AILSA CHANG, HOST:
Many people in the U.S. have had a giant bite taken out of their finances. Colleges are dealing with a scaled-up version of that. Northwestern University in Illinois expects a $90 million budget shortfall. For the University of Kentucky, that shortfall is $70 million. And the University of Michigan estimates a loss of up to $1 billion. NPR's Elissa Nadworny has been looking into all of this and joins us now.
ELISSA NADWORNY, BYLINE: Hi.
CHANG: OK. A billion-dollar shortfall here, 90 million there - these numbers sound enormous. I mean, are they, relatively speaking? What's going on here?
NADWORNY: So yeah. They're big, but this is a bad math problem. I mean, colleges don't have money coming in. So think about this spring. A lot of schools gave refunds for tuition or parts of room and board. You know, they also don't have the extra revenue from events like athletics and conferences on campus...
NADWORNY: ...Summer camps. And then think about those big college systems like the University of Michigan. They have hospitals, and those hospitals aren't doing things like elective surgeries or other big, expensive procedures.
CHANG: Right. But it's not just a lack of revenue, right? I mean, there's actually a lot of money that still needs to be spent by these colleges right now.
NADWORNY: Exactly. That's the bad math problem. So money's still going out. It's not just payroll. It's also the cost of getting school and classes online this spring and this summer. And colleges are still spending money to recruit new students to convince their current students that they should come back in the fall.
CHANG: I mean, are there places colleges can turn to for money - not only the federal government, but state governments as well?
NADWORNY: Yeah. So college did give some money in the CARES Act, though higher ed groups said that that was way too little. For the state funding, you know, state revenues are way down. You know, the economy is essentially on hold. And in most states, funding for higher education isn't constitutionally required. So when states are strapped and they've got to balance those budgets, money for colleges often get slashed. We saw that in the last recession. And in a lot of places, state funding hadn't actually rebounded, so they weren't in a good spot before coronavirus.
CHANG: What about college endowments? I mean, why not just tap those right now?
NADWORNY: So most colleges have small endowments. You know, if you spread that money across the student body, in some cases, we're talking about a couple hundred dollars per student. You know, there's really only a handful of colleges that have those huge billion-dollar endowments.
NADWORNY: But even for those wealthy institutions, like, college endowments are complex beasts. They're often restricted to certain priorities, or they have lots of different investments. Many of those investments are not doing so well. You know, so it's not like this big pot of money that colleges can just tap into.
Robert Kelchen is a higher ed finance expert, and he says colleges think of endowments for the long term, not for the right now.
ROBERT KELCHEN: Tapping into the endowment sends a bad signal to the credit market, if nothing else. And then if this gets out in news coverage, that could potentially jeopardize student decisions.
NADWORNY: So getting money from tuition is really the most reliable money pot right now, which means that colleges have to fill - they have to focus on filling their seats for the fall.
CHANG: Well, about filling those seats, I mean, obviously, that's tied to what campus will even look like in the fall. And a lot of that depends on testing. Some of the top public health officials in the country testified today in front of Congress. And when it came to reopening schools, testing came up again and again. What have colleges said about the fall semester?
NADWORNY: So they have run the gamut. You know, colleges say they're definitely going to be in person. But then, you know, the university - the California State University system just said they're actually going to be online in the fall. That's almost half a million students. Health experts testified today contact tracing, testing, social distancing - they're going to be the key players in this.
CHANG: All right. That's NPR's Elissa Nadworny. Transcript provided by NPR, Copyright NPR.