The Great Reset, education edition (hi future)

by on November 26, 2013 at 2:18 pm in Economics, Education, Uncategorized | Permalink

Arlington-based Strayer Education Inc., hoping to curb declining enrollment, will cut tuition for new undergraduate students by as much as 40 percent.

Strayer will give all new students 20 percent off tuition at enrollment, and is offering a program called Tuition Awards, which will cover the cost of one class for every three a student successfully completes.

…Total enrollment at Strayer University for the fall term fell 17 percent, while new enrollments were down 23 percent.

Strayer (NASDAQ: STRA) is also reducing its workforce by 20 percent and closing 20 physical campuses within the next six months.

It is no surprise for many of these changes to start at the lower end of the market, just as the financial crisis started with subprime.  Here is more, and for the pointer I thank Carrie Conko.

dearieme November 26, 2013 at 2:30 pm

Whenever the topic of the long term future of the universities comes up, I intone “Dissolution of the Monasteries”.

Adrian Ratnapala November 26, 2013 at 2:39 pm

What you mean a fat king is going to come and expropriate all their assets while banning their religion?

dearieme November 26, 2013 at 3:54 pm

Much of the public won’t mind because it will think that tenured monks, oops academics, exploit their posts to draw their salaries while avoiding their duties, the work being left largely to parish priests and lay brothers, oops adjunct professors and teaching assistants. A more radical, intellectual chunk of the public will simply hold that the monasteries have become nests of corruption, indoctrinating their charges in blatant superstitions, combined with a shake-down operation. The fact that small parts of the expenditure of the monasteries may currently provide useful social goods will be ignored as they are swept away.

If Goldman Sachs, or whatever the US state and federal governments are then called, wished to minimise protests from the monks, they’d just have to copy Bad King Henry, and pay them all generous pensions. But I doubt they’d need to: just let ‘em draw unemployment pay.

john personna November 26, 2013 at 4:10 pm

I think the thing that might confirm that dire analysis is that research monies are falling at the same time.

Urso November 26, 2013 at 4:15 pm

I really like this analogy.

Bill November 26, 2013 at 5:11 pm

Amen.

dirk November 27, 2013 at 1:10 am

I’m going to steal that analogy in my American Socialist manifesto.

Finch November 27, 2013 at 8:15 am

It makes sense to start with a small theft.

XVO November 27, 2013 at 9:22 am

Brilliant!

Silas Barta November 26, 2013 at 6:58 pm

You never know…

Adrian Ratnapala November 27, 2013 at 5:24 am

I understand the analogy between universities and monasteries. But who is the fat king? The Tudors were the most powerful of English monarchs and that’s why Henry did what he did. I see no equivalent in the modern world. Do you believe the religious right is going to launch an Iran style takeover of America any time soon?

dearieme November 27, 2013 at 5:33 am

The fat King is Mr Market; tidying up of the properties will probably be crowd-sourced.

Mrs.Davis November 27, 2013 at 12:39 pm

King MOOC

Rahul November 26, 2013 at 2:47 pm

I’ll wager that if you choose a random year you can find at least one low end school that gave a 20% discount or some such.

Ergo, this is hardly the omen of an impending trend but more life as usual I guess.

Z November 26, 2013 at 3:30 pm

I’ll take the wager. Go find find an example from each year going back a decade.

JWatts November 27, 2013 at 2:51 am

I think Rahul would be hard pressed to find a 20% discount in any particular year. But to his broader point, one case does not make a trend.

Alan Coffey November 27, 2013 at 7:18 am

And he did write YOU choose…

Kevin November 27, 2013 at 1:45 pm

Strayer is not exactly some some liberal arts college with a 1,000 undergrads. It has almost 40,000 students across 100 campuses.

ummm November 26, 2013 at 3:15 pm

B&S ..bitcoins and stocks still going nuts

bitcoin at $940 and DJIA making new highs everyday. Great stagnation more a tgreat era of prosperity and wealth creation

Willitts November 26, 2013 at 3:39 pm

He’s suggesting that there is a bubble in one sector. The stock market and bitcoin won’t react much to that.

Proprietary schools rely heavily on federal loans and grants, and their margins are low on B&M education. Online classes are their bread and butter.

ummm November 26, 2013 at 3:59 pm

he’s wrong to think that higher ed tuition will collapse like the housing market

ppl been predicting bubble in higher -ed since 2006 and still keep being wrong

Z November 26, 2013 at 4:05 pm

It has not rained here for three days. I guess that means it will never rain here again.

Willitts November 26, 2013 at 4:24 pm

Why is he wrong to think that? Granted, he presented an anecdote which hardly contains evidence, but your hypothesis that tuition won’t collapse is based on what? I might even agree that nominal tuition cuts are rare, but there are often concessions such as school grants.

