$ 670 billion university-industrial complex threatened by online school

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College Inc. is facing an account.

U.S. colleges and universities saw their biggest drop in cash inflows in decades in the past academic year, thanks to a sharp drop in enrollment and a lack of room and board income from students who enrolled but took their courses online.

But that was just the start. Now that a generation of potential candidates have gotten used to online learning, the higher education industry will likely never be the same again.

The affected schools are mostly nonprofits, but they are a huge corporation with $ 670 billion in collective revenues, over 300 billion in debt and around 3 million employees. At the height of the epidemic, between February 2020 and February 2021, they laid off around 13% of their workforce. And researchers at the Federal Reserve Bank of Philadelphia estimate that higher education institutions will lose revenues between $ 70 billion and $ 115 billion over the next five years due to the pandemic.

Many schools were already facing financial difficulties before the pandemic as they distributed more scholarships to compensate for stagnant enrollment. Many have also been hurt by the decline in the number of international students paying full freight amid the less favorable visa policies of former President Donald Trump.

With millions of students switching to distance learning, institutions specializing in online education have received a boost. They have suffered from stigma in the past, in part due to the sometimes low standards and predatory behavior of for-profit online colleges that derive most of their money from federally subsidized loans and grants. But more respectable nonprofit schools, like Purdue Global, Southern New Hampshire University, and Arizona State University, are now competing with them for online enrollment.

“We’ve grown significantly over the past year, in part because of Covid,” says Jon Harbor, president of Purdue Global, Purdue University’s online adult education division. “Many institutions have faced financial difficulties.”

The online threat even appeared in the high end. Minerva Institutes at KGI, which rotates its student body between leased sites around the world but is taught by remote staff and has its own admissions tests, received 25,000 applications for the Class of 2024, admitting less than 1 % – far more selective than even Ivy League schools. It’s cheaper too.

And perhaps most alarming for the college-industry complex, Google has launched certificate programs that it says it will treat as the equivalent of a four-year college for hiring purposes.

Every student who opts for an online college degree – or the Google equivalent – is another student who won’t pay for the much higher cost of traditional education. And fewer students necessarily means fewer colleges.

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Residential schools will not go away entirely – many young people are relishing the experience. Large state universities as well as renowned brands with global snobbish appeal and huge endowments may survive the additional pressure of the pandemic. But hundreds of small institutions facing precarious finances – yes, maybe even your alma mater – might not be if the pressure on tuition fees and enrollment survives the pandemic.

They were giving it the old college essay, but Covid-19 forced higher education to face economic reality.

Tuition fees at US public universities have nearly tripled since 1990. With President Biden seeking to ease the burden on some students, experts explain how federal financial aid programs can actually help drive up costs. Photo: History blocks

Write to Spencer Jakab at [email protected]

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Appeared in the print edition of June 26, 2021 under the title “An existential crisis for higher education”.


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