Television at SLC

Bankroll
Fri, 15 May 2009 15:15:08 +0000

“What is a bubble school” . . .

There are those who believe that the smaller, private liberal arts schools are on a “bubble”, i.e., they could cease to exist or at least cease to operate as they do today. A “Google” of the phrase “bubble college” will give you other information.

The small LACs are among the most expensive schools to operate and charge the highest tuitions. Their “all-in” costs per year are often more than most households earn in a year.

They’ve been able to stay in business because wealthy families have been willing to pay these high costs and not-as-wealthy families have been able to send their kids because the schools could provide large grants to students from the large endowments they have, making the very expensive schools much more affordable.

The smaller LACs have now seen their existing endowments shrink because that money is invested in the same way that our 401(k) and pension funds are invested. That lump of money has shrunk. That means they can’t offer the generous grants they once did. Also, the wealthy who once funded the endowments are not contributing as they once did.

All this leads to a situation where only the wealthiest families will be able to send their kids to these small, private LACs. They’ll be the only ones who can afford it. There may not be enough students from wealthier families to populate all of the various LACs in the country. That will likely cause some of them to close and some to probably strike strategic relationships with larger universities in an attempt to stay in business.

There are LACs that have already closed and others that are not planning to “field” a freshman class this year. Some students and parents have become concerned that the LAC they’re attending this year may not be around for them to graduate from in four years.