I have written several times now that colleges are digging themselves into a big hole with their investments in expensive facilities. This generates huge fixed costs that aren’t easily gotten rid of. I mean, most businesses can sell off assets in order to adjust to reduced customer demand. How does a college divest itself of a student union, or a million dollar fitness center? In fact the only real area you can cut in colleges is labor costs. Thus you see the determined assault on tenure. This sets the stage for cost reductions if finances go south. This also explains the experimentation with MOOCs. It’s preparation for outsourcing teaching.
I came across this article called Colleges Paying the Price for Expensive Facilities. It has some nice quotes but this one from Jeffrey Selingo the author of College (Un)bound is really interesting.
“Well, they … [improved facilities] in the last decade when enrollment was going up, when money was free-flowing, you know. Most parents were using their homes as ATMs to pay for college, because of the housing market. And now suddenly those bills are coming due, and the problem is that the students are either not there or they’re unwilling to pay the money to fund those things.”
As I have said repeatedly, each college class of freshmen has to make a choice to attend school. A drop of only 20% will blow a big hole in a lot of college budgets. Beware.