Prepare For An Unprecedented Wave Of College Bankruptcies

[FarCenter]

You would think traditional university educators would take notice. Beyond allowing some of their classes to be offered online, they haven’t. They won’t.

Its the ultimate Innovators Dilemma. They don’t believe they should change and they won’t. Until its too late. Just as CEOs push for that one more penny per share in EPS, University Presidents care about nothing but getting their endowments and revenues up. If it means saddling an entire generation with obscene amounts of school debt, they could care less. This is how they get their long term contracts and raises.

It’s just a matter o time until we see the same meltdown in traditional college education. Like the real estate industry, prices will rise until the market revolts. Then it will be too late. Students will stop taking out the loans traditional Universities expect them to. And when they do tuition will come down. And when prices come down Universities will have to cut costs beyond what they are able to.

They will have so many legacy costs, from tenured professors to construction projects to research they will be saddled with legacy costs and debt in much the same way the newspaper industry was. Which will all lead to a de-levering and a de-stabilization of the University system as we know it.

http://www.businessinsider.com/student-debt-bubble-impending-doom-for-colleges-2012-5

[coalition_unwilling]

1. Interesting article. You might also wish to check out the 2-part

series on same topic in New York Times:

http://www.nytimes.com/2012/05/13/business/student-loans-weighing-down-a-generation-with-heavy-debt.html?_r=2&ref=studentloans

[leveymg]

2. Just another pillar of a crumbling empire. Expect higher costs and more privatization

and more inequality.

[TheMightyFavog]

3. Student loan debt cannot be expunged by bankruptcy.

Only death or getting a major disability can expunge student loan debt.

[sharp_stick]

4. That's what I thought too n/t

[davekriss]

9. The article refers to bankruptcy of universities...

...not bankruptcies of people carrying unsupportable student loan debt.

[truebrit71]

13. But that would require reading the actual OP instead of typing up a knee-jerk response....

...and where's the fun in that?

[Proud Public Servant]

5. I'm trying to think this through

I've been trying to think through what such a crisis would mean. Here, I think, is what we would see:

1) A wave of small-college bankruptcies. In my own experience, small, non-elite colleges generally get by by the skin of their teeth in the best of times; most have nothing to offer that students can't get at their own state universities for half the price. (Some background: I spent several years as a college administrator at precisely the kind of college that would be first on the chopping block in a Higher Ed bankruptcy crisis: a small private college of no real academic distinction.) Such bankruptcies will not have a particularly significant impact on prospective students; state universities could absorb their small numbers rather easily. The impact on newly-unemployed faculty, however, would be enormous; small-college faculty tend not to have significant publication records, making them pretty much unemployable at a research university.

2) An influx of foreign students. It's not a big secret that foreign students are the cash cows of higher ed, since they almost always pay full price. As money gets tighter, expect to see colleges try to recruit more and more of these. This will ultimately set up a showdown between colleges and the State Department, since State has fairly stringent visa requirements for students.

3) Post-Millennial feudalism. When I graduated from college almost 30 years ago, I did so with a degree from an elite university that certainly opened some doors. However, my classmates and I have not done significantly better than our friends who graduated from state universities or non-elite private colleges. However, with my daughter's generation, that no longer seems to be true; the right school seems to matter more than ever, and graduating without the need to service debt puts you in a much better position than those poor souls described in the Times series. The class gap between college-educated twenty-somethings with elite educations and no debt, and everyone else, seems poised to be one of the greatest class gaps in US history.

[riderinthestorm]

11. This is really true....

"the right school seems to matter more than ever, and graduating without the need to service debt puts you in a much better position than those poor souls described in the Times series. The class gap between college-educated twenty-somethings with elite educations and no debt, and everyone else, seems poised to be one of the greatest class gaps in US history."

[larkrake]

6. Good riddence, they have lost sight of their purpose

raking in millions on their football programs and bleeding students, I hope we go back to community colleges only- then specialist schools.

[byeya]

7. Also, don't forget raking in millions from corporations to turn out corporate-friendly grads

at the expense of teaching critical thinking.

[Proud Public Servant]

8. That's not who will get hurt

The big sports schools will be just fine. It's small private colleges that will be in trouble. Not that I dispute your point about sports powerhouses having lost their way...

[jwirr]

10. We used to call this a vicious circle. One action brings on another. And you are correct the market

has no room for recognizing what it is doing to the furture. And has little care for the future because they assume they will not be there. Guess what? We all were here for the housing bubble when it burst. As another poster said last week - the future is already here and our world is collapsing around us a little at at time.

[SheilaT]

12. What I keep on hoping is that young people will finally wake up

and realize that borrowing huge sums of money for a degree in creative writing is a Very Bad Idea. There are any number of majors that generally don't lead to decent jobs, and meanwhile there are other fields that require only a two year degree and has good job prospects.

I am actually the kind of person who thinks education for its own sake is not such a bad idea, but I also recognize quite clearly that most people need to earn a living. Get a degree or certificate that actually leads to employment, and then, if you want to study anthropology or philosophy or, yes, even creative writing, go ahead and do so. Exercising your brain is a good thing, just learn to distinguish between what makes sense in the real world, and what you do just for your own pleasure or self-fulfillment.

[KamaAina]

14. Thank St. Raygun

he's the one who gutted Pell Grants and replaced most of them with loans.

Dishonorable mention to the repuke House, which is about to allow interest rates on student loans to double.

[Sirveri]

15. my school has 6 or 7 vice chancellors. Each making 200-250k/yr.

I say 6 or 7 because we have 'secret' chancellors who aren't known to the public.

We're laying off 6 permanent staff, none of which are vice chancellors. Must be nice to know the people who give out the kick backs...