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"Death Spiral" - Harvard Professor Predicts Up To Half Of US Universities May Fail In 15 Years

Tyler Durden's picture


Soaring student debt, competition from online programs and poor job prospects for graduates are shrinking the applicant pools for many universities and, as Bloomberg reports, the National Association of Independent Colleges and Universities warns "there will clearly be some institutions that won’t make it...through these difficult steps." Rather stunningly, Moody’s found that expenses are outpacing revenue at 60 percent of the schools it tracks even as many try to slash their way to balanced budgets," and concluded "what we’re concerned about is the death spiral... this continuing downward momentum for some institutions." As Harvard professor Clayton Christensen has warned, as many as half of the more than 4,000 universities and colleges in the U.S. may fail in the next 15 years, and is "not sure a lot of these institutions have the cushion to experiment with how to stay afloat."

As Bloomberg reports,

Dowling College (on Long Island), which got a failing grade for its financial resources from accreditors last month, epitomizes the growing plight of many small private colleges that depend almost entirely on tuition for revenue. It’s been five years since the recession ended and yet their finances are worsening. Soaring student debt, competition from online programs and poor job prospects for graduates are shrinking their applicant pools.

As the debt loads and poor payoffs finally meet market forces...

What we’re concerned about is the death spiral -- this continuing downward momentum for some institutions,” said Susan Fitzgerald, an analyst at Moody’s Investors Service in New York. “We will see more closures than in the past.”


But Harvard Business School professor Clayton Christensen has much more dire warnings of the technological shift...

as many as half of the more than 4,000 universities and colleges in the U.S. may fail in the next 15 years. The growing acceptance of online learning means higher education is ripe for technological upheaval, he has said.


“I’m not sure a lot of these institutions have the cushion to experiment with how to stay afloat,”




“There will clearly be some institutions that won’t make it and there will be some institutions that will be stronger because of going through these difficult steps,” said David Warren, president of the Washington-based National Association of Independent Colleges and Universities.

The flood of credit to reflate yet another bubble has simply mispriced yet another critical aspect of society past...

We haven’t hit bottom yet,” said Glenn Harlan Reynolds, a law professor at the University of Tennessee in Knoxville and author of the book, “The New School: How the Information Age Will Save American Education From Itself.” Students are shopping for a less expensive education as the cost of college has increased and the job market worsened, he said.

But, rather worryingly for the future of that exponential trend...

Moody’s found that expenses are outpacing revenue at 60 percent of the schools it tracks even as many try to slash their way to balanced budgets, according to Fitzgerald.

Time for the government to find another credit transmission channel bubble to blow

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Mon, 04/14/2014 - 22:01 | 4659247 Ignatius
Ignatius's picture

Long colleges with winning football programs.

Mon, 04/14/2014 - 22:04 | 4659256 JohnnyBriefcase
JohnnyBriefcase's picture

Long apprenticeships.


BTW stay classy Intelligence_Insulter.

Mon, 04/14/2014 - 22:25 | 4659316 Ignatius
Ignatius's picture

Apprenticeship was my path and it works.

Mon, 04/14/2014 - 22:26 | 4659319 flacon
flacon's picture

Who will be left to teach the religion of Keynesianism if the universities fail? 

Mon, 04/14/2014 - 22:35 | 4659336 Tengri Temujin
Tengri Temujin's picture

This process of educational decline mirrors the Constitutional Decline we have been experiencing, there is a falling apart not just of infrastructure but of morality and values and quality of people.  This is the very sort of decay that afflicted the Roman empire and it coincided with their inability to further expand.  Similar things we are seeing now in our accelerated empire lifespan.

Mon, 04/14/2014 - 22:49 | 4659404 Handful of Dust
Handful of Dust's picture


My alma mother, Thomas Jefferson Virginia State University New Buffington Campus of the Commonwealth College of the Americas, will bee around for a long time. My bizniz degree is invalable. There online, at knight, part time currikulum cant be beet!

