Amid funding crunch, CT colleges look to diversify revenue streams

Photos | Contributed Angel Perez, Trinity College's vice president, said the rising costs to run a college combined with declining federal and state support is forcing institutions of higher education to look for new revenue streams.

UConn’s relationship with Barnes & Noble, which runs the school’s bookstores, has yielded millions of dollars in new revenues.

Photo | HBJ File University of Hartford President Gregory Woodward said his school is relying more on international students and online education for revenue.

UHart students are increasingly taking online courses.

Scott Jordan, Executive Vice President of Administration and Chief Financial Officer, UConn

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By Matthew Broderick Special to the Hartford Business Journal

Trinity College generated headlines earlier this year when it announced that for the first time in the school's history, its tuition — inclusive of room, board and annual fees — would exceed $70,000 beginning in 2018-2019.

Yet, the 195-year-old private liberal arts college in Hartford's Frog Hollow neighborhood is not alone at that price point. In fact, several private schools across New England, including Middletown's Wesleyan University, Amherst College in Massachusetts and Dartmouth in New Hampshire, are all on the threshold of the $70,000 mark.

“The cost of our physical plant and operations goes up every single year,” said Angel Perez, Trinity College's vice president, noting that the school's costs — from housing and feeding students to providing health care and compensating a highly educated workforce — adds up. “It's like running a small city, 24-hours a day.”

Yet, as average tuition and fees for higher education have skyrocketed nationally over the past decade, American incomes have not kept pace, narrowing the affordability gap. At the same time, federal and state aid used to offset those costs is shrinking, forcing institutions of higher education — both public and private — to figure out how to diversify their revenue streams.

At the University of Connecticut, it's imperative given the declining trends in state support and an increasing number of enrolled students the school has seen over the past 18 years.

“In 2000, about 43 percent of our revenue came from the state and currently we rely on just shy of 25 percent,” said Scott Jordan, UConn's executive vice president of administration and chief financial officer. During that time, enrollment has increased from 14,225 to 23,845 this year, he said.

While UConn's tuition, room, board and fees package — $28,605 for in-state residents, $50,973 for out of state — remain lower than many private colleges, more than 90 percent of its students receive some form of financial aid, Jordan said. Part of that has come from an increased focus on philanthropy through the UConn Foundation, which in less than 20 years has raised, Jordan estimated, nearly $400 million, the interest from which is often used for scholarships.

Another revenue generator is UConn's new partnership with Barnes & Noble, which has run the university's bookstores, formerly operated as co-ops, in Storrs, on its regional campuses, and at UConn Health since 2016. In its first two years, the partnership has generated $9 million, with half to date directed to scholarships and the remainder helping with renovations and capital projects on campus.

Additionally, according to UConn spokeswoman Stephanie Reitz, the larger selection of used, rented and digital books available through the bookselling giant has collectively saved UConn students more than $660,000 in the fall of 2017 alone, a number that's expected to grow as more come online.

And it's not just books online that is changing the landscape of higher education; it's the classes too. In fact, digital learning worldwide — including higher education and certification programs — is forecast to surpass $243 billion U.S. dollars by 2022, according to Statista, an online market research portal. Last year, the University of Massachusetts system generated more than $107 million in online learning revenue, which has grown 7 percent to 10 percent annually since 2012.

It's a revenue stream the University of Hartford has been increasingly relying on.

“If there's one area where the enrollment and revenue have gone up markedly every year, it's been online education,” said Greg Woodward, the university's president. “The audience that we [and other institutions] are trying to attract is changing. The average age of a college student in America is closer to 28 than 18.” And they're often looking for greater flexibility and convenience as they balance work, school and family life.

UHart now offers 11 online graduate degrees and has expanded to include online certificate programs for professional competencies across various industries. It's proven to be a winning strategy, with revenue from online learning doubling annually over the past three years and now accounting for roughly 8 percent of the university's revenue, Woodward said.

International attraction

Relying more on international students is also smart business for many colleges. That's because foreign students — who are not eligible for federal financial aid in the U.S. — often pay a school's full sticker price compared to only about 12 percent of U.S. students at private colleges who did so last year, according to a survey from the National Association of College & University Business Officers. At UHart, nearly 10 percent of the total student body — undergraduate and graduate — is comprised of international students.

It's also part of Trinity College's revenue strategy. Perez says the growth of international students on campus has come slowly but steadily in recent years. However, given the current political landscape in the U.S., colleges and universities need to work harder to convince international students to study here, he said.

“We are losing students to Canada and the UK,” Perez said.

He fears his college may also be losing students to the sticker shock of a $70,000-a-year education. But with $55 million in financial aid that the school disbursed last year alone, Perez says most Trinity students pay less than half the marketed cost.

“We need to help our prospective students understand how our financial aid process works a lot earlier,” Perez said. But with less than 3 percent of its revenue from the federal government and less than 0.3 percent from the state of Connecticut, he said the current model isn't sustainable.

“We are expected to not only provide education, but we're also providing the resources [to fund that education],” he said. “That financial model doesn't work well.”

Like many colleges nationwide, Perez says Trinity is exploring new revenue options by making its campus facilities available for conferences and events during the mostly dormant summer months. Institutions will have to be creative, he says, in generating new revenue.

“It's not going to be one solution that saves higher education; it's going to be a combination of things,” Perez said. “These are complex issues, but higher education must survive; it's a public good.”

Higher-eds Growing Costs

According to Bureau of Labor Statistics' Consumer Price Index, from Jan. 2006 to July 2016, the cost of college tuition and fees nationwide increased by 63 percent, compared to a 21 percent increase for all other consumer goods during that time span.