Rich universities scramble with virus forcing student refunds

[NEW YORK] Some of the most expensive US universities are scrambling to come up with a new and once inconceivable calculus: how much money to refund students.

Harvard College, Princeton University and the Massachusetts Institute of Technology are among schools that plan to prorate room and board costs as the coronavirus has forced them to send students home.

The spread of the virus and responses to it are causing havoc across the economy, with companies scrapping earnings projections, markets in free fall and lawmakers squabbling about how best to address what increasingly looks like a recession this year. While higher education has been less exposed to broader financial trends, this time these institutions may not be exempt.

For students and their parents, it will be a breather from the spiraling cost of higher education, even if it's just for a quarter of the school year. The givebacks could mean a financial squeeze for schools, especially those that increasingly rely on student revenue to pay some of their operating expenses.

"One could imagine it costing schools something like US$2,000 per student," said Phillip Levine, a professor of economics at Wellesley College. "At a school of 2,000 students, that's US$4 million."

Brown University said Thursday it will offer a pro-rated credit or refund for the unused portion of the semester's room and board charges, which is about US$16,000. Refunds will go to those who are graduating.

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At Harvard, room and board for this academic year is almost US$18,000. The college has agreed to pro-rate those expenses as of March 15, the deadline by which students must leave their housing.

The schools are still formulating refund plans and have provided few details, largely because they need to be individualized. At Harvard, for example, more than half of the undergraduate students receive some financial aid.

"Most schools will have difficulty offering rebates," said Ron Ehrenberg, a professor at Cornell who directs the Cornell Higher Education Research Institute. "They depend upon revenue from room and board to fund the housing and dining facilities. What will they do with the fixed costs, things that they can't vary?

Schools with large endowments, like Harvard at US$41 billion, have the financial cushion to bear the expense. That's not so for smaller colleges or those run by a state.

"Public universities are going to be much harder hit," said David Feldman, a professor of economics at William and Mary. "The only way they can deal with that is with layoffs."

Even so, "all institutions are going to take a closer look at their refund policy," said Brad Farnsworth, a vice president at the American Council on Education, a higher education trade group. "Everybody wants to do right by their students. It's an absolutely unprecedented situation."

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