Mon, 04/14/2014 - 23:01 | 4659435 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

One simple fact the author overlooked was there is going to be a LACK of qualified kids. Simply put, the products of the ghetto and the hood are not qualified to go nor can afford to go. Our baby bust will for sure do the lower ranked colleges in. RIP marxist, existential liberalism!

Mon, 04/14/2014 - 23:04 | 4659451 CrimsonAvenger
CrimsonAvenger's picture

Qualifications haven't mattered in some time. Today the only qualifications are whether they (or someone helping them) can fill out a FAFSA form.

Mon, 04/14/2014 - 23:38 | 4659532 mrpxsytin
mrpxsytin's picture

And therein lies the problem... 

Tue, 04/15/2014 - 06:15 | 4659876 zhandax
zhandax's picture

There are a lot of 'institutions' which are better off dead.  Harvard is the first one to come to mind.  Unfortunately, it is probably last on the list to go.

Tue, 04/15/2014 - 06:51 | 4659893 Thomas
Thomas's picture

We would be fine without half of the schools. The path to get there, however, will be a bitch.

Tue, 04/15/2014 - 06:53 | 4659894 Richard Chesler
Richard Chesler's picture

I thought it was common knowledge by now these "institutions" were nothing more than debt zombie factories...

Tue, 04/15/2014 - 07:25 | 4659928 RSDallas
RSDallas's picture

That would be Tenure Zombies.  

Tue, 04/15/2014 - 07:05 | 4659905 Bangin7GramRocks
Bangin7GramRocks's picture

Harvard will merge with Goldman Sachs, Stanford and Google to create "The One". Supreme World Leader and corporate deity!

Tue, 04/15/2014 - 07:17 | 4659911 DanDaley
DanDaley's picture

Marc Faber's take on higher ed. (hint-it's better to just have a brain and know how to use it): https://www.youtube.com/watch?v=F-hTffVyB9U

Tue, 04/15/2014 - 10:22 | 4660713 Ayr Rand
Ayr Rand's picture

Good point. I'm top 1% of college-bound seniors. But what does that mean in the Obama nation? If anything?

Tue, 04/15/2014 - 10:22 | 4660714 Ayr Rand
Ayr Rand's picture

Good point. I'm top 1% of college-bound seniors. But what does that mean in the Obama nation? If anything?

Mon, 04/14/2014 - 23:41 | 4659533 UselessEater
UselessEater's picture

I wonder if there will be a "lack" of qualified kids for the future planned economies? Foundations and endowments have been vehicles used by TPTB to pervert the course of TRUE tertiary studies and research in sciences, business and arts fields.

Colleges seem to be production lines to form debt and identify useful idiots who conform to the myth of humans being consumers and the validity of consensus science that justifies planned economies and planned societies for the "global" good of a few. I suspect there will be no 'lack' in the minds of the psycho's running this debt servitude ponzi scheme.

Perhaps kids moving away from tertiary education is a good thing in some respects. As SME's are crushed the youth look to secure employment with the mega-corp's serving the fascist trend and all that comes from that moronic 'utopia'. A possible backlash could be us supporting the micro businesses that more of us are setting up and countering the system by recruiting kids who have not been indoctrinated by advanced education; the role of elders (us) should be to pass on knowledge and skills in a way that allows the younger generation to become self sufficient, wise and resilient so they can become people who can defend, protect, nuture, grow, stimulate advance the lives of our and their next generation families.

If in your job you get a chance to pervert the rfascist ecruitment system DO so! Don't ask for their qualifications perhaps ask them to come back and talk to you after they've read a key book/ experimented with solving a problem.... anything that points to their willingness to learn and try. Perhaps your patience and perspective will bring the kids into the fascist backlash.

