<p>The laws of supply and demand may finally be taking hold;</p>
<p>[Colleges</a> Caught in Value Trap, Study Finds - WSJ.com](<a href=“http://online.wsj.com/article/SB10001424127887324442304578231922159602676.html?google_editors_picks=true]Colleges”>http://online.wsj.com/article/SB10001424127887324442304578231922159602676.html?google_editors_picks=true)</p>
<p><a href=“http://www.nytimes.com/2013/01/11/business/colleges-expect-lower-enrollment.html[/url]”>http://www.nytimes.com/2013/01/11/business/colleges-expect-lower-enrollment.html</a></p>
<p>New York Times article today…</p>
<p>Answer is no!</p>
<p>There are too many schools and too many students and too many entry level jobs demanding college degrees and too many govt subsidies keeping weak programs afloat and broke kids in debt.</p>
<p>College is not a true marketplace. It’s terribly skewed and not likely to self correct as much as crash and burn.</p>
<p>One contributor not often mentioned is the explosion in public colleges. Here in Florida we got along fine with UF and FSU for the longest time but our state legislators decided we needed UCF, USF,UNF,UWF,FAU and on and on. None of these colleges were needed-most of the students would be better served in community colleges.
Did a little deeper and you find alot of legislators who also happen to be employed by these new colleges-hence the movement of big dollars from the public to these colleges.</p>
<p>The answer is “yes” for some schools. We have already seen school “lower” the price by finding more “scholarships.” This is really just a simple retail trick, keep the price high, but offer discounts, so people think they are getting a deal. We are seeing many more kids go to CC for the first two years, then transfer to state u. to save money. Some schools are looking at 3-year degree programs to lower cost. The really popular schools are feeling very little pressure, it would seem.</p>
<p>And at this school if you have a 3.5 GPA or better, your net cost is $27,000 just for that ONE scholarship…assuming you live on campus. If you commute, your net cost is $17,000–less then our state schools…</p>
<p>But how long until the market crashes and burns?</p>
<p>The college market will not crash and burn, but there will be fall-out. It is supply and demand and while the numbers entering college have been increasing for quite a few yearsthat will soften for several years as the number of kids in 9-12 is slowly decreasing as the children of the tail end of the baby boomers exit high school. This happened in the 80s also when there was a softening of college bound numbers of kids. The difference between now and the 80s was there was greater price differentiation. The colleges that will be hurting are those that “grew” their facilities and have excess capacity and have little room to contract expenses and price structure.</p>
<p>As far as pricing, every commodity has a market price it will bear. A college is a commodity since it is a choice to attend a college. I’ve always been surprised, and just said on a different thread that the lack of really differentiated tiered pricing is interesting to watch. There’s only a few revenue streams for small colleges and if you can’t get it one way, you’ve got to adjust and get it another way.</p>
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<p>The explosion in public universities in California occurred in past decades, with small growth since then (CSU opened 11 of its 23 campuses from 1947 to 1965, but only 3 since then; UC opened 4 of its 10 campuses from 1954 to 1965, but only 1 since then). The result has been increasing selectivity, as population has grown faster than the number of spaces in universities. Budget cuts have caused reduced capacity in CSU and the community colleges in recent years.</p>
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<p>Actually, there is differentiated tiered pricing, but it is hidden in that the price is different for each student through financial aid and scholarship discounts. But it does make the process of comparing price more opaque to the students and parents, although the recently mandated net price calculators do help.</p>
<p>If the market (demand) is shrinking, the private fringe schools that cannot command the premium price will feel it first. Public schools can always “go back to the well” - they’ll experience cuts (reduced increases :p), but private schools could be forced to really scale back. Especially the regional ones.</p>
<p>My sample of one,
Class of 2008 local HS, 230 grads
4-year college attendance was approx 200
2-year/military/employment were the remaining 30
Of those 200 maybe slightly more than 1/2 went to private or OOS universities</p>
<p>Last years class, only the kids that got into IVY’s about 10 or so went
About 20 went private or OOS schools, the remaining 180 went to in state publics</p>
<p>Not seeing fall off in 4 year college attendance but sure as heck seeing opting out of the private schools and OOS schools</p>
