Colleges, Universities Face Dwindling Enrollment During Economic Slump

NEW YORK — Colleges and universities are looking for alternative ways to keep students enrolled in the face of a growing need for student loans, rising gas prices and waning donor contributions, according to a recent report by Moody’s Investors Service.

Higher learning institutions that have been sheltered from economic downturn by a diversified business model and multiple revenue sources are experiencing flagging revenues. Families suffering from the economic strain are struggling to pay college tuition and fees — one of the main sources of income for colleges and universities, the report states.

During 2008, a majority of the financial resources that parents and students use to pay for college, such as private student loans, home equity loans, credit lines and stocks, have grown increasingly difficult to obtain due to swelling unemployment numbers and the cost of obtaining loans from banks and other financial institutions.

Analysts attribute the ongoing credit crunch to the collapse of the subprime mortgage market, which, along with rising attendance costs for colleges and universities, is forcing students to turn to less expensive schools.

As a result, higher-tuition schools are experiencing a downturn in enrollment, as well as a decline in the number of donors and the amount of donors’ contributions. State-supported schools may also see a decrease in government funding.

In May, legislation was passed to ease credit restrictions on federal parent loans and raise credit limits for certain federal student loans. The legislation was intended to cushion the blow of increasing financing obstacles resulting from disruptions in the credit and student loan markets. However, it was countered by private providers of federal and student loans that continued to drop unprofitable and loss-heavy loan programs, according to the report.

Rising gas prices are also a factor in declining enrollment numbers as more students opt for online courses, the report states. This year, University of Houston reported an increase of 40 percent in online course enrollment compared with last summer’s enrollment numbers. Drexel University experienced an 86 percent spike in the number of applications to online programs submitted between April and June, compared with application numbers for January through March.

While online classes are not estimated to be less expensive than traditional on-campus courses, analysts say the money students can save on gas by attending classes from home could explain why online enrollment is growing across the U.S.

To combat financial obstacles for students and parents, some colleges and universities are working to reduce gas use by shortening on-campus class schedules from five days to four days per week.

Other institutions are accommodating the rising interest in online enrollment by providing more online courses and hybrid courses that combine classroom and online lessons.