January 8, 2019

HIGHER EDUCATION BUBBLE UPDATE: Annual Open Letter to the People of Purdue from Mitch Daniels.

Tuition across the sector continued to increase, but at an apparently slower pace. I say “apparent” because, especially in the private colleges, the practice of back-door discounting, raising the stated “sticker price” while simultaneously offering bigger and bigger financial aid to favored students, clouds the picture. . . .

But any honest report on the sector must be on balance highly cautionary. The multiyear decline in enrollments continued, with total student population falling another 1.7%. . . .

Meanwhile, financial distress continues to broaden. A quarter of non-public institutions reported running at an operating deficit in 2017-18. Finding one in five small private colleges under “fundamental stress,” Moody’s bond rating service renewed its “negative outlook” on the higher education sector, amid forecasts that the number of schools closing their doors would grow from 11 to around 15 per year. That may be the good news. For years, demographers have noted the coming decline in the total number of 18-year-olds. To this challenge, some have added the observation that a rising percentage of future cohorts come from backgrounds historically much less likely to attend college.

If only there had been some sort of warning. But read the whole thing.

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