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Why your college could go bankrupt
The Week ^ | 02/15/2013 | Blaire Briody

Posted on 06/11/2013 6:26:30 PM PDT by SeekAndFind

As the higher education system in the U.S. faces rising costs and reduced state funding, many are asking, What will colleges of the future look like?

According to a recent cover story in The American Interest, some won't look like anything at all, because they'll cease to exist. Author Nathan Harden estimates that in 50 years, half of the approximately 4,500 colleges and universities in the U.S. will go belly-up.

How could this happen? Through technology, he argues. Virtual classrooms, lectures through streaming videos, online exams — we've already seen these innovations crop up at major academic institutions, but they'll only proliferate on a much larger scale and disrupt the higher education system as we know it.

Harvard and MIT already have the online education venture edX, while Stanford has Coursera and has formed agreements with Penn, Princeton, UC Berkeley, and the University of Michigan to manage their online education programs. Harden also predicts that as online education becomes more widespread, a college-level education will soon be free (or cost just a minimal amount) for everyone in the world, and that the bachelor's degree will become irrelevant.

"If a faster, cheaper way of sharing information emerges, history shows us that it will quickly supplant what came before," he argues. "We may lose the gothic arches, the bespectacled lecturers, dusty books lining the walls of labyrinthine libraries, but nostalgia won't stop the unsentimental beast of progress from wreaking havoc on old ways of doing things."

Prestigious institutions, he says, will be in the best position to adapt, while for-profit colleges and low-level public and non-profits will be the first to disappear. "Universities of all ranks below the very top will engage each other in an all-out war of survival. In this war, big-budget universities carrying large transactional costs stand to lose the most. Smaller, more nimble institutions with sound leadership will do best," he writes.

While Harden takes the extreme outlook, signs of the traditional university's bumpy future are already apparent. Moody's Investors Service recently gave a negative outlook to all U.S. universities, citing "mounting fiscal pressure on all key university revenue sources," as a number of states continue to cut higher education budgets, endowments fall, and enrollment numbers and tuition dollars dwindle. Long-term debt at not-for-profit universities has been growing at 12 percent a year, according to consulting firm Bain & Company and private-equity firm Sterling Partners. For-profit colleges, booming businesses only a few years ago, have seen their enrollments fall 7 percent from 2011 to 2012 (compared to a 1.8 percent decline for all higher education institutions), despite efforts to offer generous tuition discounts.

Other colleges have gone into survival mode — some are deferring billions of dollars of maintenance needs, cutting staff, and combining resources with other nearby schools. Minnesota's St. Olaf College and Carleton College, for example, have begun discussing combining libraries, technology infrastructure, human resources and payroll — and possibly even their academic programs.

While many students and parents worry that an online education won't offer the same quality or formative experience as a brick-and-mortar school, Harden cites research at Carnegie Mellon's Open Learning Initiative and Ithaka S+R, an academic research and consulting service, which looked at machine-guided learning combined with traditional classroom instruction. They found that students who receive computer instruction do equally well on tests as traditional students, but can learn material much faster.

Other experts have come out recently on the traditional university's doom: Billionaire investor Mark Cuban compared the current higher education system in the U.S. to the newspaper industry. Harvard Business School professor Clayton Christensen also predicts "wholesale bankruptcies" among standard universities over the next decade due to online technologies.

As Harden puts it, "Why would someone pay tens of thousands of dollars to attend Nowhere State University when he or she can attend an online version of MIT or Harvard practically for free?"




TOPICS: Business/Economy; Education; Society
KEYWORDS: bankruptcy; college

1 posted on 06/11/2013 6:26:30 PM PDT by SeekAndFind
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To: SeekAndFind

See also here:

http://www.thefiscaltimes.com/Articles/2013/01/16/Moodys-Gives-Negative-Outlook-to-All-US-Universities.aspx#page1

Moody’s Investors Service now has a negative outlook for the entire U.S. higher education sector, the rating agency said on Wednesday, citing “mounting fiscal pressure on all key university revenue sources.”


2 posted on 06/11/2013 6:27:27 PM PDT by SeekAndFind
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To: SeekAndFind

Uh, it’s NOT “my college”.


3 posted on 06/11/2013 6:34:21 PM PDT by Paladin2 (;-))
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To: SeekAndFind

Let the Creative Destruction commence.


4 posted on 06/11/2013 6:41:33 PM PDT by Paladin2 (;-))
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To: SeekAndFind

I remember the college student union building. I loved the peace and quiet. I could go there between classes and study stretched out on a sofa or a comfy chair — much nicer than the library. Sometimes I would engage a fellow student in a game of chess. I always got my butt kicked but learned with every game.

One day I entered the building and there was a crowd of zombies staring blankly at a brand new large screen television which was blaring a commercial. I knew at that very moment that higher education was in decline.

Idiocracy is a documentary.


