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Mon Jan 28, 2013, 11:41 AM

Colleges Are Going To Start Going Out Of Business

The question is not whether or not you should go to school, the question for the class of 2014 is what is your college plan and what is the likelihood that your college or university you attend will still be in business by the time you want to graduate.

Still in business? Yep. When I look at the university and college systems around the country I see the newspaper industry.

...


So back to the economics of 4 year schools. Before you go to college, or send your child to a 4 year school you better check their balance sheet. How much debt does the school have ? How many administrators making more than 200k do they have ? How much are they spending on building new buildings. None of which add value to your child’s education, but as enrollments decline will force the school to increase their tuition and nail you with other costs. They just create a debtor university that risks going out of business.

There will be colleges and universities that fail, declare bankruptcy or have to re-capitalize much like the newspaper industry has and long before the class of 2018 graduates.

The smart high school grad no longer just picks a school, borrows money and wings it. Your future depends on your ability to assemble an educational plan that gets you on your path of knowledge and discovery without putting you at risk of attending a school that is doomed to fail , and/or saddling you with a debt heavy balance sheet that prevents you from taking the chances, searching for the opportunities or just being a fuck up for a while. We each take our own path, but nothing shortcuts the dreams of a 22 year old more than owing a shitload of money.

Now is the time to figure it out and avoid the mess schools are creating for themselves and for those who take the old school way to college graduation.


http://www.businessinsider.com/will-your-college-go-out-of-business-before-you-graduate--2013-1

22 replies, 2340 views

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Arrow 22 replies Author Time Post
Reply Colleges Are Going To Start Going Out Of Business (Original post)
FarCenter Jan 2013 OP
el_bryanto Jan 2013 #1
FarCenter Jan 2013 #4
el_bryanto Jan 2013 #5
Fawke Em Jan 2013 #9
FarCenter Jan 2013 #18
The Velveteen Ocelot Jan 2013 #2
FarCenter Jan 2013 #6
The Velveteen Ocelot Jan 2013 #7
stopbush Jan 2013 #3
The Velveteen Ocelot Jan 2013 #8
stopbush Jan 2013 #12
FarCenter Jan 2013 #17
stopbush Jan 2013 #22
Arugula Latte Jan 2013 #19
FarCenter Jan 2013 #21
KamaAina Jan 2013 #10
Yavin4 Jan 2013 #11
stopbush Jan 2013 #14
Yavin4 Jan 2013 #16
liberal_at_heart Jan 2013 #13
Fire Walk With Me Jan 2013 #15
Arugula Latte Jan 2013 #20

Response to FarCenter (Original post)

Mon Jan 28, 2013, 11:44 AM

1. There's some difference between Newspapers and Universities

They both provide information, but only Universities provide certification. And I don't see other institutions competing for that societal role effectively.

That said double checking your university is always a good idea; make sure you are buying the certification (degree) that gets you where you want to go.

Bryant

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Response to el_bryanto (Reply #1)

Mon Jan 28, 2013, 11:49 AM

4. The parallel was between newspapers and universities as businesses

Newspapers were seen as sound businesses, but technological change and customer behavior led to the rapid demise of many newspapers. Similar changes will lead to the demise of many colleges.

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Response to FarCenter (Reply #4)

Mon Jan 28, 2013, 11:50 AM

5. Yes - because people have complete confidence in online universities providing the same degrees

I mean getting a degree online from a diploma mill is just as useful as attending a four year university.

Bryant

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Response to FarCenter (Reply #4)

Mon Jan 28, 2013, 12:38 PM

9. That's not why newspapers went out of business.

They went out of business because vulture capitalists bought them, packaged them and saddled them with debt.

True, there were technological changes, but most newspapers would have weathered that. I mean, we read online instead of hard copy, but it's still reading and we still need reporters to produce that copy.

