– “Death Spiral” – Harvard Professor Predicts Up To Half Of US Universities May Fail In 15 Years (Zerohedge, April 14, 2014):
Soaring student debt, competition from online programs and poor job prospects for graduates are shrinking the applicant pools for many universities and, as Bloomberg reports, the National Association of Independent Colleges and Universities warns “there will clearly be some institutions that won’t make it…through these difficult steps.” Rather stunningly, Moody’s found that expenses are outpacing revenue at 60 percent of the schools it tracks even as many try to slash their way to balanced budgets,” and concluded “what we’re concerned about is the death spiral… this continuing downward momentum for some institutions.” As Harvard professor Clayton Christensen has warned, as many as half of the more than 4,000 universities and colleges in the U.S. may fail in the next 15 years, and is “not sure a lot of these institutions have the cushion to experiment with how to stay afloat.”
As Bloomberg reports,Dowling College (on Long Island), which got a failing grade for its financial resources from accreditors last month, epitomizes the growing plight of many small private colleges that depend almost entirely on tuition for revenue. It’s been five years since the recession ended and yet their finances are worsening. Soaring student debt, competition from online programs and poor job prospects for graduates are shrinking their applicant pools.
As the debt loads and poor payoffs finally meet market forces…
“What we’re concerned about is the death spiral — this continuing downward momentum for some institutions,” said Susan Fitzgerald, an analyst at Moody’s Investors Service in New York. “We will see more closures than in the past.”
But Harvard Business School professor Clayton Christensen has much more dire warnings of the technological shift…
as many as half of the more than 4,000 universities and colleges in the U.S. may fail in the next 15 years. The growing acceptance of online learning means higher education is ripe for technological upheaval, he has said.
“I’m not sure a lot of these institutions have the cushion to experiment with how to stay afloat,”
…
“There will clearly be some institutions that won’t make it and there will be some institutions that will be stronger because of going through these difficult steps,” said David Warren, president of the Washington-based National Association of Independent Colleges and Universities.
The flood of credit to reflate yet another bubble has simply mispriced yet another critical aspect of society past…
“We haven’t hit bottom yet,” said Glenn Harlan Reynolds, a law professor at the University of Tennessee in Knoxville and author of the book, “The New School: How the Information Age Will Save American Education From Itself.” Students are shopping for a less expensive education as the cost of college has increased and the job market worsened, he said.
But, rather worryingly for the future of that exponential trend…
Moody’s found that expenses are outpacing revenue at 60 percent of the schools it tracks even as many try to slash their way to balanced budgets, according to Fitzgerald.
Time for the government to find another credit transmission channel bubble to blow