5 posted on 06/11/2013 6:41:49 PM PDT by Jeff Chandler (Idiocracy is a documentary.)
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To: SeekAndFind

It’s still the rite of passage for a typical American kid graduating from high school.


6 posted on 06/11/2013 6:43:23 PM PDT by MinorityRepublican
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To: SeekAndFind

It’s still the rite of passage for a typical American kid graduating from high school..


7 posted on 06/11/2013 6:46:26 PM PDT by MinorityRepublican
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To: MinorityRepublican

Where the hell are kids going to party?


8 posted on 06/11/2013 6:51:49 PM PDT by umgud (2A can't survive dem majorities)
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To: SeekAndFind
Geez, they are actually learning about business, economics and finance after all. ;-)
9 posted on 06/11/2013 6:55:35 PM PDT by Average Al ( Our founder fathers never knew we could fail due to a Techtatorship.)
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To: Paladin2
AWESOME.
10 posted on 06/11/2013 6:56:34 PM PDT by 4Liberty (Some on our "Roads & Bridges" head to the beach. Others head to their offices, farms, libraries....)
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To: SeekAndFind

I was the starting quarterback on our virtual university’s football team. I threw for thirty simulated touchdowns. I was going to be a first round draft pick for the virtual professional football league, but I got hurt in a game. I have a trick thumb.


11 posted on 06/11/2013 6:58:50 PM PDT by blueunicorn6 ("A crack shot and a good dancer")
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To: SeekAndFind
"As Harden puts it, "Why would someone pay tens of thousands of dollars to attend Nowhere State University when he or she can attend an online version of MIT or Harvard practically for free?"

The same thing could be said for pre schools, and K-12 schools too.

12 posted on 06/11/2013 7:00:03 PM PDT by Average Al ( Our founder fathers never knew we could fail due to a Techtatorship.)
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To: blueunicorn6

Are you on injured reserve for the season?


13 posted on 06/11/2013 7:01:12 PM PDT by nascarnation (Baraq's economic policy: trickle up poverty)
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To: SeekAndFind

We will thrive with a 50% cut in the number of colleges. We can only hope.

The bubble is about to burst.


14 posted on 06/11/2013 7:03:10 PM PDT by St_Thomas_Aquinas
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To: SeekAndFind

Couldn’t happen to a more deserving bunch.


15 posted on 06/11/2013 7:03:49 PM PDT by stevio (God, guns, guts.)
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To: 4Liberty

LOL.


16 posted on 06/11/2013 7:05:30 PM PDT by Paladin2 (;-))
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To: St_Thomas_Aquinas
The bubble is about to burst.

Most unlikely.

"Big Education" is a major source of funding for Democrats.

No way they let it suffer much of a haircut.

17 posted on 06/11/2013 7:05:56 PM PDT by nascarnation (Baraq's economic policy: trickle up poverty)
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To: nascarnation

Yes, but I’ve hired a trainer to help get my thumb back in shape. He was a hitch hiker for thirty years.


18 posted on 06/11/2013 7:08:05 PM PDT by blueunicorn6 ("A crack shot and a good dancer")
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To: blueunicorn6
If you went to online university you could post any picture of yourself you would like. Online dating might
suck though. ;-)
19 posted on 06/11/2013 7:08:51 PM PDT by Average Al ( Our founder fathers never knew we could fail due to a Techtatorship.)
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To: SeekAndFind

Let’s see what happens to unionize college professors and instructors when they are not given raises. Some may be able to make the leap to the private sector/real world, but most will be utterly lost. I bet the cost of college adjusts and unions will have to go along with it or not survive.


20 posted on 06/11/2013 7:09:44 PM PDT by ConservativeInPA (Molon Labe - Shall not be questioned)
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To: SeekAndFind
Change the rules so that college loans are able to be discharged in bankruptcy?

Change the rules so that college loans are NOT guaranteed by the government?

Why your college could go bankrupt

21 posted on 06/11/2013 7:12:40 PM PDT by 2banana (My common ground with terrorists - they want to die for islam and we want to kill them)
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To: blueunicorn6
"He was a hitch hiker for thirty years."

Around the Galaxy?

22 posted on 06/11/2013 10:05:45 PM PDT by Paladin2 (;-))
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To: SeekAndFind

So colleges are starting to consolidate, but it is the smaller ones that will be in better shape?


23 posted on 06/11/2013 10:06:31 PM PDT by 9YearLurker
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To: Average Al
"Why would someone pay tens of thousands of dollars..."

For k-12 it's called property taxes.

24 posted on 06/12/2013 5:22:16 AM PDT by glorgau
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To: stevio

A dramatic reducing in the number of tenured professors would be a good thing. And schools that inflate tuition to pay superstar professors who hardly step in a classroom are the most likely to go bankrupt.
Better yet, they go bankrupt, cancel all tenure contracts and reorganize with cheaper professors and fewer junk classes for students.


25 posted on 06/12/2013 7:02:12 AM PDT by tbw2
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