After Housing And The Stock Market, Is Higher Education The Next Bubble To Burst?

Thursday, January 3, 2013

Few industries today have a worse business model than higher learning institutions.

Simply put, colleges are slowly pricing themselves out of existence. Tuition has consistently increased faster than inflation and household income, to the point that it is now four times more expensive to attend college than it was a generation ago. The result is that the average college senior carries $25,000 in student loans at graduations. The debt can follow students around for years, sometimes to the end of time, literally: $36 billion in loan debt is held by

Colleges are now faced with the challenge to the long held belief that a degree is worth the student loan burden because it leads to a lifetime of good paying jobs. However, the recession and the tepid recovery made make this belief more questionable as new evidence points to a much lower lifetime earnings. As a result, last year a whopping 41% of all colleges saw their enrollment fall.

Faced with declining enrollment, many colleges across the country assume that they have a marketing problem and are hiring CMOs to build their brands. However, the lack of branding or coordinating the admissions offices’ sales pitch is not the reason for a shrinking student body. While whitewashing substantive and largely self-inflicted problems with advertising campaigns may be an appealing quick fix, transforming the business model itself would be a better approach – better for the colleges, for students, for the nation as a whole in the long run.

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