Tag: Rootstrap

Costly COVID: How The Pandemic Is Hurting US Colleges’ Bottom Lines

By Patrick Ward, director of marketing, Rootstrap.

Patrick Ward

You don’t have to search far to find a family that’s had schooling upended by the pandemic. Stories echo in the virtual workplace meetings of hybrid schooling, anxious parents and students left baffled by a series of communication missteps. In the midst of all this chaos in the education industry, the tech side has seen an explosion in growth.

According to a recently released report from education development agency Rootstrap, the ed tech and online learning space has grown 335% in terms of revenue because of COVID-19, when compared with the previous year. This growth, however, is not being evenly distributed across the entire space.

Most notably, the majority of the increase (a staggering 559% revenue growth) was on education IT services that are used by universities to conduct and manage online coursework. Revenue increases for courses and e-learning alternatives to traditional college education was only up by 130%. These ed tech services include secure web conferencing licenses, ebooks, learning management systems, and a whole host of IT services specifically enabling universities to transition from an in-person model to a digital-first student experience.

The issue?

Universities are caught between a rock and a hard place. As much as universities have been spending big on Education IT services, they are taking a financial loss in declining revenue from income streams such as athletics, housing, and dining. Take UC Berkeley as one example: $10 million was spent on upgrading their technology to support online learning, while simultaneously anticipating a $340 million fiscal hit because of COVID-19. In summary: they’re spending more, and earning less.

As Aaron Rasmussen, founder of Outlier.org and MasterClass, states, “Traditional, in-person, higher education experience is suffering, since colleges are unable to deliver on much of their value proposition.”

For those colleges without the large endowment funds or brand name credentials, the situation is even more dire. New York University professor Scott Galloway predicts that as many as 10% to 20% of US universities could permanently close as a result of COVID-19.

So what’s causing this crisis in higher ed? At a casual glance, it boils down to two factors: structural and perceptive.

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