Showing posts with label college closures. Show all posts
Showing posts with label college closures. Show all posts

Sunday, June 28, 2020

NYU professor describes second-tier universities as higher education's Walking Dead, predicts "hundreds, if not thousands" will fail

Zero Hedge posted an article yesterday by Maria Copeland on the precarious condition of America's second-tier colleges.  Copeland quoted NYU professor Scott Galloway's dire prediction:
What department stores were to retail, tier-two higher tuition universities are about to become to [higher] education and that is they are soon going to become the walking dead.
 Galloway predicts that "hundred, if not thousands" of non-elite college will close within the next five to ten years.

I think Professor Galloway is right. We will soon see the mass closures of colleges and universities. Small institutions in New England, the mid-Atlantic states and the upper Midwest have already begun closing.

Why is this happening?

Sky-high tuition. First, small private colleges allowed their tuition to creep up to unreasonable levels.  Until recently, students and their families absorbed these tuition increases passively because they could always pay college costs by taking out more jumbo student loans.

But the coronavirus pandemic, which forced colleges to shift to online instruction, prompted many students to question the value of their educational experience. It is one thing to pay $50,000 a year to listen to a pompous professor's lecture when the student is sitting in an ivy-covered campus building surrounded by sexually active classmates. It is quite another to hear the same lecture on a home computer.

Colleges tried to reverse declining enrollments by drastically slashing tuition costs. Net first-year tuition at the private liberal arts colleges is now about half the sticker price.  But for many small schools, tuition cuts did not attract enough new students to maintain their revenues.

Fewer international students.  It's all about the money, and private American colleges aggressively recruited Asian (mainly Chinese) students who generally paid the full cost of tuition--no discounts for these kids.  But Asian enrollments have dropped off dramatically.

The colleges say that Chinese students are opting not to go to college in the U.S. because they are frightened by America's "gun culture" and Trump's so-called xenophobic foreign policy.  But I disagree.

Asian students and their parents have figured out that American higher education is not worth what it costs.  Secondary education in China and other Asian countries is generally more rigorous than U.S. high school programs. What must Chinese students think when they discover that many of their American classmates come to college without knowing the basic rules of grammar and diction?

Declining interest in the liberal arts. The small private colleges nestled in rural New England and small Midwestern towns specialize in the liberal arts: history, philosophy, literature, etc.  But young people aren't interested in getting a classical college education--especially when it will cost them a quarter-million dollars and doesn't prepare them for a job.

Second-tier colleges have tried to rebrand themselves by offering programs that are more vocationally oriented. But they are burdened by battalions of professors who got their Ph.Ds in the humanities and are unwilling or incapable of retooling.

Most of these professorial dinosaurs are tenured, entitling them to paychecks, health insurance, and pension plans.  The inability to jettison low-value faculty is bringing many private colleges down.


What does this mean to students and professors? Second-rung colleges have been in trouble for years, but the coronavirus pandemic may be the straw that breaks the camel's back.  Now may be a good time for high school graduates to take a gap year while the turmoil in higher education gets sorted out.  College students should also consider transferring from expensive private schools to cheaper public universities.

Humanities professors at struggling private colleges need to formulate their Plan B.  There is an excellent chance their institution will shut down within the next few years.   And graduate students in the humanities need to rethink their career plans. In the coming years, the United States will need a lot more plumbers, electricians, and medical technicians and a lot fewer historians specializing in the Ming dynasty.

Second-tier private colleges: Are they the Walking Dead?

Thursday, April 9, 2020

Things are falling apart for American higher education: It is time to be cautious about taking out student loans

Things are falling apart for many American colleges and universities. The signs of stress and turmoil are everywhere.

First, college enrollments are down significantly, putting an enormous strain on colleges that are heavily dependent on tuition revenue. Over the past decade, college enrollment dropped by more than 2 million students, dipping below 18 million students in the fall of 2019.

Second, the for-profit college industry is on the verge of collapse. According to Forbes, the number of for-profit institutions declined by 25 percent between 2010 and 2018, and total enrollment dropped by half.

Third, private nonprofit colleges are closing at an accelerating rate. An analysis in The Chronicle of Higher Education reported that more than 50 small private colleges have closed since 2016.  Already this year, MacMurray College and Nebraska Christian College have announced they are shutting down.  And Notre Dame de Namur University stated that it will not enroll a first-year class this fall. 