From what I hear from all my friends in traditional education, times are very hard and competition for declining enrollments is fierce.

I teach courses for a proprietary college from time to time. Our budgets have been pinched from declining enrollment. I can’t say whether tuition will be dropped but I can say with certainty that it will not go up. A nominal freeze is a real decline.

Z November 26, 2013 at 4:35 pm

It seems to me we have a few bits of machinery to consider. Consumers of higher ed exist because of rare credit consideration that do not exist in nature. Take that away and colleges line up in Federal court to declare bankruptcy within 90 days. That can only happen if the lender stops lending, the borrower stops borrowing or we run out of borrowers. I think we can eliminate the third option as the population of college aged people is not in decline.

Current delinquency rates should have resulted in a either a spike in interest rates or far less lending. Because this is a government run operation, lending continues at the same pace. A trillion dollar debt market with a 20% delinquency rate should be ringing alarm bells, but that’s story for another day. All that matters is the loan spigot is still open. That leaves only one option and that’s borrowers are not borrowing.

Is there any data to suggest this?

Willitts November 26, 2013 at 9:46 pm

The high delinquency rate and the credit conditions are endogenously determined. It is a bubble practically by definition. The only thing left is for the labor market to either recognize low quality degree holders, plunge wages, or restrict hiring and the bubble bursts. I think that may already be underway as soon as the class of 2014 graduates.

ac November 26, 2013 at 5:00 pm

I’m curious how you separate these anecdotes into “confirmation bias” vs “real data” categories

VT Prof November 26, 2013 at 5:15 pm

But is “the future” likely to progress beyond the bottom of the market? Are Strayer and MOOCs competing hard for YOUR smart 17-year-old? Maybe if you have very low income, but those folks were never a market for traditional higher ed anyway. Look, MOOCs homogenize & commodify education. That’s a big bonus for those who were locked out of traditional higher ed by ability or poverty. But commodified students command commodified earnings – again, a step up for many, but still low. For a student with $ and smarts, traditional higher ed provides labor-market “product differentiation”, and the earnings (rents?) that follow.

john personna November 26, 2013 at 5:36 pm

MOOCs have broad geographical reach and zero cost of entry. Those two things allow masses of students to taste-test a course, or even a career. I’ve taken MOOCs and seen kids from all over the world succeed. Yes, there are huge numbers of dropouts, but with this model, of “come on and try it,” I don’t see that as a traditional sort of failure. In fact, I’m quite sure that every dropout learned something, even if it was just that computer programming (etc.) is hard.

The end game is hard to predict. I’ve guessed that low cost junior colleges will get better, with credits granted via elite-school MOOCs. But perhaps that is only in the medium term, and 20 or 30 years away we might have a higher education that is very different.

Tim November 26, 2013 at 9:47 pm

There’s nothing wrong with higher education that a minimum income and harder entrance exams wouldn’t fix.

JWatts November 26, 2013 at 10:00 pm

There’s nothing wrong with higher education that harder entrance exams themselves wouldn’t fix. Universities catering to the smartest 10% will continue to be prestigious and do very well. Universities catering to the 50th percentile may well be in trouble.

ummm November 26, 2013 at 10:17 pm

more like smartest 2%

JWatts November 27, 2013 at 3:01 am

Well, your probably right, at least as far as being prestigious. The entire Ivy League only accounts for 0.5% of the college population. However, that would probably include some of the smartest and some of the richest.

Guest November 27, 2013 at 9:22 am

Is the “Ivy League” relevant anymore? Aren’t MIT, Stanford and CalTech “better” than Cornell, Brown and Dartmouth?

Benny Lava November 26, 2013 at 11:47 pm

As a counterpoint I would merely remind you that law school enrollment has dropped precipitiously.

prior_approval November 27, 2013 at 12:21 am

They used to talk about this more at the Volokh Conspiracy – somehow, the topic seems to have slipped from view in the meantime.

Possibly because they are having a glimmering that American society is unlikely to keep worshipping at the altar of the legal profession.

Ray Lopez November 26, 2013 at 11:51 pm

Ho-hum, boring. Baby Boomers out of school, and tuition has increased more than inflation for more than one generation, coupled with the fad of higher education as a cure-all means there will be retrenchment. Nothing special here.

prior_approval November 27, 2013 at 12:05 am

Am I the only one hear that thinks Strayer College has as much to do with higher education as MCSE certification?

