December 13, 2018

HIGHER EDUCATION BUBBLE UPDATE: How Many Colleges Will Go Under? Will Yours Be One?

The pessimism of the rating agencies seems justified. Total higher education enrollments in the U.S. have been falling for the last seven years, particularly concerning for the majority of institutions dependent on tuition fees for much of their operating funds. Most current college freshmen were born in or near the year 2000. The number of births in 2005 or even 2009 (potential students a few years from now) was less than it was in 1990. The lifetime fertility rate of American women is at a record low of around 1.8, well below the level needed to avoid long-term population decline in the absence of large-scale immigration. Moreover, anti-immigration attitudes and toughening visa requirements do not bode well for large increases in foreign-born students.

Even more ominous, the prevailing view that “a college education is vital if you are going to be at least modestly successful financially” seems to be changing as the media tells us about former college students suffering from mountains of student loan debt, or students who are underemployed working as baristas or retail sales clerks at wages no higher than what high school graduates make. And the public is impacted by stories of welders making six-digit salaries, or about the desperate need for drivers of long-distance trucks. Mike Rowe of “Dirty Jobs” is viewed as a positive role model. The earnings advantage associated with a college degree has been stagnant for years, even as college costs continue to rise.

If only someone had warned them about this.

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