Below are the key findings on institutional risk from the latest analysis.
In 2022 fewer COVID-19 relief dollars were present in profit margin equations, revealing the underlying economics of institutions.
An institution’s profit margin carries 25% weight in the IVM, and any institution with surplus receives a "Stable" designation on the metric. In 2019 and 2020, average profit margins by risk category were comparable and only slightly lower in 2020 overall (-2%) than in 2019 overall (2%). However, in 2021, a stark increase in average profit margin occurred across risk categories and overall (21%) as budgets were uplifted by nearly $80b from the Higher Education Emergency Relief Fund (HEERF). In general, institutions were required to spend half of allotments on student grants and remaining funds on permissible operating costs by July 2023, though some extensions into 2024 were granted. As shown in Figure 2, profit margins decreased sharply across risk categories (and to -11% on average overall) in FY22. With fewer relief funds remaining, the “ibuprofen effect” of COVID-19 stimulus on institutions’ financial positions weakened, and in many cases, actual spending outpaced available budget.
Figure 2: Average profit margin by IVM score, 2019–2022