect costs. 

    Sen. Patty Murray, a Washington Democrat, described NIH’s move as an illegal violation of an appropriations bill that prohibits modifications to NIH’s indirect cost funding. Murray also said that the move will shift costs onto states rather than reducing them.

    In their lawsuit, the attorneys general argued, “Without relief from NIH’s action, these institutions’ cutting-edge work to cure and treat human disease will grind to a halt.” 

    They pointed to the legislation flagged by Murray that protected indirect reimbursements: During President Donald Trump’s first term, his administration in 2017 included a 10% cap in its budget proposal, but Congress responded the next year with an appropriations provision prohibiting NIH from modifying reimbursement rates, the lawsuit said.

    Filed in U.S. District Court in Massachusetts, the 59-page lawsuit — brought overwhelmingly by Democrat-led states — seeks both preliminary and permanent injunctions blocking NIH from enforcing the rate cap. 

    Many in the higher education sector reacted with dismay over NIH’s move.

    The decision “sabotages the decades-long partnership that has ensured U.S. global leadership in life-saving medical research,” American Council on Education President Ted Mitchell said in a statement on Friday. 

    “This decision is short-sighted, naive, and dangerous,” Mitchell added. “It is a self-inflicted wound that, if not reversed, will have dire consequences on U.S. jobs, global competitiveness, and the future growth of a skilled workforce.”

    Mark Becker, president of the Association of Public and Land-grant Universities, described NIH’s policy change as a “direct and massive cut to lifesaving medical research.” 

    “NIH slashing the reimbursement of research costs will slow and limit medical breakthroughs that cure cancer and address chronic diseases such as diabetes and heart disease,” Becker said in a statement. APLU noted that funded indirect costs include patient safety, research security and hazardous waste disposal. 

    Jeremy Day, director of the University of Alabama at Birmingham’s Comprehensive Neuroscience Center, said on social media that NIH’s cut would “cripple research infrastructure at hundreds of US institutions, and threatens to end our global superiority in scientific research.” 

    Meanwhile, institutions are grappling with what it means for their research programs going forward. The University of Michigan, for instance, said in a statement that NIH’s indirect cost funding supports development and maintenance of its laboratories as well as information technology and administrative support for regulatory compliance. 

    “This change would result in a significant decrease in the amount that U-M receives from the federal government to conduct vital research,” the university said. 

    Others echoed the warning. In a statement, the University of Wisconsin-Madison said NIH’s directive would “significantly disrupt vital research activity and delay lifesaving discoveries and cures.”

    “Indirect costs contribute to everything from utilities charges to building out the laboratories where science is done, to infrastructure for clinical trials of new medicines and treatments,” the university said.

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  • College presidents’ survey finds alarm over Trump

    College presidents’ survey finds alarm over Trump

    Even before President Donald Trump unleashed a flurry of executive orders involving higher education, college and university presidents expressed serious concerns about his possible impact on the sector and on their own institutions. That’s according to findings released today from Inside Higher Ed’s forthcoming 2025 Survey of College and University Presidents with Hanover Research.

    More than half of presidents surveyed in December and early January—51 percent—at that point believed Trump’s second administration would have a somewhat or significant negative impact on the regulatory environment for higher education. Some 38 percent of respondents said they believed Trump would have a somewhat or significant positive impact on the regulatory environment, while the remainder expected his administration to have no impact. Male presidents were more likely than their female counterparts to express confidence in the Trump administration, with 42 percent of men responding that they expected an at least somewhat positive regulatory environment for the sector compared to 30 percent of women.

    Drilling down into specific concerns, the vast majority of presidents—80 percent—indicated Trump would have a negative impact on DEI across higher education. On an institutional level, 60 percent said he would negatively impact DEI efforts at their own colleges and universities.

    Presidents also expressed concerns about what Trump 2.0 would mean for public perceptions of higher education’s value, the climate for campus speech and the financial outlook for colleges and universities.

    The latest edition of the annual survey of presidents, now in its 15th year, includes responses from 298 leaders from a mix of two- and four-year institutions, public and private nonprofit. It was administered after Trump was elected but before he took office. The findings below are focused exclusively on his new administration and the broader political environment. The full survey, covering a broad range of issues relevant to college leaders, is forthcoming.

    Unpacking the Findings

    Given the timing of the survey and the rapid-fire executive orders and other actions that have followed, which included a temporary freeze on federal funding that created uncertainty and alarm across the sector, some experts believe presidents would respond even more negatively now.

