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Sunday, September 2, 2018

Harvard Prof: 50% Of American Colleges Will Be Bankrupt In 10-15 Years

CNBC, Harvard Business School Professor: Half of American Colleges Will Be Bankrupt in 10 to 15 Years:

In his recent book, The Innovative University, [Harvard Business School Professor Clayton] Christensen and co-author Henry Eyring analyze the future of traditional universities, and conclude that online education will become a more cost-effective way for students to receive an education, effectively undermining the business models of traditional institutions and running them out of business.

At the Innovation + Disruption Symposium in Higher Education in 2017, Christensen specifically predicted that "50 percent of the 4,000 colleges and universities in the U.S. will be bankrupt in 10 to 15 years."

More recently, he doubled down on his statements, telling 1,500 attendees at Salesforce.org's Higher Education Summit, "If you're asking whether the providers get disrupted within a decade — I might bet that it takes nine years rather than 10." ...

Fortunately, Christensen says that there is one thing that online education will not be able to replace. In his research, he found that most of the successful alumni who gave generous donations to their alma maters did so because a specific professor or coach inspired them.

Among all of these donors, "Their connection wasn't their discipline, it wasn't even the college," says Christensen. "It was an individual member of the faculty who had changed their lives. Maybe the most important thing that we add value to our students is the ability to change their lives," he explained. "It's not clear that that can be disrupted."

http://taxprof.typepad.com/taxprof_blog/2018/09/harvard-prof-50-of-american-colleges-will-be-bankrupt-in-10-15-years.html

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Comments

Not including Harvard.

Posted by: mike livingston | Sep 2, 2018 5:10:00 AM

I parse the situation differently. I majored in engineering, graduating in the top ten percent of my class. I can't imagine STEM subjects being threatened by online programs. They're so demanding, that only the most disciplined can learn at a distance. I'd have never made it through on my own.

The humanities are a different matter. A few years ago, I worked at a major art museum and was amused at how many of the young women who worked there had been art or art history majors. Unable to get jobs in those fields, they'd decided to make the best of a bad situation and sell tickets at the museum.

Ah, but imagine a world where you could learn a particular topic in the humanity that you love online at little or no cost. That world is already here. Like and want to learn more about history? Check out Youtube where the videos are free and numerous. Want to learn graphic design or web development? Lynda.com does charge, but it's a tiny fraction of the cost of a private design school.

I hope you see my point. There are fields where only on-campus learning will work for most students. They need the discipline that being there imposes.There are other fields where the high cost and limited value of a college degree means there's little reason to study on campus or fret about acquiring a degree as a job-acquiring credential.


Posted by: Michael W. Perry | Sep 2, 2018 6:19:34 AM

It is deeply reassuring to know that -- were this to come about -- there is no way it could affect law schools. No way. Right?

Posted by: Peter D. Lederer | Sep 2, 2018 11:39:33 AM

I'll just say that much like the stock in trade of some is "wage premium!" Christensen has made his brand on "creative disruption!" Sometimes it pans out, sometimes it doesn't. There are certainly some cutting critiques of his economic worldview out there. I would say that as American higher education is a roughly $200 billion per year industry and is still usually considered the best in the world, it shouldn't be something we root for too much - even as we have conversations about tuition sustainability and such,

Posted by: Unemployed Northeastern | Sep 2, 2018 4:16:47 PM

Clarification: the failure of 50% of colleges shouldn't be something we root for too much. The dangers of rushing to post a comment before the dreaded auto-refresh wipes it...

Posted by: Unemployed Northeastern | Sep 2, 2018 4:17:44 PM

He made this prediction about 5 years ago too. Time is running out on that...

Posted by: Real Reality | Sep 2, 2018 6:14:17 PM

Unemployed: "The failure of 50% of colleges shouldn't be something we root for too much."

If the failures are coupled with a severe cut in government student loans, I see every reason to root for it. That's called a market correction, and bursting a bubble that should never have gotten this big:

https://inflationdata.com/articles/charts/college-tuition-fees-inflation/

No ordinary competitive industry could ever get away with cost increases far beyond inflation and demand without getting propped up by the taxpayer.

Posted by: MM | Sep 2, 2018 10:24:45 PM

@MM,

You forget private student lenders who, thanks to the 1-2 punch of nondischargeability and securitization, have no more use for due diligence than the free-for-all of federal loans. Think about it this way: there is a ceiling for undergrad federal loans, and it is just $31,000. That means that every horror story you've ever heard about some four-year graduate from Blahsville Open Enrollment College with $100k or $200k in student loans was because Sallie Mae or Nelnet or Great Lakes or whoever thought it was a great idea, by which I mean they want to sell some securities to pension funds. There is a reason why the biggest lobbyists for the would-be PROSPER Act, which would eradicate federal GradPLUS loans, are private student lenders - and it isn't because they think that would reduce tuition levels. It's because it would increase their market share.

Posted by: Unemployed Northeastern | Sep 3, 2018 8:20:20 AM

I predict this prediction will fail for the reason that HigherEd isn't a normal market. The entitlement program for the middle class is very popular and props up a market that would otherwise need to compete much more keenly on price and quality.

Posted by: TS | Sep 8, 2018 2:40:28 PM

Perhaps the Harvard professor expects the ABA to continue driving competition out of the market with demands about accreditation standards which ignore bar results of graduates.

Posted by: Woody | Sep 9, 2018 7:54:33 PM