Ensuring Postsecondary Students Earn Credentials In A Changing Economy Summer 2020
The Future Of Postsecondary Education
The COVID-19 pandemic and economic downturn will affect students, higher education leaders, and their communities.
The Future Of Postsecondary Education
The COVID-19 pandemic and economic downturn will have consequences for three groups of higher education stakeholders: students approaching college graduation, students in college or thinking about enrolling, and higher education leaders and their communities. The unique challenges that each group faces will require tailored solutions.
For students approaching college graduation: What kind of economy will they face, and how can they best navigate the abrupt realignment that COVID-19 has brought to the US economy?
The pandemic has devastated nearly every measure of US and Tennessee economic activity, including the availability of jobs, and precipitated a recession that began in February 2020. Considerable uncertainty remains about the path for future economic recovery and growth. Most forecasters expect strong growth during the second half of 2020, but not strong enough for 2020 GDP to match 2019 GDP. It may take years to get back to February 2020 employment levels, so finding new jobs over the next year will be very challenging for both new job market entrants and those whose jobs were permanently eliminated by the pandemic.
Postsecondary credentials still matter, and a college education is as valuable as it was before the recession.
Additionally, the COVID-19 recession will likely affect earnings for future graduates. A feature of earlier recessions that will likely hold true in the months and years ahead is that new graduates will not earn as much as graduates who completed a postsecondary credential when the economy was better. Recession-era graduates had lower earnings for up to 10 years after college, although those who switched jobs as the economy improved fared better.1
In the short term, COVID-19 is also changing what industries are considered “in demand” for graduates. Employment and job openings are down in most industries, although a recent Burning Glass analysis shows that there are a small number of “lifeboat jobs” in demand — or, where demand is not falling as much as others — that could lead to higher-paying work down the road.2 Some of these occupations align with industries identified as high-demand in Tennessee: advanced manufacturing, health care, and information technology.3
In the long term, today’s graduates will have to be nimble as new job opportunities arise, and as new skills and technologies advance in an ever-changing economy. Beyond existing degree programs, shorter-term credentials are one way students may develop proficiency in emerging areas or retool skills when needed at a faster pace — although research shows that not all short-term credentials pay off in terms of higher earnings and better jobs.
For students in college or thinking about enrolling: How do the benefits of college stack up against the costs, especially in a moment when household finances are vulnerable and many are struggling to make ends meet?
Postsecondary credentials still matter. In the current crisis and downturn, nothing suggests that a college education is less valuable than it was in February 2020. Workers with only a high school diploma were much more likely to be unemployed prior to the COVID-19 downturn. As with prior recessions, a COVID-19 recession may accelerate the adoption of new technologies putting less-educated workers at even more of a disadvantage.4 And for students who were undecided about college prior to COVID-19, weak job market opportunities and potential limited earnings mean that college might be a better use of their time.
At the same time, prospective students and their families have been financially affected by the crisis. The COVID-19 downturn was so abrupt and far-reaching that many current and potential college students are struggling with new financial pressures and time demands, and these will not vanish if they enroll. For many, the ability to pay for college out of household earnings and savings is diminished and student work opportunities are fewer than before. Additionally, the nature of hybrid and online learning requires technology and high-speed internet connectivity – something that many Tennesseans lack.5
For current high school students looking to college, several opportunities remain for students to consider. Tennessee’s early postsecondary opportunities offer high school students the opportunity to earn college credit that can be transferred toward a postsecondary credential.6 Additionally, many high schools offer industry-valued credentials and work-based learning opportunities. Moving forward, high school students looking to college should take advantage of these opportunities to gain college and career exposure.
For colleges and universities: What is the financial and operational outlook?
Colleges and universities are financially vulnerable during the ongoing pandemic. Federal and state recovery and relief efforts — unemployment benefits, federal checks and direct deposits, and forgivable business loans, among others — have kept household finances in better shape than employment and production. As a result, tax revenues have not declined as much as might have been anticipated. Still — relative to March expectations — the Tennessee budget assumes an additional $500 million loss in revenues during the fiscal year ending June 30, 2020, and another $1 billion reduction for the next year. Compared to 2019-20, the General Assembly has proposed steady higher education funding in June 2020, and the Lee administration has proposed absorbing the effects of revenue losses resulting from COVID-19 and the associated recession on overall state spending across three years.7
Enrollment — a critical source of higher education revenue — remains an open question for the 2020-21 year and beyond. Enrollment volatility will have consequences for higher education budgets and the quality of resources that schools can provide. High unemployment rates and a weak labor market will make college look more appealing for many prospective students.
High unemployment rates and a weak labor market will make college look more appealing for many prospective students.
