Standard and Poor\u2019s joins Fitch\u2019s and Moody\u2019s as the latest credit agency warning that finances in higher education, in particular private colleges and universities, are continuing to deteriorate. According to Standard and Poor\u2019s the outlook is definitely negative for the coming year and maybe longer. The reasons for this by now are well known \u2013 the demographic cliff, changes in prospective student preference for college, price competition, the impact of new technology, and colleges trapped with a fixed cost budget model that lacks flexibility. Given the long-term demographic trends, the number of colleges facing deep financial distress will surely increase.<\/p>\n
An interesting side note about shrinking margins is that studies have suggested that many sectors of the higher education market operate in an oligopolistic market. This may no longer be true for a larger swath of higher education because shrinking student markets and aggressive price competition indicate that higher education is losing market power and no longer can control pricing. The loss of market power is evident for private colleges with enrollments less than 2,000 students. The disconnect between tuition discounts and enrollment means that higher tuition discounts are going to offset the loss of revenue through higher discounts.<\/p>\n
The business model for smaller, tuition-driven college is broken. They either must find new revenue streams or make huge cuts in their expenses. Even then, there are other factors, such as location of the college, accreditation restrictions, tenure structure, and other policies constrain major changes in a college. Broken business models will push many more colleges over the brink to oblivion.<\/p>","protected":false},"excerpt":{"rendered":"
Standard and Poor\u2019s joins Fitch\u2019s and Moody\u2019s as the latest credit agency warning that finances in higher education, in particular private colleges and universities, are continuing to deteriorate. According to Standard and Poor\u2019s the outlook is definitely negative for the coming year and maybe longer. The reasons for this by now are well known \u2013 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0},"categories":[29],"tags":[],"coauthors":[24],"_links":{"self":[{"href":"https:\/\/knowacademia.com\/index.php?rest_route=\/wp\/v2\/posts\/2421"}],"collection":[{"href":"https:\/\/knowacademia.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/knowacademia.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/knowacademia.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/knowacademia.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2421"}],"version-history":[{"count":2,"href":"https:\/\/knowacademia.com\/index.php?rest_route=\/wp\/v2\/posts\/2421\/revisions"}],"predecessor-version":[{"id":2423,"href":"https:\/\/knowacademia.com\/index.php?rest_route=\/wp\/v2\/posts\/2421\/revisions\/2423"}],"wp:attachment":[{"href":"https:\/\/knowacademia.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2421"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/knowacademia.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2421"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/knowacademia.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2421"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/knowacademia.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcoauthors&post=2421"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}