Sun, Apr 21, 2019 - Page 15 News List

The US’ great college boom winds down as demand wavers

By Noah Smith  /  Bloomberg Opinion

The US’ for-profit college industry is collapsing. The Chronicle of Higher Education has reported that in the past five years, more than 1,200 college campuses have been closed — an average of about 20 every month. Of those that shut, 88 percent were for-profit and their students amounted to 85 percent of those affected by the closures.

Enrollment at four-year for-profit colleges is in free fall, dropping 13.7 percent from fall 2014 to fall 2015, 14.5 percent the following year and 7.1 percent the year after that.

Perhaps the only surprising thing was that it took this long. For-profit colleges have long been plagued by poor performance — a 2012 study by economists Kevin Lang and Russell Weinstein found no earnings premium from attending a for-profit university. Follow-up studies yielded similar results.

However, the price tag for these colleges was high and students were encouraged to take out lots of loans to pay it. The inevitable result was a generation of for-profit college students with poor employment prospects and a mountain of debt.

Meanwhile, a whiff of dubious marketing hung about the industry, with DeVry University being forced to pay a US$100 million settlement for misleading prospective students about the economic benefits of attending.

The winnowing of the for-profit college industry shows that although it can take years for poor quality and high prices to reduce demand in the education sector, eventually it does happen.

Fortunately, for-profits only account for a relatively small slice of undergraduate education — perhaps about one-10th. The more important question is whether the carnage among for-profits is a harbinger of similar declines for non-profit and public colleges.

Enrollment at four-year public and nonprofit colleges has remained essentially unchanged during the past two years. College enrollment rates overall — which include the big decline in for-profits and a smaller decline in two-year public schools — are essentially constant since 2005.

However, this conceals some potentially important underlying trends. Hispanic enrollment rates are up since 2010, but white and black enrollment rates have dropped a bit.

Meanwhile, tuition might be falling at four-year public and nonprofit universities — another potential sign of weakening demand.

If demand for college were weakening, this is probably how it would manifest itself. The number of spots at good schools is rationed by the application process — these schools limit their enrollment to maintain their prestige.

So falling demand would reduce prices for these colleges, but not the number of people attending.

Meanwhile, enrollment would fall at institutions that were less in demand, such as for-profits and two-year colleges.

Why might demand for college be weakening? One reason is that there are simply fewer young people in the US these days. The reversal of Mexican immigration probably has something to do with that.

Falling fertility rates would do even more to thin out the ranks of the young in the decades to come.

US universities could make up the difference by allowing in more international students, but US President Donald Trump’s anti-immigration policies and attitudes have made that difficult — enrollment from overseas is now in decline.

The strengthening labor market might also be pulling a few young Americans away from college, although so far that trend seems to be very slight.

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