One of the things I like to do is to set up scenarios where if X happens, how will people react? My thesis lately has been that enrollments in universities will slow, and then start to unwind pretty soon. In addition, I think there will be a surge in people dropping out of school because we had a surge in enrollments a few years ago. So what happens then?
Many universities are on the edge of disaster in terms of their financial health. Whereas it makes sense to plan for rainy days in good times, many schools have not. They have spent all their gains on better facilities in order to compete better with all the other schools. This is understandable, but will cause problems in bad times.
So what happens if the supply of students starts to diminish? Well, if you look at other industries you can get a clue. A business has several options if it wants to survive.
- Cut costs, therefore allowing a reduction in price.
- Increase price, but this is difficult in the face of competition.
- Increase advertising.
- Use the law to force your competitors out of business (or make their costs increase)
In terms of universities, number 1 is hard because they have large fixed costs now. Number 2 has been tried for the last 30 years but is coming to an end for now. Number 3 is being done so that leaves number 4.
If you have been following the computer industry for any length of time you will be aware of a term called “lawfare”.
Lawfare - the process of using the legal system to attack and impede your competitors, usually by means of patents.
Apple and Samsung have been suing each other for years. Before that it was Apple and Microsoft. There are even companies that do nothing but purchase patents from companies, and then sue the heck out of everyone else. It’s disgusting. (see Patent Troll)
This brings me to accreditation. Accreditation is a credentialing process for universities. This matters a great deal because in order for your students to get federal loans you have to be accredited. Think of it like the bar exam to become a lawyer. I have always been a little bit uneasy by the process to become accredited. Basically what happens is a panel of representatives from other universities will come to your school and check over your operation. If you meet their standards you can become accredited. What bothers me is what happens if the supply of students starts to dry up? Would universities be able influence the accreditation process to start excluding their competitors? They could say they are “raising standards”, which on the surface sounds like a good idea but what if it was expensive to try to meet the new standards? That would push a lot of smaller, less affluent universities out of the market wouldn’t it?
I’m not saying this will happen or that it’s even likely. I’m just saying it’s possible. We will have to see how conditions develop over the next few years and how desperate large schools become. If the economy doesn’t improve and states continue to have to cut funding and students don’t see the benefits of a college education (with massive debt) we may very well see accreditation warfare.
Next week I have off of work but I might blog a bit anyway. After that will be my end of the year summary of my best posts. I would like to wish my readers a very happy and safe holiday season!