<p>^^giterdone, I’ll think it will separate out the really well managed privates from the poorly managed who either grew to fast, were to aggressive risk-wise with the endowment, etc. We may not “know” who the “fringe” is unless there is a real implosion. Personally I think it will have absolutely nothing to do with the USNWR :-)</p>
<p>The enrollment at my son’s public uni for CS went from about 60 when he started to about 400 this past fall. His graduate adviser remarked that the quality of the students coming in is a lot higher than it used to be.</p>
<p>"Last years class, only the kids that got into IVY’s about 10 or so went
About 20 went private or OOS schools, the remaining 180 went to in state publics</p>
<p>Not seeing fall off in 4 year college attendance but sure as heck seeing opting out of the private schools and OOS schools " - Samiamy</p>
<p>Yup - we are seeing exactly that in our neck of the woods.</p>
<p>Re: #14</p>
<p>Probably because memories of the tech bubble crash have been replaced by the relatively good CS job market. Numbers of CS majors graduating seem to be highly correlated with the CS job prospects four years prior.</p>
<p>Students considering CS should realize that there can be wild industry cycles. Those who piled into CS during the hot CS job market of 1998-2000 graduated into the crash, while those few who dared to major in CS in 2002-2004 graduated into an improving job market.</p>
<p>Agree with ucb. So is wall street jobs and other jobs. They all have cycles. Some have bigger swings than other.</p>
<p>My guess is we’ll see a lot of small, undercapitalized (little or no endowment) private colleges close their doors over the next decade or two. These schools are almost 100% dependent on tuition revenue, which means they can’t afford a lot of tuition discounting (FA), nor can they absorb significant declines in enrollment.</p>
<p>I’m thinking, for example, of a small (1,150 students) college in a small Midwestern town, with a total endowment around $8 million, which works out to about $7K per student, which on a 5% annual payout amounts to about $350 per student per year–a mere drop in the bucket. The particular school I have in mind (which I won’t name) has an annual tuition around $23K, roughly twice that of the state flagship and nearly 3 times as much as some of the less prestigious state “directional” universities. The school gives as much as it can in need-based aid, but even so it meets full need for fewer than 20% of its students, and on average it meets only 75% of need (and much of that comes in the form of loans and work-study); in short, most students get “gapped,” which means the net cost after FA is probably still considerably higher for most people than at an in-state public.</p>
<p>Nor is this school an academic powerhouse: median HS GPA of its freshman class is 2.8, median ACT composite score is 20.</p>
<p>The school is located in a state where overall population is projected to remain flat or decline slightly over the next several decades, while the number of newly minted HS graduates (i.e., the potential applicant pool) is expected to decline as the population ages. Currently, 93% of the students come from in-state; the school is barely known in neighboring Midwestern states, much less nationally.</p>
<p>Seems to me a school like that is extremely vulnerable to declining enrollment, which translates to a direct hit in tuition revenue which makes up almost 100% of its budget. The state isn’t going to come to its rescue; and if the school tries to compensate for declining enrollment by raising tuition, it may only hasten its own shrinkage. The only option, then, would be to cut expenses, i.e., to cut academic programs, shrink the faculty, defer maintenance, roll back salaries, or whatever, but many of those moves will make the school less attractive to prospective students, and some might drive away faculty the school would like to keep.</p>
<p>I’m not predicting this particular school will fail; only suggesting that there are a lot of schools like it that may be in for some pretty rough sledding. But I wouldn’t expect Harvard to roll back its tuition anytime soon; there’s ample demand for seats at the top end of the market. It’s at the bottom end where enrollment declines and price-sensitive comparison shopping will hit hardest.</p>
<p>I’m waiting to see what the tuition increase is going to be for next year. And am also anxious as to what the cost will be for my youngest. What we paid for a private school for my oldest is now what a number of OOS publics charge and there are some that are edging near the cost of the privates. </p>
<p>In our high school, though there has been an increase in those going to our instate publics, there are still a lot of kids going and paying full freight to the privates.</p>
<p>There’s a lot of small LACs in my region of the country that have tried to increase enrollment in the past few years, probably to generate more net tuition revenue. Each year the news is that they’ve enrolled ‘the largest class ever’. I’d be curious to see if this continues.</p>