Fourth, small liberal arts colleges are slashing tuition for their first-year classes by 50 percent. Although most small colleges post a very high sticker price, in reality, they are giving out financial aid and scholarships like candy. As a result, the average net cost of tuition is only half the posted price.

Fifth, business schools and law schools have rolled out new types of graduate degrees to counteract declining enrollment.  Business schools have introduced one-year MBA degrees because the demand for traditional two-year programs has dropped. And law schools have started offering law-based degrees for people who do not intend to practice law. According to numbers released by the American Bar Association, 14 percent of law school students were in non-JD programs in 2018.

Sixth, the coronavirus crisis has caused some college students to feel less positively about their educational experience.  The COVID-19 pandemic forced the vast majority of colleges to cancel face-to-face classes this spring and replace them with online instruction.  Unfortunately, the quality of online teaching has often not been good.  A recent survey found that 63 percent of undergraduate respondents reported that the quality of their online instruction was "worse" or "a lot worse" than the live teaching they received before the pandemic.

More than 40 percent of the undergraduate respondents said that their view of their college had gotten worse as a result of COVID-19. And one out of 10 high school seniors who had intended to enroll in a 4-year college this fall said their plans will likely change. 

Seventh, student debt has doubled from $750 billion in 2010 to $.15 trillion in 2019. Today, 45 million Americans hold student loan debt.  More than one million people defaulted on their student loans last year. Almost 9 million more are shackled by long-term, income-based repayment plans that can last as long as 20 or 25 years. 

Conclusion: Students should do everything possible to avoid taking out student loans

For three decades, colleges and universities raised tuition on an annual basis at twice the national inflation rate. College students financed the rising cost of their education by taking out larger and larger student loans.

College leaders assured students they were getting good value for their tuition dollars. After all, they purred soothingly, salaries for college graduates vastly exceed the wages of people without college degrees. Taking out student loans to get a college degree seemed like a smart investment.

In fact, inflation-adjusted salaries for American workers have remained flat for the last 40 years. "[T]today's average hourly wage has just about the same purchasing power it did in 1978." The wage gap between college graduates and non-college graduates has widened, but this is mostly because wages for non-college graduates have declined.

In other words, a college degree may be a good investment for most Americans. Still, it may not be as good as the colleges have represented.  People who take on enormous student debt to get liberal arts degrees or graduate degrees will find that their college education was a terrible investment if they do not land a good job.

The coronavirus pandemic has put millions of Americans out of a job. Experts predict an unemployment rate of more than 30 percent—higher than during the Great Depression of the 1930s.  Forty million Americans may be out of a job by the end of this year.

Our economy will bounce back, but who knows when that will be? So if you are thinking about going to college or graduate school, let me give you a little advice:

Now is not the time to take out massive student loans to finance a bachelor's degree in gender studies from an expensive private college.

Now is not the time to finance a luxury apartment with your student loan checks.

And now is not the time to thoughtlessly take out loans to enroll in a master's degree program without a clear sense of how that program will increase your income. 

It is a terrible thing to be unemployed—as millions of Americans will soon be. But it is far worse to be unemployed and burdened with student loans that you will never be able to repay.



Saturday, March 14, 2020

President Trump waives interest on student loans "until further notice": Woefully inadequate relief for distressed student-loan borrowers

In yesterday's speech on the coronavirus crisis, President Trump announced he is temporarily waiving interest on all federal student loans.

"I've waived interest on all student loans held by federal government agencies ... until further notice," Trump said in his speech "That's a big thing for a lot of students that are left in the middle right now. Many of those schools have been closed."

I appreciate President Trump's effort to assist distressed student borrowers, but yesterday's action is totally inadequate.  Millions of distressed student borrowers need broad and immediate relief, and a temporary waiver of interest offers almost no help at all. 

Around 45 million Americans have outstanding student loans totaling $1.6 trillion.  For many college-loan debtors, interest has already accrued, causing their loan balances to double, triple, and even quadruple.  Temporarily waiving interest on that debt is almost meaningless.

