Chris Hansen

I think the correct formulation is that colleges are in trouble because the wage premium stagnated, but during the lag before people figured that out, colleges increased tuition to the point where expected value declined for marginal students. This led to a proliferation of low value master’s programs, as students vied to differentiate themselves and increase the wage premium, but schools got very good at extracting most of that premium in the form of tuition, and many of those programs were negative NPV. The public now views college as a risk-reward calculation rather than a guarantee of a good job, and that means colleges outside the top elite no longer have anything like the pricing power they enjoyed 15 years ago. The demographic crunch makes that problem even worse. But what makes it existential is that during the boom, many schools assumed cost structures that cannot be sustained in the current climate, but are very difficult to cut because so much of the cost is either in debt/buildings/maintenance/tenured professors—and also because the things that are easiest to cut while maintaining the educational mission are the various amenities that do nothing for education, but attract tuition paying students. You could offer a great education much cheaper by returning college to what it was in my day, when rooms were spartan, meal plan was terrible, the gym was a pit, and there were fewer administrators managing every aspect of student life. Or you could go back to my what it was in my Mother’s Day—no phones in the rooms, truly appalling food, barely any administration at all, and no counseling/student life/centers for this and that. The problem is students would go elsewhere.