Over 2,000 Colleges and Universities May Go Bankrupt
About Michael John ScottMr. Scott is the owner and publisher of Mad Mike's America. He is a U.S. Army veteran, career law enforcement executive, and dog trainer. He is a university professor, and criminal justice consultant, holding several degrees, including a master's in criminal justice and human services. He has completed the requisite coursework toward his doctorate, and is still working on his dissertation.
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In troubled economic times college degrees just aren’t worth what they once were, and as costs continue to escalate the future looks bleak indeed for America’s bastions of higher education. Blaire Briody of The Week examines the phenomenon.
This may literally be the last you see of your alma mater.
Randy Faris/Corbis
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?”
Story contributions by Blaire Briody | The Week
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James Smith
February 15, 2013 at 8:35 am
With any luck at all, places like Oral Roberts University will be among the first to go. They are already useless, so no big loss.
Michael John Scott
February 15, 2013 at 8:54 am
Agreed. Those religious schools are a stain on higher education.
Dale Fisk
February 15, 2013 at 8:59 am
In many cases these schools will reap their own rewards here, after decades of over paying administrators, and soaking students with ludicrously high tuition fees, students will simply stop attending and the party will be over. The worst of the worst are the for-profits.
Bill Formby
February 15, 2013 at 9:11 am
I think one thing these researchers are not taking into account are the students and their desire to learn versus just getting a degree. I have taught at a major traditional university and I am teaching at a couple of online universities. Overall the quality of student and depth of the learning experience at the traditional on ground university. Sadly, some of the schools that we may loose will be those that enrich our culture the most. The small private, liberal arts schools that focus on the quality of thought and philosophy will become a thing of the past and the future will no longer have the deep thinkers of ethics and morality of the past.
Michael John Scott
February 15, 2013 at 9:24 am
Good points Bill and I agree with you. Our common background gives us insight into the higher education system I think.
Jess
February 15, 2013 at 2:58 pm
Someone somewhere will find a way to make it pay for online college much like the ITT and Univ of Phoenix classes being way more than regular old coleges and unis. It’s the Amrukan way doncha know.
James Smith
February 15, 2013 at 3:02 pm
That’s already being done with courses for everything from guitar playing to macrame. All it takes is a credit card then issuing an ID and a password for the course. Much as you have to post articles here except for the credit card, naturally. (I hope Mike doesn’t read this. He gets enough ideas on his own)
Jess
February 15, 2013 at 5:19 pm
Even with this posted he’ll forget sooner rather than later. If you don’t remind him you should be fine
James Smith
February 15, 2013 at 5:27 pm
Forget what?
Michael John Scott
February 15, 2013 at 5:58 pm
LOL. Thanks Jess
True that 
Michael John Scott
February 15, 2013 at 3:46 pm
Yes!! James, you are a true genius
Credit cards 
Jess
February 15, 2013 at 5:18 pm
Hmmmph, credit cards are for the dark ages. Electronic money transfers are the way to go. You get the money right away. Yer so very welcome
James Smith
February 15, 2013 at 5:26 pm
I don’t know about your bank, but my bank charges for electronic transfers. It’s the same price ($16) no matter what the transfer amount. Of course, if you’re a high dollar depositor, those fees can be waived. If it’s a transfer between accounts within the bank, between different depositors, for example, there is also no fee. Maybe I am at the wrong bank or maybe I am just a tiny account? OK, I already knew the last part.
Jess
February 15, 2013 at 6:28 pm
I have never paid for a transfer in or out of my bank, even when I had Bank of America and Wells Fargo accounts. I’ve since closed both and put money into a credit union, and haven’t paid a fee yet.
James Smith
February 15, 2013 at 6:33 pm
Oddly enough, I am in a credit union that caters mostly to military personnel. Perhaps they saw that a lot of electronic transfers were taking place and decided it would be a fine revenue stream.
My auto deposits are free but they do charge me a 1% fee for ATM withdrawals here in Brazil. They claim it is a Visa currency conversion fee, but my card is not a credit card but a debit card, so that seems unlikely. The next time I am in the USA, I will open an account with a different bank as this is far from the first problem I have had with them.
Changing my auto deposits will be a PITA, but not as bad as putting up with this credit union.
Marsha Woerner
February 19, 2013 at 3:31 pm
James, I agree; you should now have paper any electronic transfer! Even being with one of the big banks (Chase) I do not have to pay! I will admit that years ago when I first started online banking exclusively, it did charge a monthly fee
, but that was quickly remedied! Once the bank realizes that you are saving it money by doing all of your banking online, if the bank does not also realize that its customers are not willing to pay above and beyond, that bank (or savings and loan, in your case) will lose enough customers that it will change its ways! T
Marsha Woerner
February 19, 2013 at 3:46 pm
On the topic of the article, there is so much that cannot be altered in online courses! I attended a large (although the undergraduate population was not large), well known, college for my undergrad degree. I attended a large (although the graduate program was not as large) University for my graduate degree. I also did some online training after I got my job, so I have sort of done the whole range. The online training FOR ME was not nearly as good as actually going to class! Note that I “for me”. Different people DO have differenemphasizedt styles! But I would be terribly upset and horribly saddened to see universities going out of business in preference of total online classes. But I agree, the “for-profit” schools are a waste, in more ways than one!
James Smith
February 19, 2013 at 5:12 pm
To be clear, they do not charge me for auto deposits nor for withdrawals from other bank’s ATMs. Because I am taking foreign currency (I live in Brazil) there is always a 1% charge from Visa for a “Currency Conversion Fee.” I know this is a scam because currency conversion is automatic and electronic and is up to the minute.
But, unlike many banks there is no fee on either end for going between different banks. Unfortunately, Brazilian banks are starting to catch on that this can be a revenue stream. A couple of machines near me do charge a fee, so I do not use them.
What I am charged for is funds transfer between banks. A few years ago, when I bought a boat in Florida, I had to make an electronic transfer to the boat broker. The was $16. That was a flat charge no matter what the amount. As this was also all electronic, the actual cost to the bank couldn’t be much above $0.00.
I have worked for banks and one thing I learned is, under use banking regulations, it is almost impossible to lose money if you stay strictly withing the rules. If you bend those rules a bit, you can make a lot of money. So all banks that I know about bend them – a lot. As long as there are not too many complaints and things keep rolling smoothly, the feds will ignore that. But if they go in determined to find trouble, they know they can.