Tue, 04/15/2014 - 11:49 | 4661310 Monty Burns
Monty Burns's picture

I ran a post-gradute technology program at a well-known mid-western university and even in that field and at that level the Cultural Marxist/PC/Equalist/AA agendas were beginning to pollute the learning environment.  This was about 20 years ago.  The damage done from a pedagogical perspective was enormous and it's got drastically worse in the interim.

Tue, 04/15/2014 - 01:40 | 4659691 Freddie
Freddie's picture

True.  I had to go to a local state 4 year university for something about a year ago.  I walked around the school.  I remember 30 years ago it was a spartan or utilitarian place.  Today, they have buidlings that would be class A office buildings with upscale furnishing.

I would guess 40% of the kids attending can barely read.  College has become a right.  The state or private college will baby sit a lot of illiterate kids who will get a diploma.  I bet many of this subset will still have a 5th grade reading level.

Tue, 04/15/2014 - 07:51 | 4659970 therover
therover's picture

I thought it was how fast they can run the 40 yard dash.

Mon, 04/14/2014 - 23:52 | 4659557 Stuck on Zero
Stuck on Zero's picture

The Universities are lobbying Congress to hand out visas and put degree holders on the path to citizenship.  Already most of our graduate studentsa are foreign. 

Tue, 04/15/2014 - 08:34 | 4660110 pods
pods's picture

Just a coincidence that Visa holders make less and have to work harder than citizens.  They run them ragged at my place. Sad really.


Tue, 04/15/2014 - 09:06 | 4660258 More_sellers_th...
More_sellers_than_buyers's picture

I'd take them over some lazy lump who gets in for politically correct reasons

Tue, 04/15/2014 - 01:03 | 4659654 Ben Dover
Ben Dover's picture

Assuming here your comment on "the ghetto" and "the hood" referred to Black and Hispanic kids, I have to ask you to expand your definition of useless to be more inclusive. I For the record, I interact daily with lots of kids and have to let you know that the White kids are no prize to be sought after either. Low expectations transcend race and neighborhood lines.

Tue, 04/15/2014 - 09:54 | 4660514 cheetahbaby
cheetahbaby's picture

For 40 years black and Hispanic kids have had significantly lower Sat scores. When the shame got too much to bear, their liberal mouthpieces starting convincing schools that scores don't matter. Doesn't make them any dumb.....

Tue, 04/15/2014 - 08:00 | 4659987 FredFlintstone
FredFlintstone's picture

Hey, they gave out $500k mortgages to gardeners why not give out $50k in student loans as well as $50k in grants to gang bangers?

Mon, 04/14/2014 - 22:48 | 4659406 NuckingFuts
NuckingFuts's picture

I was in college in the late 80's - early 90's and it does have one thing going for it. Tons of women your own age and away from home as well as copious amounts of drugs and alcohol. As far as an education goes ...... Yeah, not so much. Very expensive women and cocktails.

Completely OT: I saw no info on the shootings in KC on ZH. Did I miss it? Usually these lone wolf shooters get at least one thread.

Mon, 04/14/2014 - 23:06 | 4659457 Almost Solvent
Almost Solvent's picture

Certain topics are verboten on the new ZH.

Mon, 04/21/2014 - 13:53 | 4680140 slvrizgold
slvrizgold's picture

That was the feel good story of the week.

Mon, 04/14/2014 - 22:51 | 4659412 The man with po...
The man with pointy horns's picture

More like exponential decline. In the last one hundred years civilization has been on steroids. Empires have risen just as quickly as they have fallen.

Tue, 04/15/2014 - 09:52 | 4660505 Chuck Walla
Chuck Walla's picture

 It’s been five years since the recession ended and yet their finances are worsening.

Perhaps the recession didn't end? Or doesn't that compute to the overpaid brainiacs out there?


Ein Volk, Ein Obama, Ein Reich!

Mon, 04/14/2014 - 22:48 | 4659403 HardAssets
HardAssets's picture

The universities have been failing to help turn out informed citizens who can think for themselves for decades.

What else is new ?

