The sole source of revenue for public universities comes from students' tuition fees (Hauptman, 2018). However, government funds also form part of the income generated by these institutions (Hauptman, 2018). However, economic recession causes such funds to reduce as the government struggles to allocate its dwindled resources to different public sectors. Since government cutbacks occur regardless of the number of students enrolled, universities suffer because lack of such funds reduces revenue collection. Most institutions of higher learning face challenges of strategizing appropriate ways that can increase revenue to offset reductions in funding received from the government. Public universities usually strategize to enhance revenue collection by raising tuition fees, increasing enrolment for international students and reducing expenditure.
Tuition fee acts as the sole source of revenue for public institutions of higher learning (Hauptman, 2018). Hence, public universities opt to raise tuition fees as a way of increasing revenue collection. Such increments help in balancing cutbacks from government funding and expenses within the university (Hauptman, 2018). However, increases in tuition fees that fail to offset reduced funding from the government and institution expenditure are ineffective because they fail to serve the main purpose of enhancing revenue collection. Such ineffective increments in tuition fees tend to reduce revenue collection. Nonetheless, when an increase in tuition fees amicably offset or surpasses cutbacks in government funding and expenses, these institutions experience an increase in revenue collection.
The assumption made while formulating university budget is that each student spends a fixed amount of money regardless of the national economic circumstances. Hence, there are risks to students not paying enough tuition fees if their spending expenses rise (Hauptman, 2018). Such unequal increase in tuition fees will not fully offset costs incurred, and hence public institutions will collect lower revenue. However, when institutions strategize to increase tuition fees proportionally to students spending rates, revenue collection remains constant. Rising tuition fees to surpass students spending rates will increase the revenue for these institutions.
During economic recessions, most people prefer to further their studies rather than to remain unemployed and thus, institutions of higher learning experience an increase in enrolment (Hauptman, 2018). However, these enrolments always drive down resources needed by each student. Hence, when public institutions fail to increase tuition fees in a manner that offsets the reduction in government funding, their revenue will depreciate. However, when an increase in tuition fees equals to increase in students' spending, revenue collection will remain constant.
The number of students enrolling in NSU usually correlates with the amount of tuition fees collected by the institution. An increase in the number of students enrolled in the university increases revenue collection (Declercq & Verboven, 2014). Each student generates particular revenue for the institution, and thus an increase in their numbers enhances revenue collection. Also, increasing the number of tuition fees will generate more revenue. Therefore, improving enrolment of students with higher tuition fees will offset expenditure and government funding and thus produce higher income for the institution. Such increments in enrolment increase revenue because the institution can balance their budgets by enhancing cost-recovery rates (Declercq & Verboven, 2014).
Nonetheless, students with difficulties in affording higher tuition fees will have dwindles access to NSU. Most of these students rely on government funding when they enroll in universities. Since there are no or reduced financial aids from the government to offset increments in tuition fees, enrolment of needy students will reduce (Declercq, & Verboven, 2014). Since revenue collection is a cumulative function of each student, reduction in their enrolment lowers payments made to the institution. Hence, the revenue collected will reduce when NSU enrolls a few students because of increasing tuition fees.
Universities can expand revenue collection by increasing enrolment of international students to their institutions (Bound, Braga, Khanna, & Turner, 2016). International students usually pay for out-of-state tuition fee that is free from government funding. Out-of-state tuition fee has higher charges than that paid by resident students and thus can effectively increase revenue collection in universities (Bound et al., 2016). Universities need to market their quality education services to international students, who have an increase in demand for higher education. Such strategies will increase revenue collection because international students pay higher tuition fees.
Universities can also strategize on reducing expenditure as a way of lowering constraints in collected revenue. Institutions of higher learning can effectively cut down their spending by reducing the number of employed staff. Wages paid to staff are part of university expenses that strain the budget (Bound et al., 2016). Therefore, reducing the number of staff will lower institutions' spending on their salaries.
Universities rely on tuition fees as their sole source of revenue. Increasing tuition fees can enhance revenue collection in universities and offset the reduction in government cutbacks. When increases in tuition fees are higher than reductions in government funding, universities benefit because of increased revenue. Increasing admission for international students also helps in enhancing revenue for universities because their tuition fees are higher (Bound et al., 2016). Also, universities need to reduce their expenses as a strategy for managing collected revenue.
Bound, J., Braga, B., Khanna, G., and Turner, S., (2016). A passage to America: University funding and international students. The National Bureau of Economic Research. Retrieved from http://www.nber.org/papers/w22981
Declercq, K., and Verboven, F., (2014). Socio-economic status and enrollment in higher education: do cost matter? Journal of Education Economics, 23 (5) pp 532-556. Retrieved from https://www.tandfonline.com/doi/full/10.1080/09645292.2015.1047822?utm_source=TrendMD&utm_medium=cpc&utm_campaign=_Education_Economics_TrendMD_0
Hauptman, A. M, (2018). Assessing four budget-balancing strategies in higher education. Journal of the Boston College Center for International Higher Education. Retrieved from https://ejournals.bc.edu/ojs/index.php/ihe/article/view/8485
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