In July 2017, the university took out the $60 million policy, based on the tuition fees paid by Chinese students studying business and engineering, at the cost of $425,000 a year
“It allowed us some sense of security that we could make our plans and investments”
Under its terms, the sum would be paid out if enrolment dropped by 18.5% before July 1, 2020.
Speaking with The PIE News in 2019, Brown said the policy was a result of looking for a way to protect against the risk of having so many students from one country, and that he wanted to mitigate the costs of an unexpected political, economic or health event.
“It allowed us some sense of security that we could make our plans and investments, knowing that if something did come along, we had a little bit more time to be intentional and thoughtful in how we responded because we wouldn’t be scrambling to close a big budget gap,” he said at the time.
“I will be delighted if we don’t need this policy,” he added.
However, in a new investigation, Reuters has claimed that “an error in the wording of the contract” necessitated changing brokers and delayed renewal negotiations by several months, meaning a new policy was not in place by the time Covid-19 hit.
As a result, the university is no longer able to get “get pandemic, visa restriction, or sanctions coverage.”
“The [new] terms quoted as much as $1.95 million to cover up to $58 million in tuition losses for three years, about 50% more expensive than the original policy,” noted the report’s author.
“Further, the pandemic-related coverage was capped at $20 million, down from $36 million earlier, and the coronavirus was now excluded.”
The Covid-19 pandemic and the breakdown of relations between China and the US have shone a light in recent months on the reliance of US – and other – higher education systems on Chinese students for revenue.
One estimate suggests institutions could lose up to $1.15 billion in tuition revenue over the next 10 years due to the US-China trade war alone, while data from NAFSA puts the cost of Covid-19 at a potential $4.5 billion.
UIUC has been approached for comment but did not respond prior to publication.