Friday, February 1, 2013

Is Your College Going Out of Business?

English: Study of rising college costs due to ...
Study of rising college costs due to cost shifting from state funding to tuition. (Photo credit: Wikipedia)
by Mark Cuban, LinkedIn:

I've been getting a lot of questions from high school kids asking whether or not they should go to college. The answer is Yes.

College is where you find out about yourself. It's where you learn how to learn. It's where you get exposure to new ideas.

For those into business, it's where you learn the languages of business, accounting, finance, marketing and sales.

The question is not whether or not you should go to school, the question for the class of 2014 is what is your college plan and what is the likelihood that the college or university you attend will still be in business by the time you want to graduate.


The newspaper industry was once deemed indestructable. Then this thing called the internet came along and took away their classified business. The problem wasn't really that their classifieds disappeared. It was more that they had accumulated a ton of debt and had over invested in physical plant and assets that could not adapt to the new digital world.

When revenue fell, the debt was still there - as were all the big buildings they had purchased, all those presses they had bought and the declining-in-value acquisitions. But the debt accumulated to pay for them never went away. They were stuck with no easy way out.

The exact same thing is happening to our 4 year schools. You can't go to a big state university and not see construction. Why ?


Think about this from a business perspective. Schools are seeing state and federal funding decline, as they should. Why should taxpayers be paying for another building?

They are seeing their primary revenue source - tuition, once a number that was never really questioned - becoming a value decision by prospective students. As they should.


The class of 2014 and beyond now has to prepare a college value plan. What classes are you going to take online that enable you to get the most credits for the least cost. What classes are you going to take at a local, low-cost school so you can get additional credits at the lowest cost.


If you have the personal discipline you may be able to avoid ever having to step on a campus and graduating with a good degree and, miracle of miracles, no debt.

For the smart student who cares about getting their money's worth from college, the days of one school for four years are over. The days of taking on big debt (to the tune of $1 TRILLION as I write this) are gone.


Which in turn means that four-year schools that refuse to LOWER their tuition are going to see their enrollment numbers decline. It just doesn't make sense to pay top dollar for Introduction to Accounting , Pyschology 101, etc.


So back to the economics of four-year schools. Before you go to college, or send your child to a four-year school you better check their balance sheet. How much debt does the school have? How many administrators making more than $200,000 do they have?

How much are they spending on building new buildings - none of which add value to your child's education, but as enrollments decline will force the school to increase their tuition and nail you with other costs. They just create a debtor university that risks going out of business.





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