But in this period of economic decline, we cannot be certain that enrollments will rise as they did during the last two recessions. For one, there are fewer high school graduates today to fill college seats due to generational trends. Second, these “seats” will be different in 2020, with virtual meetings and online assignments substituting for face-to-face lectures to some extent. And third, many students are facing dire economic circumstances in their households, including food and housing insecurity that may hinder their ability to enroll, as well as health and safety anxieties about returning to in-person, on-campus classes.8
Early signals about entering and returning class enrollments are mixed. At some of the state’s four-year universities, Summer 2020 enrollments or Fall 2020 commitments are higher than in 2019, but that is not true of all state colleges and universities.9 Nationwide, the number of completed FAFSA applications was 3.5 percent lower on May 15, 2020, than the same date in 2019, and applications from students who are low-income were 5.2 percent lower than they were in 2019.10
Aside from state funding reductions and enrollment uncertainty, Tennessee’s colleges and universities also face threats to other funding sources. Grants, contracts, donations, and endowment earnings that provide funding may be reduced, and auxiliary goods and services such as on-campus housing and food, events and camps, and athletics will be disrupted by the health and safety concerns COVID-19 presents. Although some of these functions are self-sustaining, they each entail significant fixed costs that institutions will have to cover out of other funds if campuses shut down again as they did in Spring 2020, and they employ a large number of staff and students.
State colleges and universities receive revenue from various sources, including state appropriations, tuition and fees, and other sources (Table 1). On a per-student basis, the three largest sources are state appropriations, tuition and fees, and grants and contracts — with federal Pell Grants and state financial aid treated as grant revenue. Community colleges and TCATs rely on state funding and grant revenues more than student tuition and fees and rely very little on auxiliary revenues. Universities rely on tuition and fees about as much as appropriations, while auxiliary revenues and other revenues are important but smaller sources of incoming funds.
Table 1. College and universities revenues are made up of many sources. State funds, net tuition and fees, and auxiliary revenues are threatened by recession and shutdowns.
State appropriations per student
Net tuition and fees per student
Grants and contracts
Auxiliary and service revenues per student
The table lists appropriations, tuition, auxiliary, grants/contract, and other revenues per full-time and part-time students for 2017-18. Grants and contracts include federal Pell grant aid and state financial aid. Auxiliary and service revenues include funds from auxiliary enterprises, educational services, and independent operations. Other revenues include federal and local appropriations, capital appropriations, gifts, investment earnings, and various additional sources of revenue.
And as COVID-19 threatens the health and safety of campus communities, postsecondary institutions are facing new, unexpected costs of instruction and operation. These include technology purchases necessary to offer classes virtually, support for students who need emergency aid or computing and connectivity upgrades to attend their classes, and supplies necessary to ensure the safety and health of students attending in-person classes.
Putting It Together: What Does It Mean For Students In Tennessee?
As noted in lessons learned from previous recessions, state funding for higher education moves in the same direction as sales tax revenues — and usually lags one year behind any dramatic shifts. The timeline is even more accelerated during the COVID-19 downturn as the General Assembly looks to meet revenue shortfalls of uncertain depth and duration.
The pandemic and associated downturn will not be felt equally. Unemployment rose higher and faster for Black workers, Hispanic workers, and workers without a college education.
Some federal relief funds have been provided for higher education, but it remains unclear what additional funds will be disbursed during this period and if Tennessee will maintain higher education funding. UT Knoxville has recommended to the University of Tennessee System’s Board of Trustees to not to increase tuition for the 2020-21 year, and many other institutions will also likely curb tuition increases in the next year.11 In the absence of additional federal aid to state governments or a recovery that — contrary to economic forecasts — is as abrupt as the initial downturn, we expect that higher education revenues and resources per student will fall significantly for 2020-21 and 2021-22 academic years. 12 And if a recession causes more students to enroll, resources per student will fall more, putting further pressure on colleges and universities to do more with less.
The pandemic and associated downturn will not be felt equally. Unemployment rose higher and faster for workers who are Black, Hispanic, and those without a college education (Figure 7). People of color are also overrepresented in COVID-19 infections and deaths, nationally and in Tennessee.13 These inequities will exacerbate the challenges facing our state economy if we do not address intentionally the needs of these identified student groups.
Figure 7: Nationwide, Unemployment Is Growing Faster For People Of Color And Workers Without A College Education
Figures illustrate the percent of U.S. workers who are unemployed by race, ethnicity, and educational attainment.
Source: BLS Employment Situation, June 5, 2020
As colleges and universities fulfill a mission to educate tomorrow’s workforce amid declining revenues, control public health threats posed by day-to-day operations, and work to serve students and personnel facing new threats to their overall well-being, the economy is adapting to a new normal. That new normal may look very different on the other end of COVID-19. During the Great Recession, the nature of work shifted significantly toward a greater use of technology and workers with more education in metropolitan areas where the downturn was more severe.14We should expect a COVID-19 recession to spur a similar restructuring — perhaps more so because in-person, on-site work poses new risks to health.
One point is clear: Online learning will remain an important component in postsecondary education.
Regardless of how revenues and spending unfold for Tennessee’s higher education institutions, virtual learning is likely to play a bigger role than ever before as campuses try to preserve the health and safety of students in classrooms and lecture halls. Research provides three key insights for policymakers and leaders to consider as the move to online learning becomes more widespread:
Online learning increases access to higher education. In normal times, online options have been shown to increase access to higher education, and in the era of COVID-19, virtual learning has already proved capable of meeting students where they are.15 Online options are particularly appealing for students with work and family obligations outside of school, and one possible silver lining of the COVID-19 response is the opportunity to make college more accessible for nontraditional and midcareer students.
