The shrinking demand for overpriced higher ed

 Thomas Lifson:

The prestige sector of higher education — private colleges and universities reject a large portion of applicants — has resembled a cartel for decades.  Since the late 1950s, every year has the tuition charged by competitive colleges rise by 5 to 10 percent, with most such schools' tuition staying within a few hundred dollars of each other.  A financial aid nonprofit estimates that average tuition hikes are about 8% per year, at which pace the cost of college doubles every nine years.

In recent years, the easy availability of federal student loans has allowed tuition levels to rise astronomically, where four years at a competitive private school can cost over a quarter of a million dollars in tuition and expenses.

But demography — shrinking cohorts of high school graduates — and COVID have caused a decline in the number of people seeking to attend college.  Bloomberg reports:

U.S. colleges are seeing sharp declines in enrollment of new students this semester in another sign of the economic toll that Covid-19 is having on higher education.

The number of first-year undergraduate students enrolled fell 16%, the National Student Clearinghouse Research Center said in a report Thursday. Total undergraduate enrollment slid 4% from last year at this time, led by international students.

Amazingly, the laws of supply and demand apparently are starting to kick in, and we are seeing a few tuition levels demanded by the prestige schools just barely showing some signs of softening.  As a Bloomberg Quint article reports:

Hold on to your mortar board: the cost of a U.S. college education has finally stopped going up. At least that's the case at a small handful of liberal arts colleges that need to lure students in the middle of a pandemic.

Oberlin College, in Ohio, has cut its tuition by $10,000 for all new students. Nearby Denison University is offering an even better deal for Ohio residents: a $100,000 scholarship over four years. And Davidson College, in North Carolina, has frozen its tuition for the first time in a quarter-century.

Oberlin has been suffering national humiliation over its level of campus craziness, culminating in losing a lawsuit by Gibson's Bakery and being ordered to pay $25 million in damages.  I would imagine that students returning to campus may be very dissatisfied paying 10 grand more for tuition than the freshmen they see around them, so Oberlin may be buying future turmoil with this limited discount for incoming students.

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The colleges have taken advantage of unsophisticated borrowers to push up the cost of college so that administrators can live like the one percent.  The law of supply and demand is catching up with them.  It is possible that several colleges will fail as students opt for career choices that do not require high-priced degrees that make it hard for them to pay off loans and have to put off buying homes and transportation.