Tuesday, June 18, 2013

Colleges Going Broke

In his Moneybox blog at Slate, Yglesias blurbs that small, private schools can scale themselves down to sustainable levels so that they do not go out of business. Some colleges are in danger of closing. Whoop-tee-damn-doo. Philosophy major Yglesias thinks it is pretty simple since they are sitting on a lot of awesome real estate that has gone up in value. OMG, just downsize! Maybe Matty Yglesias could look up old Bradford College that had been in business for nearly 200 years when it closed its doors in 2000. Could it be the product? What he fails to take into account is the college system, which is as agile as a three toed sloth, the product, the consumers, and basic economics.

Colleges don't change. Seriously, what change is there in the degree a Millenial earns vs. their Boomer parent. It's the same 4 year BA with worse filler for credits. The only thing about the product that has changed is that you get better dorms and cool stuff like gyms, rock walls and more gyms. The real product: the ticket to the good life and good jobs. That product is now harder to find, and schools are having trouble justifying the high costs when the job placement rates are worse with each graduation class. His good point is that small school are especially sensitive to it, and it's so amazing that fewer have failed. Gee, Matt, why? Maybe a multi-decade, debt slavery scheme that is coming to an end might explain the rise and hopefully soon, fall of schools. Maybe Americans have caught onto the "go to college or you're a loser" brainwashing trick your media friends pulled for decades.

Small colleges are more sensitive to enrollment. Small colleges do have smaller alumni networks to fundraise from. How do you get kids to go to your generic college versus another? Bradford lavished student aid on students and built brand new dorms to entice students to stay on campus rather than commute, thinking they could attract wealthy enough students to start minting coin. It didn't work. Maybe a brilliant mind like Matt could see that when private schools can take advantage of low interest loans and dole them out without dipping into the endowment, they take their tuition check and shift the risk of non-payment off to the lender. Cheap loans make it possible to raise the costs for everyone, thus reaping more money from the kids who don't qualify for any aid. Yglesias cited a black school closing, and another for cutting jobs (nice, pointless Occupy protest pic). What is the benefit of going to a crappy, historically black college over getting a degree online? Is it worth it over a degree from a subsidized state college that can provide the same party atmosphere? Looking at black employment levels, probably not. Another problem is that the student loan game has reached mass awareness that the loans are non-dischargeable and are not worth it. The students at the margin who picked a private school over public and absorbed the cost is disappearing.

Education is a product that is finally facing disruption. HR departments are starting to accept online degree programs as legit, which is the key since HR decides who is interviewed let alone hired. If consumers can get what you are selling elsewhere with the same results for cheaper, they will take their dollars elsewhere. All bad business models eventually meet their end. College is no different. Like the first defaulters on housing loans and first sign of the housing crisis was in hot spots with the worst borrowers, schools at the margin are the first to feel the pinch. Small private schools and historically black colleges sound like prime targets. What happened to the beautiful old buildings and new dormitories in Haverhill, MA that formed Bradford? They were sold to a bible college with some help from a billionaire donor from Oklahoma. In the heart of progressive Massachusetts sits a little bible college making money that was selling a good enough product to raise enough funds for a lifetime. It's the product, and no amount of sold off buildings will make up for a bad product with marginal consumers.


Big Bill said...

Any sources for the HR departments accepting online degrees? I would love to see it, but I suspect it is bogus. The girls in HR are such sheep.

Then again, it would make superstars of some professors.

When Arthur Miller of Harvard Law started videotaping his Civil Procedure lectures 20 years ago Harvard got the conniptions.

They thought they owned the Arthur Miller brand and didn't want to let him water down the Harvard Law brand by pimping his video tapes to commoners.

I expect there will be the same reaction to superstar professors at every university.

Think of it: "I took Civil Procedurte 206 from Arthur Miller and got an A. I took Cosmology 552 from Steven Hawking and got an A. I took Recombitant DNA 423 from Oliver Smithies and got an A." Three different experts from three different universities, and you studied under all of them (so to speak).

It will be devastating for Universities if each professor gets to brand themselves. Their current value is in selecting and hiring the experts. If the experts can go directly to the public, what is the value of the university in HR hiring decisions?

Son of Brock Landers said...

Thanks for comment. I agree that the professors have the most to gain and the brand issue. Randall Parker has mentioned profs recording entire courses in sequence then selling them or packaging them. An enterprising million or billionaire could set up the greatest university with some creativity.

The trend in HR is real. Here's the progression.

In 2001 the skew was heavy towards online degrees associated with a brick and mortar uni.


Then 5 years later, the view changed significantly.


By 2010, the trend that had started 5 years earlier was pretty clear in the direction of online degrees being aceppted.


PRCD said...

We automated HR. It's now a web-based application full of a bunch of links helping you get stuff done.

We maintain a couple of HR figureheads who are kept-on to justify layoffs when the board is unhappy with profits.