An interesting question in higher education is could a series of established colleges ever lose enough volume of students to go out of business? Tamar Lewin talked about the phenomenon in a New York Times article that we blogged about last week.
Turns out, we don’t really need to debate the question. It’s happened.
According to the MSNBC article, “Could independent colleges be the next bubble?”, 157-year old Antioch College decided to “suspend operations” at its flagship campus this past June. The article says, “Home builders and banks aren’t the only ones facing economic headwinds these days. America’s undercapitalized independent colleges are staring at a spiral of major threats to solvency as penny-pinching students and parents consider cheaper options, and funding sources dry up. As a result, they could be the next bubble industry to pop.”
When we cite disruptions in the higher education space—such as teaching universities, community colleges, and online universities—a big question is do they have the room to continue to move up-market given the aid in donations and federal dollars established universities tend to receive? It’s a good question. Federal loans and grants, for example, allow families and students to avoid making quality-cost tradeoff decisions they would make ordinarily in a normal marketplace. This has the effect of propping up high-cost higher education institutions that otherwise might lose market share—and stifling lower-cost options.
This example suggests, however, that disruptive players can ultimately overcome this market distortion. Interestingly, just as we suspect that budget crunches in the years ahead will accelerate the adoption of online learning in high schools, so too will these same pressures likely exert a similar effect in the higher education market.
– Michael B. Horn
