Parents worrying about the costs of college are always looking for evidence that the higher-education bubble may finally burst. This Wall Street Journal article highlights trends that provide some hope toward that end. College tuition is still unlikely to drop meaningfully anytime soon, but it appears that the higher-education marketplace is becoming more competitive, and unproductive providers are beginning to suffer:
According to an analysis of 20 years of freshman-enrollment data at 1,040 of the 1,052 schools listed in The Wall Street Journal/Times Higher Education ranking, U.S. not-for-profit colleges and universities are segregating into winners and losers — with winners growing and expanding and losers seeing the first signs of a death spiral.
The Journal ranking, which includes most major public and private colleges with more than 1,000 students, focused on how well a college prepares students for life after graduation. The analysis found that the closer to the bottom of the ranking a school was, the more likely its enrollment was shrinking.
Undoubtedly, some members of Congress and other government officials at the federal and state level will be under pressure to intercede on behalf of colleges that are struggling financially. They should resist. In fact, policymakers and the public should welcome the decline and even elimination of higher-education institutions that aren’t performing. Creative destruction is never pretty — it’s sad to see any business have to scale back or shut its doors — but this is the best way for customers to see an improvement in value.
This is great news to parents and to anyone concerned about how the workforce will fare with our rapidly changing economy. The marketplace has the potential to address these needs — if we let it work.