This is an AArete Higher Education insight

The Biden-Harris administration’s war on junk fees has recently set its sights on higher education institutions. With reforms targeting auxiliary revenue streams like dining services and bookstores, the proposal presents significant challenges and opportunities for universities.

The initiative reflects a broader commitment to making college affordable and auxiliary practices more favorable to students.

Regardless of whether these reforms, with rules and guidance expected by mid-summer 2024, are implemented, they serve as a vital reminder for universities to proactively adapt their financial and operational strategies to contend with regulatory changes.

This foresight is critical to maintaining financial health and transparent practices with students.

Financial Implications

Higher education institutions are bound by the directives of regulatory changes, and the implementation of such proposals can have a profound impact on the viability of their financial models. This underscores the need for universities to be prepared for regulatory shifts.

For dining services, the potential mandate to refund unused meal plan dollars to students stands in opposition to the traditional framework — returning the funds to the university or vendors — many institutions currently follow.

Meanwhile, a move toward student-centric, transparent pricing in book sales could upend the bundled fees model, consequently reducing profit margins.

An increasing number of universities are pricing textbooks at a fixed fee per semester or credit hour. While the system simplifies student expenses, the bookstores, often run by third-party vendors, earn through high markups, and universities receive a share of the profits. In both cases, reevaluating contract terms and pricing strategies in auxiliary services are worthwhile, ensuring financial stability amid shifting regulations while keeping students’ interests in focus.

Proactive Strategies

Why universities should adapt proactively to regulatory changes is clear, even as what lies ahead remains blurry or uncertain. How to prepare, on the other hand, can be a perplexing matter.

There are four comprehensive strategies that higher education institutions can adopt to evolve alongside regulations:

• Conduct comprehensive reviews of existing contracts, particularly those related to dining and bookstore operations.
• Consider adjustments, including negotiating more flexible terms to adapt to new regulations.
• Proactively align billing practices to address hidden fee concerns to meet demands for fairness and transparency.
• Leverage long-term strategic planning that not only accounts for compliance with upcoming changes but also leverages these shifts as opportunities for innovation.

Strategic Partners

Even if the aforementioned proposal fails to come to fruition, increased scrutiny toward auxiliary revenue streams in higher education will likely persist. Likewise, as regulatory concerns evolve, developing new business models for dining and bookstore services that prioritize transparency and align with broader institutional values of student service and satisfaction may become a pressing matter. Universities should prepare to comply with these changes and capitalize on them to enhance their service offerings and institutional reputation.

AArete has a proven track record of assisting universities in navigating complex transitions. Our team of expert consultants can provide strategic advice on contract review, financial impact analysis, and compliance strategies. Engaging with AArete will ensure your institution can rise to challenges and thrive in a reformed educational landscape.

Learn more about AArete’s Profitability Improvement solutions

Meet the Author

Ken Anderson

Manager