Face-to-face instruction is a more effective learning environment. It is important to note that while online options increase access, research suggests that students learn less in an online learning environment than in a face-to-face classroom.16
Online learning may be costly. Before the pandemic, online learning was viewed as one way that colleges and universities could cut costs, although that has not always been the case in practice.17 On the contrary, colleges and universities will incur start-up costs as they shift face-to-face classes online, and this form of learning requires hardware and internet connectivity that many students lack.18 Online and hybrid classes may be a necessity due to the pandemic, but we should not count on them to close holes in a college budget or serve all students well.
The outlook presents Tennessee with a set of big challenges, but the reality remains: A postsecondary credential matters for student mobility and career readiness in a changing economy. Developing targeted policies can help address the current challenges facing Tennessee’s postsecondary system and provide long-term improved opportunity.
The Roadmap To Stability
New policies can help ensure students succeed in earning postsecondary credentials. Here are our recommendations to Tennessee policymakers and higher education leaders.
The Roadmap To StabilityNext section title will be automatically displayed here.
Section 4 Sources
1 Oreopoulos, Philip, Till von Wachter, and Andrew Heisz. “The Short-and Long-Term Career Effects of Graduating in a Recession.” American Economic Journal: Applied Economics (January 2012). Altonji, Joseph G., Lisa B. Kahn, and Jamin D. Speer. “Cashier or Consultant? Entry Labor Market Conditions, Field of Study, and Career Success.” Journal of Labor Economics (December 2015).
2Filling the Lifeboats: Getting America Back to Work in the Pandemic. Burning Glass Technologies (May 2020). 3 Scott, Katherine and Ann Thompson (November 1, 2019). “LEAP 2019: In-Demand Occupations.” Tennessee Department of Economic and Community Development.
4 Hershbein, Brad and Lisa B. Kahn. “Do Recessions Accelerate Routine-Biased Technological Change? Evidence from Vacancy Postings.” American Economic Review (July 2018)
5 US Census Bureau, 2018 American Community Survey. “Types of Internet Subscriptions by Selected Characteristics,” Table S2802; Fazlullah, Amina and Stephanie Ong. The Homework Gap: Teacher Perspectives on Closing the Digital Divide. Common Sense (2019).
6 Tennessee Department of Education, (n.d.)
7 Administrative decisions to postpone filing requirements for a number of taxes exaggerate the monthly revenue losses, and make it difficult to understand the volume of tax revenues that have been lost to COVID-19 shutdowns.
8 Lowe, Peggy. “Colleges grapple with student food insecurity during COVID-19.” Marketplace Morning Report (May 2020); Bramhall, Emily. “Emergency Aid is Critical for Housing Insecure Students during COVID-19.” Urban Institute (May 2020).
9 Kast, Monica. “UT enrollment ‘well positioned’ for the fall semester, despite national trends.” Knoxville News-Sentinel (May 2020).
10 DeBaun, Bill. “New Data: Nearly 250,000 Fewer Low-Income FAFSA Renewals this Cycle Nationally.” National College Attainment Network (May 2020).
11 UT Knoxville Advisory Board Meeting (May 13, 2020).
12Interim Economic Projections for 2020 and 2021. Congressional Budget Office (May 2020).
13 Other & Belonging Institute (June 2020).
14 Hershbein, Brad and Lisa B. Kahn. “Do Recessions Accelerate Routine-Biased Technological Change? Evidence from Vacancy Postings.” American Economic Review (July 2018).
15 Goodman, Joshua, Julia Melkers, and Amanda Pallais. “Can Online Delivery Increase Access to Education?” Journal of Labor Economics (October 2018).
16 Xu, Di and Shanna Smith Jaggars. “The impact of online learning on students’ course outcomes: Evidence from a large community and technical college system.” Economics of Education Review (August 2013); Figlio, David, Mark Rush, and Lu Yin. “Is it Live or is it Internet? Experimental Estimates of the Effects of Online Instruction on Student Learning.” Journal of Labor Economics (2012); Alpert, William T., Kenneth A. Couch, and Oskar R. Harmon. “A Randomized Assessment of Online Learning.” American Economic Review (May 2016); Bettinger, Eric P., et al. “Virtual classrooms: How online college courses affect student success.” American Economic Review (2017).
17 Bowen, William G. “The ‘Cost Disease’ in Higher Education: Is Technology the Answer?” The Tanner Lectures, Stanford University (October 2012); Deming, David J., et al. “Can Online Learning Bend the Higher Education Cost Curve?” American Economic Review (May 2015); Hemelt, Steven W., et al. “Why is Math Cheaper than English? Understanding Cost Differences in Higher Education.” National Bureau of Economic Research Working Paper (November 2018).
18 McMurtrie, Beth. “Students without Laptops, Instructors without Internet: How Struggling Colleges Move Online during COVID-19.” The Chronicle of Higher Education (April 2020).