By CityTownInfo.com Staff
June 1, 2009
Two higher education authorities have predicted that the financial structure of colleges and universities will be the next "bubble" to burst in the United States.
According to Joseph Marr Cronin, former secretary of education in Massachusetts, and Howard E. Horton, president of Boston's New England College of Business and Finance, a combination of high tuition and reduced student loan availability will soon test the viability of many small- and medium-sized private colleges. Their opinion piece, "Will Higher Education Be the Next Bubble to Burst?" appeared in the Chronicle of Higher Education.
In the article, the authors noted that the according to the National Center for Public Policy and Higher Education, average college tuition and fees have risen by 440 percent over the past 25 years. Patrick M. Callan, the center's president, warned that low-income students will soon no longer be able to afford a college education.
The authors also pointed out that private student loans are no longer readily available, college endowments which allowed institutions to lower tuition costs have dried up, and declines in home values have made it impossible for families to utilize home-equity loans to pay for college. As a result, many families are increasingly turning to lower-cost options such as community colleges and online education.
In an interview with the Boston Herald, Cronin said that private schools--which rely heavily on tuition money--are not reacting quickly enough to these market pressures. As a result, he predicted that 20 to 40 colleges may very well close in the next few years, although the larger and more prestigious schools such as Harvard and MIT will survive.
Other experts agreed. "You're going to see some bankruptcies," said Gerald Cassidy, an analyst at RBC Capital Markets, who was quoted in the Herald. "A breaking point is going to come (for some schools). There's going to be a real problem."
An article in The Washington Post reinforced the opinion that students are increasingly seeking out lower-cost options for higher education. At Northern Virginia Community College, for example, enrollment was up 4 percent last fall compared to the previous year, and increased 10 percent this summer over last year.
"We are predicting a student tsunami for next fall," said Robert Templin, president of the college, who was quoted in the Post.