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Response to Fawke Em (Reply #9)

Mon Jan 28, 2013, 02:04 PM

18. You are mininimizing the costs of transitioning from print to digital

The newspapers have to operate and maintain two distribution infrastructures: a cheap digital distribution with increasing volume; and an expensive print distribution with decreasing volume.

The print distribution tends to cripple the newspaper, since it has high fixed costs for printing facilities, warehousing, etc. as well as possible pension obligations to staff no longer needed or employed. So it is very hard to bring down costs on the print side as fast as the print volume decreases.

It is most practical to "cash cow" the print side and get out as much cash flow as possible before it goes bankrupt, while starting a digital property from scratch.

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Response to FarCenter (Original post)

Mon Jan 28, 2013, 11:44 AM

2. And avoid for-profit schools like the plague.

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Response to The Velveteen Ocelot (Reply #2)

Mon Jan 28, 2013, 12:01 PM

6. There are non-profit schools in financial trouble

One-Third of Colleges Are on Financially 'Unsustainable' Path, Bain Study Finds

By Goldie Blumenstyk

An analysis of nearly 1,700 public and private nonprofit colleges being unveiled this week by Bain & Company finds that one-third of the institutions have been on an "unsustainable financial path" in recent years, and an additional 28 percent are "at risk of slipping into an unsustainable condition."

At a surprising number of colleges, "operating expenses are getting higher" and "they're running out of cash to cover it," says Jeff Denneen, a Bain partner who heads the consulting firm's American higher-education practice.

Bain and Sterling Partners, a private-equity firm, collaborated on the project. They have published their findings on a publicly available interactive Web site that allows users to type in the name of a college and see where it falls on the analysts' nine-part matrix.


http://chronicle.com/article/One-Third-of-Colleges-Are-on/133095/

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Response to FarCenter (Reply #6)

Mon Jan 28, 2013, 12:33 PM

7. That's true. But the for-profit ones are more likely

to be overpriced because they rely almost entirely on tuition (students taking out those crushing loans), and they generally have an extremely high dropout rate because the students can't afford to keep paying that high tuition. What's worse, their degrees are often almost worthless because employers don't look at them as "real" schools, and since many are not accredited the students can't transfer their credits to a "real" college. At least the nonprofit schools often have endowments that help them stay afloat, and their degrees have some value.

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Response to FarCenter (Original post)

Mon Jan 28, 2013, 11:48 AM

3. Building buildings on college campuses rarely takes away from spending on students.

That's because most buildings are funded by rich people whose main interest is having their name on a building. That's why they're willing to cough up the millions. They are not going to make that donation to fund programming or to offer financial aid to students. They'll just take their money and go elsewhere.

Millionaires and billionaires didn't get to be that way because they let other people dictate how they spend their money.

We may well be looking at college campuses with beautiful new buildings sitting empty because there are no students who can afford tuition. But the alternative is having campuses with large open spaces where the buildings weren't built and where the students still can't afford the cost of tuition.

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Response to stopbush (Reply #3)

Mon Jan 28, 2013, 12:34 PM

8. Campus buildings are often just ego trips for their wealthy alumni-donors.

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Response to The Velveteen Ocelot (Reply #8)

Mon Jan 28, 2013, 12:58 PM

12. Exactly. And what are the colleges to do when offered these ego trips? Say no?

Never gonna happen.

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Response to stopbush (Reply #12)

Mon Jan 28, 2013, 01:59 PM

17. The donations don't cover operating and maintenance costs of the buildings.

And many times the architectural features, landscaping, etc. that goes with donated buildings make them very expensive to operate and maintain.

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Response to FarCenter (Reply #17)

Mon Jan 28, 2013, 07:57 PM

22. Actually, I've worked on raising funds for such projects, and they ALWAYS include operating costs

for the buildings into the out years. There's also contingency costs tossed in.

No college is going to let a person erect a building without first pencilling out the operating expenses. The money for the operating costs may not come from the person doing the heavy lift of the titled sponsorship, but from other donors who are roped into donating the funds to help cover expenses. In fact, you can't break ground on such a project until you've secured the majority of the overall expenses through a combination of actual donations and pledges.