    “I don’t think there’s any question that had this survey been done after Jan. 20, the numbers would be more negative than they were, with what we have seen since: the executive orders flowing out of the White House and funding freezes and just the chaos and uncertainty,” Michael Harris, a professor of higher education at Southern Methodist University, told Inside Higher Ed.

    “The survey indicates that presidents had some sense of what was coming,” Harris said. But he noted their “failure of imagination” to realize how quickly Trump would act.

    Already higher education is feeling the pressure on DEI, an area presidents anticipated would come under fire by the new administration.

    One of Trump’s first executive orders, issued on Jan. 21, called on federal agencies “to enforce our longstanding civil-rights laws and to combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.” It also tasked Trump’s attorney general and the education secretary with crafting guidance for universities on how to comply with the 2023 Supreme Court ruling that banned the consideration of race in admissions policies.

    Universities have reacted in myriad ways to Trump’s attack on DEI. Last month the Rutgers University Center for Minority Serving Institutions canceled a virtual conference on apprenticeships at historically Black colleges and universities, and Michigan State University called off a lunch to celebrate Lunar New Year (but allowed other related events to go on).

    According to the survey, 71 percent of respondents believe that Trump will have a negative impact on the climate for free inquiry and civil dialogue across higher education. But only 52 percent said their own institution would suffer those negative effects.

    The majority of respondents—71 percent—also said Trump would have a negative financial impact on the sector. But at the institutional level, only 45 percent believe the same is true at their institution. And nearly a quarter of respondents believe he’ll positively affect their finances.

    Harris views with skepticism the belief among many presidents that their institutions will fare better than the rest of the sector. He argues that presidents can be “blinded” by proximity to their institution, which makes them overconfident in its strength.

    “I tend to believe the response around the industry more than the individual institution,” he said.

    But Anne Harris, president of Grinnell College—and no relation to Michael—believes that presidents have a firm grasp on their community “and all of its complexity,” which helps them better understand how a situation may play out on campus. She said that the “direct impact of a federal policy is always going to be negotiated, diffused and maybe absorbed by the multiplicity of constituencies on a campus.”

    While the new Republican president was the cause of concern for many respondents, presidents also expressed dissatisfaction with his Democratic predecessor, Joe Biden, last year.

    In Inside Higher Ed’s 2024 survey of College and University Presidents, only 33 percent of respondents indicated satisfaction with the Biden administration’s record on higher education. Last year’s survey found that 41 percent of respondents were completely or somewhat dissatisfied with Biden, who left behind a mixed legacy on higher education. He was accused of leaving some promises unfulfilled while overreaching in other areas, such as student loan forgiveness.

    Killing the Education Department

    One of Trump’s campaign promises was to dismantle the U.S. Department of Education, a process that he has already taken steps toward but that will likely face an uphill battle given that he would need congressional approval to shut it down, which Democrats have made clear they are unwilling to provide. Even with a Republican majority in the Senate, the move faces highly unlikely odds.

    The majority of presidents surveyed disapprove of shutting down the department: 72 percent opposed the idea and 21 percent indicated uncertainty, while 8 percent voiced support for the effort. Presidents of private, nonprofit institutions were most likely to support the move.

    Harris, the Grinnell College president, questions what role last year’s botched launch of the new Free Application for Federal Student Aid played in draining support from the Department of Education, given the financial pressures felt by countless students, families and institutions.

    “There are going to be very few presidents who are going to cheer what happened with FAFSA,” she said. “So maybe this is some FAFSA lack of confidence saying the Department of Education did not serve higher ed well with the FAFSA debacle last year. So why not try something else?”

    Brad Mortensen, president of Weber State University, offered a similar perspective.

    “It wouldn’t have surprised me if [that number] was higher, just given how rough of a time the Department of Education had in rolling out the new FAFSA,” Mortensen told Inside Higher Ed. “That had real impacts on all types of institutions across the country.”

    Both presidents indicated that the programs housed in ED are more important than the department itself. They are more concerned about the continued flow of federal financial aid, for example, than where it comes from—whether that’s ED or the U.S. Department of the Treasury.

    Ongoing Optimism

    Concerns about Trump notwithstanding, other findings in the forthcoming full survey were positive—including the financial outlook at the institutional level, despite clear signs of strain across the sector. (Financial findings will be covered in depth as part of the full survey release.)

    Some presidents believe that optimism comes with the job.

    “College and university presidents are a funny lot. As I was applying for this job, I had a past president tell me, ‘Brad, you have to be smart enough to get the job and dumb enough to take it.’ I think by nature, we tend to be naïve optimists because it’s a job with a lot of challenges,” Mortensen said.

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