Besides, I think President Trump may have overestimated the Department of Education's ability to implement his moratorium.  Adjusting interest costs for 45 million student borrowers is no small task. Many student debtors have more than one student loan, and these loans have varying interest rates. (In fact, I met a woman yesterday who has five separate student loans.)We're probably talking about interest adjustments on more than 100 million individual loan agreements.

Frankly, I don't think Betsy DeVos's DOE is up to the job. DOE completely botched the Public Service Loan Forgiveness Program, denying 99 percent of the applications for PSLF debt relief. Last year, a federal judge ruled that DOE had managed the program arbitrarily and capriciously and in violation of the Administrative Procedure Act.

Also last year, a California federal judge held Secretary DeVos and DOE in contempt for not abiding by the judge's order to stop trying to collect on student loans taken out by people who had attended schools operated by the now-defunct Corinthian Colleges. I don't think DeVos and her crew intentionally disregarded the judge's order. I think they simply don't know what they are doing.

If DOE cannot manage its routine responsibilities, how can it manage adjustments on student loans held by 45 million people?

As Steve Rhode wrote a few days ago, "People in denial about the impact of COVID-19 may be adequately protected with emergency savings, good health insurance, and paid time off of work. But those of us who work in hourly paid jobs are at a very high risk of having finances slaughtered by this virus."

Mr. Rhode's observation is particularly applicable to college students and former college students.  A lot of people with substantial student-loan burdens are working in temporary jobs that pay low wages. In the coming weeks, these jobs are going to be lost as the public stops eating out, shopping, and traveling. The people who held these lost jobs are going to be unable to service their student loans, and many of them will default.

Giving overburdened student debtors a temporary break from the interest on their loans is like putting a bandaid on a compound fracture (a hackneyed analogy, I admit).  President Trump and Congress need to take far more drastic action.

Specifically, Congress must revise the Bankruptcy Code to allow insolvent student-loan debtors to discharge their student loans in bankruptcy.  

Ultimately, our politicians will be forced to confront the fact that the student-loan program is a colossal disaster, and the coronavirus epidemic is going to make it worse. Now is a good time to do what needs to be done. And what needs to be done is bankruptcy reform.







Tuesday, April 16, 2019

More than a thousand college campuses closed over the past five years: The for-profit scourge

Earlier this month, Chronicle of Higher Education reported that 1,200 college campuses have closed over the last five years, displacing nearly half a million students. As Chronicle reporters Michael Vasquez and Dan Bauman explained, most of these campuses were operated by for-profit colleges, which often have campuses in multiple locations.

For example,Vatterot College, Education Corporation of America, and Dream Center Education Holdings closed their doors during the last six months, and together these colleges operated 126 campuses.

As the Chronicle article pointed out, college closures can be traumatic events for students, who are forced to interrupt their studies and search for replacement colleges. Low-income and minority students are disproportionately affected. Seventy percent of the students who attended the closed institutions received Pell Grant aid, and 57 percent are black or Hispanic.

Betsy DeVos's Department of Education is doing everything it can to prop up the venal for-profit college industry, and yet this sleazy sector continues to be under stress. The for-profits are facing increased competition from public universities, which are rolling out their own online degree programs and encroaching on the for-profit colleges' target population. Arizona State University and Purdue University, both public institutions, now have big online footprints.

In addition, more and more Americans have figured out that a degree from a for-profit college almost always costs more than a comparable degree from a public institution and rarely leads to a good job. No wonder the student-loan default rate among for-profit-college students is so high. More than half of the students who borrow money to attend a for-profit college default within 12 years after beginning repayment--four times the default rate of students who attended community colleges.

It is regrettable that so many for-profit college students are having their lives disrupted by the closure of their institutions, but these shutdowns are a blessing in disguise.  Some students will transfer to low-cost community colleges, which will allow them to take out smaller student loans or avoid student loans altogether.  Those that transfer to public institutions are likely to  have more rewarding educational experiences than they were getting at these dodgy for-profit outfits.

In short, it may seem shocking that so many for-profit colleges are closing, but it is undoubtedly a good thing. In spite of everything that Trump's Department of Education has done to aid the for-profit college racket, this industry is in trouble. The for-profit colleges are a blight on American higher education. Let us look forward to the day when they are extinct.