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Response to stopbush (Reply #3)

Mon Jan 28, 2013, 02:09 PM

19. Look at this beautiful building at the University of Oregon:

Imagine how much it cost to build. It's for ATHLETES only.



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Response to Arugula Latte (Reply #19)

Mon Jan 28, 2013, 02:33 PM

21. University of Oregon students call for opening John Jaqua Academic Center for Student Athletes to al

A group of University of Oregon students today plan to enter a restricted area in the opulent academic center built for athletes by Nike founder Phil Knight and call for opening the building to all students.

Students say the top two floors of the John E. Jaqua Academic Center for Student Athletes, a three-story $42 million glass cube built on campus last year, are reserved for student athletes.

"We just feel it is a physical representation of the separation between students and athletes and how athletes are valued above non-athletic students," said Janae Schiller, 22, a senior majoring in sociology who plans to take part in the 1 p.m. demonstration.

http://www.oregonlive.com/education/index.ssf/2011/03/university_of_oregon_students.html



University of Oregon John E. Jaqua Academic Center for Student Athletes / ZGF Architects
http://www.archdaily.com/137141/university-of-oregon-john-e-jaqua-academic-center-for-student-athletes-zgf-architects/

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Response to FarCenter (Original post)

Mon Jan 28, 2013, 12:47 PM

10. Colleges would most likely not get as far as bankruptcy

their accreditation can be pulled over financial trouble. This is actually going on at City College of San Francisco, the nation's largest community college with some 80,000 students. It's been placed on "show cause" by the accrediting agency, one step away from losing its accreditation.

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Response to FarCenter (Original post)

Mon Jan 28, 2013, 12:54 PM

11. The Biggest Problem with Academia is That They All Want to be Harvard

They base their tuition on what Harvard charges. They teach exactly what Harvard teaches. They hire Harvard (or Ivy League grads) as administrators/deans/profs. They have similar admission standards even though they cannot offer similar post-graduate results.

Instead of focusing on their core competencies, they all want to be Harvard or Yale or something like that. The problem with this approach is that these schools cannot duplicate the Ivy League's post-graduate alumni network of connections and preferred hiring. Thus, you have a generation of kids graduating with nearly the same debt levels as an Ivy Leaguer, but without the plum starting job that can pay back those loans.

So, today, kids and families are getting smarter about their educational choices. They're looking at lower cost paths to higher education. The consurmer either wants actual entry into Harvard or they want a cheaper alternative.

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Response to Yavin4 (Reply #11)

Mon Jan 28, 2013, 01:02 PM

14. Harvard does offer free tuition to students whose family income is under $60k.

They also have a largest endowment of any university in the country - $12-B in 2011. The interest on that endowment covers lots of expenses.

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Response to stopbush (Reply #14)

Mon Jan 28, 2013, 01:18 PM

16. Harvard is a great school. No doubt. It's worth it's tuition.

My point is that practically all other non-profit universities and colleges cannot duplicate the Harvard model.

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Response to FarCenter (Original post)

Mon Jan 28, 2013, 12:58 PM

13. both of our state universities wanted to use state funds to invest in stocks

The voters said no, but I have no doubt that is the direction they are headed and it will no doubt lead to financial ruin.

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Response to FarCenter (Original post)

Mon Jan 28, 2013, 01:04 PM

15. I wonder if the system's been rigged in a long-game bid to privatize education. n/t

 

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Response to FarCenter (Original post)

Mon Jan 28, 2013, 02:10 PM

20. I used to assume my kids would go to four-year universities.

Now we're thinking -- no, it's not worth it to get tens and tens of thousands of dollars in debt for that.

When I went to college in the mid-80s, tuition to the Univ. of Calif. was less than a thousand a semester.

The costs are exponentially larger. It's absolutely ridiculous.

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