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20% of Colleges and Universities to Close in the Next Decade

By: Steve Johnson

8/3/2010 - 61 Comments

Just as 20% of banks, auto manufacturers, home builders and retailers are closing their doors because of the recession, colleges and universities are beginning to feel the squeeze.

The budgets’ of colleges and universities across the nation are under tight scrutiny as donations have dropped substantially and tuition increases are off the table.

At the same time, millions of students are questioning the value of getting trained to work in industries that are no longer viable career opportunities.

Will these jobs ever come back or will the economy grow into new industries in which skills in these areas are no longer going to be needed?

The return on investment (ROI) in obtaining a college degree is in question.  The ROI is much longer, which also makes inflation a very important part of the equation.   If we continue to see tuition increases like they have been for the last 20 years, than the RIO will benefit.  But if tuition prices cannot hold up under the weight of the deflationary aspects of the recession, then the ROI may never pay off.

As the same time, the deepening recession and climbing unemployment has motivated millions to go back to college as the competition for jobs has increased.  In many cases, it now takes a four-year college degree to get a secretary job.  

The increase in student enrollment coupled with the Obama Administration’s takeover of the student loan program has allowed many colleges and universities to continue to increase or at least maintain their tuition prices.  

The Higher Education Bailout

The government takeover of the student loan program is now much more willing to lend money to students and even has provisions to socialize unpaid student loans if the student’s income after graduation is not high enough to pay for the education they received.

The new government student loan program allows the average college student to borrow more for their education then for their first home.

The Obama student loan program was sold to the public as a great Obama idea when it was actually just another form of the failed far-left liberal ideas that led to the drop in the lending standards that created the housing bubble.  Here we go again.

The takeover was a bailout of the higher educational system, a payback to the many liberal academics that fully support the Obama Administration.  If it wasn’t for this bailout many of the colleges and universities would already be facing deeper cutbacks and closures.

Higher-Education Bubble

Just as the bailouts of other industries has led to deeper losses, so too will this bailout eventually lead higher-education over a cliff.  If colleges and universities are going to survive this recession, they need to be making drastic changes right now and this bailout causes them to resist change and continue doing what they are doing. 

The result is going to be catastrophic as the recession continues to deepen colleges and universities that have not undergone drastic changes will one day find that they are completely irrelevance.   What they are teaching will have no value and the RIO will be negative.  This is the buildup of the higher-education bubble and when it crashes look out.

The economy is changing faster than many traditional higher educational systems can adjust for.  Many of the colleges and universities are not going to be able to react fast enough and make adjustments away from degrees that are no longer supported by the economy to new industries that are hiring. 

Because of this, community colleges and online educational centers are likely to take much of the market share away from large colleges and universities as students look for cheaper and faster ways to get the job training they need in a marketable industry.

20% to Close

I think this will result in 20%-30% of colleges and universities to close over the next decade.

Very few people see this coming because colleges and universities have temporarily benefited from the recession, just like the dollar, as enrolement has increased with high unemployment and Obama’s bailout lets students borrow as much as they need to. 

In theory, one could attend college just to get access to the easy money, without any intention of graduating with a marketable degree and when the bills come due, claim a low income so that your debts can be forgiven – or socialized by the taxpayers.  

This is a perfect scam that our government has legalized in the process of bailing out its friends that I’m sure many students will explore.

At may not look like it today, but the higher-education industry is headed for trouble.

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