Our Changing Times

The newspaper industry was once deemed indestructible. Then this thing called the Internet came along and took away their classified business. The problem wasn't really that their classifieds disappeared. It was more that they had accumulated a ton of debt and had over invested in physical plant and assets that could not adapt to the new digital world.

When revenue fell the debt was still there, as were all the big buildings they had purchased, all those presses they had bought and the acquisitions they had made declined in value, but the debt accumulated to pay for them never went away.

They were stuck with no easy way out.

The exact same thing is happening to our four-year schools. You can't go to a big state university and not see construction. Why?

Why in the world are schools building new buildings? What is required in a business school classroom that is any different than the classroom for psychology or sociology or English or any other number of classes? A new library, seriously? What is worse is that schools are taking on debt to pay for this new construction.

Think about this from a business perspective. Schools are seeing state and federal funding decline, as it should. Why should taxpayers be paying for another building?

They are seeing their primary revenue source, tuition, once a number that was never really questioned, becoming a value decision by prospective students. As they should.

Unless your parents are wealthy or you quality for a full ride or something close, the days of picking a school because that is the school you always wanted to go to are gone.

Then, with your freshman and sophomore classes out of the way, you can start to figure out which school you would like to transfer to, or two years from now, which online classes you can take that challenge you and prepare you for the areas you want to focus on. If you have the personal discipline you may be able to avoid ever having to step on a campus and graduating with a good degree and miracle of miracles, no debt.

Which in turn means that four year schools that refuse to LOWER their tuition are going to see their enrollment numbers decline. It just doesn't make sense to pay top dollar for Introduction to Accounting, Psychology 101, etc.

Of course the big schools are going to argue this all day long. They want and need your money. They want to tell you how beautiful their campus is and the social aspects of going away to college. The amazing professors they have. The opportunities they create. The access to alumni and sports. All were great arguments in 2001 when tuition were still somewhat reasonable. They no longer hold water.

So back to the economics of four year schools. Before you go to college, or send your child to a four year school, you better check their balance sheet. How much debt does the school have? How many administrators making more than $200,000 do they have? How much are they spending on building new buildings? None of which add value to your child's education, but as enrollments decline, will force the school to increase their tuition and nail you with other costs. They just create a debtor university that risks going out of business.

There will be colleges and universities that fail, declare bankruptcy or have to re-capitalize much like the newspaper industry has and long before the class of 2018 graduates.