Oops – Strayer University. I grew up in Northern Virginia, and the ads for Strayer College were not exactly rare. The history from wikipedia – ‘Strayer established the college to teach business skills to former farm workers,[6] including shorthand, typing and accounting.[7][8] In its first decade of operations, enrollment at the school gradually increased, attracting students from other states, and in 1904 Strayer opened a branch of the school in Washington, D.C.[5][8]

Enrollment further expanded as demand for trained accountants grew after the passage of the Revenue Act of 1913 and World War I increased the need for government clerks with office skills.[8] During the 1930s, the college was authorized to grant collegiate degrees in accountancy by Washington, D.C.’s board of education.[8] The school founded Strayer Junior College in 1959, when it was given the right to confer two-year degrees. In 1969, the college received the accreditation needed to grant four-year Bachelor of Arts degrees and was renamed Strayer College.’

Well, it definitely shows something resembling a balloon – moving away from its origins, while in another sense, remaining pretty much in the same place, as American society changed. (How many secretaries can now get hired without a degree, as compared to the sort of education Strayer provided in the 30s?)

But this stands out as fantastically like a bubble – ‘In addition to reporting Silberman’s 2009 compensation (which it described as fifty times more than Harvard’s president), the strip said that in the same year that Strayer spent $1,300 per student on instruction, it spent $2,500 per student on marketing and returned $4,500 per student in profit’

(And as a side note – if wikipedia is to be believed, Strayer University actually sounds like a GMU competitor, at least in terms of trying to attract the working adult student segment. Somehow, I don’t think anyone at GMU is sad to see this happen – after all, though the Commonwealth will freeze pay, it doesn’t go out of business.)

dirk November 27, 2013 at 12:59 am

The future is socialism. Capitalism has failed America. American Socialism for the win. Regulation bad, taxes good.

Pope Francis November 27, 2013 at 3:02 am

+84 pages

Matt November 27, 2013 at 11:27 am

+1

Arun November 27, 2013 at 11:50 am

Have you bothered to look even a little?
About Strayer:
http://distancelearn.about.com/od/onlineprogramdirectory/p/StrayerUni.htm

“Strayer University is a network of campuses and online programs designed for adult learners with full time jobs.” “The average age of a Strayer University student is 34.”

About college enrollment and its relation to how the economy is doing:

http://www.deseretnews.com/article/865586154/College-enrollment-drops-after-years-of-growth.html

“The decline in enrollment was much sharper among students age 25 and older. Their enrollment fell by 419,000, while enrollment of 18- to 24-year-olds declined by only 48,000.”

“During 2008 and 2009, during the depths of the recession, higher education enrollment jumped by 12 percent. Now it is returning to normal levels, Hartle said.”

“U.S. Census Bureau data shows college enrollment rose sharply during the four periods of economic recession that occurred since 1978.”

About college enrollment and the economy, from the Chicago Fed:
http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2012/4Q2012_part1_barrow_davis.pdf

Now, higher ed. may be crumbling, but to deduce a secular trend of such from the Strayer story, especially given the relationship of college enrollment and the state of the economy, takes a real genius.

Mrs.Davis November 27, 2013 at 12:42 pm

Miss the blue light special at Penn State Law School?

http://triblive.com/news/adminpage/5151024-74/state-penn-students#axzz2lnYX0s00

FC November 27, 2013 at 1:17 pm

Do they offer a specialization in defending rapists?

CdnExpat November 27, 2013 at 3:58 pm

Strayer’s problem, like Kaplan and other for-profit schools is not the bursting a bubble but rather that the U.S. government has turned down the spigot of student loans because their graduation rates are too low. Finally, someone is saying ‘no’ to one form of crony capitalism.

prior_approval November 28, 2013 at 3:08 am

Strangely, no one has mentioned this –

‘Sebastian Thrun, godfather of the massive open online course, has quietly spread a plastic tarp on the floor, nudged his most famous educational invention into the center, and is about to pull the trigger. Thrun—former Stanford superprofessor, Silicon Valley demigod, and now CEO of online-course purveyor Udacity—just admitted to Fast Company’s openly smitten Max Chafkin that his company’s courses are often a “lousy product.”

————————

But what is the big deal about Thrun’s pivot, and why are academics and higher-ed writers alternately wary and gleeful about it? On the surface, Thrun appears duly chagrinned that his brainchild, so proudly hailed in neoliberal wet dreams, has failed the tired, poor, and huddled masses yearning to learn for free. And on the surface, the new direction of Udacity, which is to leave the university environment and focus on corporate training courses, seems appropriate: Sure, go “disrupt” a bunch of corporations, they love that kind of thing.’

http://www.slate.com/articles/life/education/2013/11/sebastian_thrun_and_udacity_distance_learning_is_unsuccessful_for_most_students.html

Luckily, since MRU is not a business, there is no reason to doubt that the infrastructure which allows it to exist will continue to attract a reliable source of funding.

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