These Are The Colleges That Will Be Screwed When The Student Loan Bubble Pops

[Dave_Berry]

" 'We know the model is not sustainable,' said Lawrence T. Lesick, vice president for enrollment management at Ohio Northern University. 'Schools are going to have to show the value proposition. Those that don’t aren’t going to be around.'

(The New York Times; May 14, 2012)

Very few topics have received as much attention here at Sense on Cents as the student loan/debt bubble.

In my opinion, the size, scope, and impact of this problem is an enormous anchor weighing down our next generation and our nation’s economy.

Make no mistake, this anchor is not only impacting thousands of students and families but is also having an equally burdensome impact on colleges and universities nationwide.

I choose my words carefully here. The other day I entitled my commentary, Student Debt Bubble: Impending Doom for Colleges." ...

These Are The Colleges That Will Be Screwed When The Student Loan Bubble Pops - Business Insider

[placido240]

So, no actual names of colleges?

[xiggi]

" 'We know the model is not sustainable,' said Lawrence T. Lesick, vice president for enrollment management at Ohio Northern University. 'Schools are going to have to show the value proposition. Those that don’t aren’t going to be around.'

Perhaps time has come for the White House boss to organize another beergarten party. Let's Lesick explain the value proposition to Kelsey:

Kelsey Griffith graduates on Sunday from Ohio Northern University. To start paying off her $120,000 in student debt, she is already working two restaurant jobs and will soon give up her apartment here to live with her parents. Her mother, who co-signed on the loans, is taking out a life insurance policy on her daughter.
http://www.nytimes.com/2012/05/13/bu...eavy-debt.html

[parentOfJunior]

<So, no actual names of colleges? >

I think we all know them, don't we? In my opinion, any college that charges over 50K a year will be on this list.

[barrons]

I'd change that to any college not in the Top 25 or so.

[Bay]

Here is a list of colleges with endowments exceeding $1 billion. Could they possibly be at risk?

List of colleges and universities in the United States by endowment - Wikipedia, the free encyclopedia

[parentOfJunior]

<I'd change that to any college not in the Top 25 or so. > Agree :-).

Any college that is not in Top 25 or so, YET charges over 50K a year. As for the endowment, it seems, incidentally, the list largely coincides with the Top 25

[barrons]

Yes, and over $50K.

[ucbalumnus]

Originally Posted by placido240

So, no actual names of colleges?

There is a link to the actual report, but the link is broken.

[ucbalumnus]

Here is a link to the paper that works (the one in the page linked to in post #1 is broken):
http://www.naicu.edu/doclib/20090209_kneedler-paper.pdf

However, the paper does not include any specific college names.

Note that the same content of the page linked to in post #1 appears to be the same as that found here:

Student Loan Crisis: Why So Many Colleges May Fail? | Sense on Cents

[hudsonvalley51]

If #26 on the US News Top 40 charts is at risk so is #25 and #24 and so on. If the Apolcalypse is bearing down on us the odds are few, if any colleges survive. But I don't believe that is about to happen and neither do most intelligent people. I would agree that the profile of the most "at risk" colleges offered by the author of the study cited in the article is probably a bit on the optimistic site but some of you guys sound like the perma-bears commenting on the market back in 2001.

[PolarBearVsShark]

Meh. Some of these smaller top LACs have endowments hovering around the 1 billion dollar range. And they also have strong alumni support, alumni with deep pockets, and extremely high alumni morale. It will be a game of favorites.

[cortana431]

I understand what the real estate housing bubble is, but what is exactly is the student loan bubble and why will/would it be disastrous if it pops and for whom? Aren't the colleges receiving the money from students and it's the STUDENTS and their families who are in trouble because they have already or already are paying their tuition, room and board through loans and now they must pay off the debts and not the colleges?

And about how long will it be until this bubble pops?

[placido240]

I thin k the bubble analogy is based on a drop in demand, just as the housing bubble in 2007 - 2008 came about because ever-increasing prices of homes combined with banks' increasing inability to lend at those prices and to get the loans off their books reduces lending - the musical chairs stopped.

In the college context, as prices for tuition keep increasing, and as government lending for student loans hits a ceiling, students will not be able to afford the tuition and simply will go to cheaper schools, thus leaving high-priced schools (like high priced homes) high and dry. The endowment may cushion this effect for some, but the point is that the high costs will serve as such a deterrent that departments will get shut down and facilities will shrink. Pretty soon colleges will figure out that their admin costs have gotten way out of line and will start to cut the "diversity officers" and other such blather.

[cortana431]

Will they also cut tuition, room and board and the overall cost of attendance so that more families will be able to soundly afford such schools?