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Model Predicts Up to a Third of Private Four-Year Colleges Are Now at High Risk Financially

Model Predicts Up to a Third of Private Four-Year Colleges Are Now at High Risk Financially

“model predicts that effects from the pandemic would reduce the life span of the average college by 22 years”

Many schools in the United States were already at risk, but the Coronavirus crisis has thrown everything into high gear.

WBUR reports:

One Third Of Private 4-Year Colleges Are At High Risk Financially, Model Predicts

A model developed by Boston startup Edmit finds that more than a third of private four-year colleges in the United States are at a high risk financially.

“Many colleges will be able to help students find ways to survive this crisis, but others will need to make the incredibly difficult decision to seek a merger or close in the next few years,” co-founder Nick Ducoff said.

The survey analyzed 17 years of revenue from tuition, return on investments, expenses and the size of tuition discounts that 937 colleges offer students. Of those, 345 are at high risk, meaning that if present financial trends continue they would be able to survive six years, at most.

Colleges were already facing headwinds. The college-age population is declining nationwide, and even more so in the Northeast. The pandemic has exacerbated those challenges. The model predicts that effects from the pandemic would reduce the life span of the average college by 22 years.

The colleges in the Edmit model participate in the federal student loan program and are well attended. There are more than 1,800 private four-year colleges in the U.S., but these are the ones for which there were at least 17 years of publicly available data.

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Comments

Well, we all should know about models by now, shouldn’t we? They’re worthless.

Still, I guess this goes into the “good news” column. It may not happen, but we can always hope.

Leaving the US with a mere 1,200+ of them. Whatever shall we do?

If their model predicts a third, I bet it will be more because of effects they did not include. For example, if good numbers start failing, that will shift the applicant pool more toward public colleges and very stable private ones – causing even more to fail. That is because no family will want to pay a ton for a school that might close while their child is there or soon thereafter, devaluing the degree.

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