Mon, 04/14/2014 - 23:29 | 4659519 RafterManFMJ
RafterManFMJ's picture

The new Univercity pogram will follow the degree path I encapsulated. I articulated at the Univercity of Phoenix where I perused 2 duel degrees in Forestey and once in Arkeology - all from my GramGram's basement!

I come your woodlot, inspect for Amurikan Chestnut, dig haunted burial ground, same day!

As always thanks you very much Univercity of Pheonx!

Mon, 04/14/2014 - 23:34 | 4659526 mrpxsytin
mrpxsytin's picture

Surely, there is no need for anyone to teach that which becomes self evident for the true believer. 

Tue, 04/15/2014 - 01:39 | 4659690 Vart Drader
Vart Drader's picture

Gay Rights & Women's Studies

Tue, 04/15/2014 - 05:37 | 4659862 Scifact
Scifact's picture

Do you imply you need education to be irrational and self serving?

Tue, 04/15/2014 - 07:33 | 4659943 TruthHunter
TruthHunter's picture

15 years?

Thats way too long for a lot of them.

They are already obsolete.

If education wasn't a corrupt, subsidized parasite,

a shake out would have occured years ago.

Tue, 04/15/2014 - 07:53 | 4659975 Everybodys All ...
Everybodys All American's picture

Liberalism having gone full circle.

Mon, 04/14/2014 - 22:55 | 4659420 sangell
sangell's picture

Yes but now you can get a 'low cost degree' too! Just select a college that failed when you would have been in college with perhaps a focus on one that failed far away from where you are now living and thus unlikely to have few if any alumni who attended that school around and claim a degree from the school. In fact, if you contact the registrars office of a failing school and offer a soon to be unemployed clerk in that office a small 'bonus' they might be happy to print you out a transcript showing your outstanding academic achievements and a black diploma for you to fill in! Look up the school and memorize a few campus landmarks and faculty members from your 'college days' and you can have your degree in a week!

Mon, 04/14/2014 - 23:17 | 4659492 DipshitMiddleCl...
DipshitMiddleClassWhiteKid's picture

hey now..dont be giving away the secrests of success

Mon, 04/14/2014 - 23:02 | 4659440 libertus
libertus's picture

Oplerno will grow and grow because it is not dependent on student loans. Check us out! Oplerno.com

Mon, 04/14/2014 - 23:06 | 4659460 remain calm
remain calm's picture

The "at risk" universities will have to find a way to integrate on line education to cut cost, those who do it well will succeed, those who don't will perrish. That is the way it is suppose to be in America. Fuck you Obama!

Tue, 04/15/2014 - 07:19 | 4659920 Van Halen
Van Halen's picture

Short any prediction that comes out of Harvard.

Mon, 04/14/2014 - 22:06 | 4659260 nuclearsquid
nuclearsquid's picture

Burn MF'ers.  I got my first degree from a school that will exist as long as the US does (20-25 years?). Free, too, if you don't count blood, sweat and tears.

Tue, 04/15/2014 - 22:51 | 4663892 IronForge
IronForge's picture

What School is that, Nuclear Squid?

Mon, 04/14/2014 - 22:10 | 4659268 Shad_ow
Shad_ow's picture

Roll Tide!

Tue, 04/15/2014 - 07:44 | 4659959 onewayticket2
onewayticket2's picture

the tide will go out as soon as the players start taking all the revenue generated from the football (and other sports') programs as their own....a la Northwestern Univ.


which, in turn, will accelerate the date of death for many universities as a major source of revenue to the university's general fund dries up.

Tue, 04/15/2014 - 10:50 | 4660884 Cursive
Cursive's picture


Yes, one of my favority poems:

Roll Tide, Roll!

Around the (toilet) bowl

and down the hole!

Roll Tide, Roll!

Mon, 04/14/2014 - 22:18 | 4659293 Jack Burton
Jack Burton's picture

Indeed! And the best party schools.

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