2015 August 19 Wednesday
Big Shake-Out Coming: Most Colleges Have Operating Losses

Most colleges are running at a loss.

Moody’s found that expenses are outpacing revenue at 60 percent of the schools it tracks even as many try to slash their way to balanced budgets, according to Fitzgerald.

The shift to online education will cut into smaller colleges especially.

What I'd do if I was operating a small college: Use online courses for lectures and allow students to take a large number of courses and give them tests and credit in the small college. Offer more classes and even more degrees by leaning on online resources to support an expansion of offerings.

A small college that sees itself as more of a tutoring, testing, and credentialing center could enable students to move thru courses at an accelerated pace and to fill in gaps between traditional semesters and trimesters with useful learning toward credits and degrees.

Some small colleges could group together to enable specialized faculty to teach courses to students at all of their campuses. Make a virtual university as a way to offer more of the advantages of the big U while retaining the advantages of a small college.

Update: Mind you, most small colleges are toast. Road kill. The walking dead at this point. But some could avoid that fate by embracing online and video recorded lectures, automated testing systems, and arranged tutoring sessions. A good college would have administrators skilled at organizing small fast paced courses, impromptu tutoring sessions, and fast paths thru for people who want to focus and get some skills in a hurry.

Share |      By Randall Parker at 2015 August 19 08:30 PM 

Brett Bellmore said at August 20, 2015 3:33 AM:

The problem, I think, is that the very factors which led to the huge increase in costs preclude effectively reducing them.

Administrative bloat. Administrators decide where the money goes, and administrators think administrators are really, really important. So, when more money comes in, the first thing they think to do is hire more administrators. When income drops, the last thing they want to cut is administrators.

It's a common problem in any area where market forces don't threaten the institution with total failure if it doesn't operate efficiently. And extremely difficult to fix from within, because the the problem is in charge of fixing it.

I think the future is likely online learning, and many of these colleges will not reform until their very existence is threatened. Administrative bloat is usually resolved by either outside forces or the death of the institution. Somebody from the outside comes in and fires the bloat, or the college just goes under. And a lot of them are going to go under.

Matt said at August 21, 2015 10:11 PM:

It isn't that simple. Accreditation agencies will probably not allow that, otherwise it would have already happened. Think that diversity is out of control on campus? One of the reasons for it is that accreditation agencies have demanded it.

Wolf-Dog said at August 22, 2015 2:51 PM:

Although the population of the US is growing, most of this growth is probably due to low quality immigrants, and those Americans who were born here have low birth rate. This would explain why the number of above-average college applicants is not rising. On the other hand, the number of VERY qualified applicants is increasing because the ranks of the top % keep improving, and this also explains why the competition to enter the top 20 colleges is more intense than ever.

This probably means that although the average university will experience significant financial problems, the top schools won't be in serious trouble, because what they offer is much more than just good courses, they offer the cutting edge contact with leading minds, and mentorship outside the classroom.

On the other hand, in the next few decades interactive software will be much more advanced in such a way that online courses will be exceptionally good, especially for undergraduate and first year graduate courses that are relatively stabilized. Even undergraduate physics and chemistry experiments can be simulated with software, and this will make an impact in a few decades.

bob sykes said at August 24, 2015 5:06 AM:

We're in the midst of a downturn in the number of 18 year olds that will bottom out around 2020. Thereafter, the numbers should rise again:


That will ease the money crisis. However, a large majority of the students now enrolled are unable to benefit from a true college education because of their intellectual limitations. Of necessity, degree programs have to be dumbed down: a college will graduate anyone they admit, dropouts do so voluntarily. The benefits of the average college degree are also questionable, especially when the accumulated debt is factored in The rampant abuse of white male students is another disincentive to higher enrollment..

Gurney Halleck said at August 26, 2015 1:12 AM:

Matt, it's already happening. When did the internet come into maturity such that access to it was ubiquitous? Only within the last ten years. It's not that simple to offer education entirely online -- a lot of streamlining and IT infrustucture is required, and it's likely that this streamlining and engineering problems are being resolved as we speak. Western Governors University is a distance education college that is accredited and currently only costs 3k per semester. It's fairly popular non-for profit school that has a wide enrollment and is surely eating away at traditional colleges.

Of course I'd imagine there are some degrees with practical aspects (anything that might involve labs basically) that will be hard to do purely online, but consider a degree like English, philosophy, mathematics, econ, etc -- I see no reason why such subjects can't be taught purely online with accredidation. Heck, even the testing aspect could be taken care off through a testing center local to the student if cheating is a concern.

The economic case for this sort of model is so evident that it'll be hard to resist this transition for many, though not most, subjects.

Randall Parker said at August 29, 2015 1:13 PM:


There are many accrediting agencies. Only one of them has to buy off in it for this idea to fly. As Gurney points out, WGU alread has demonstrated that an online college can get accredited. A hybrid online/in-person college will have an easier time of it.

One thing a college could do: offer a path to a bachelor's degree that requires at least one year on-campus education. People could have to show up to take tests on campus to prove they have learned enough for some of the classes. So someone could show up on campus a few times a year to get thru their lower division courses. Kids could earn lots of college credit that way while still in high school.

Wolf-Dog said at August 30, 2015 10:41 AM:

The tests of any college can also be taken in national test centers scattered all over the country. Students won't have to show up at the campus itself. So the main obstacle is that computers are not yet advanced enough for interactive courses that adapt themselves to the students, but this will change within few decades. And another obstacle will be that the top universities might resist loaning their best professors give away their courses, but even with a licensing fee these electronic courses would still be much more affordable than regular colleges.

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