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‘bifurcation of student demand favoring the highest quality and most affordable’ colleges

by Grace

Moody’s Investor Services gave favorable ratings to colleges and universities that offer the highest quality and most affordable higher education options, noting the increasingly strong consumer interest in these types of schools.  Moody’s sees a bifurcation of demand, with declining interest in expensive, mediocre schools.

Lower-tier schools charging $50,000 or more annually are beginning to look like dinosaurs, soon to be extinct and possibly replaced by less expensive online alternatives.

Moody’s Investors Service, in a report earlier this year, said it had a favorable outlook for the nation’s most elite private colleges and large state institutions, those with the “strongest market positions” that had multiple ways to generate revenue. Ohio State, for instance, received a stable outlook from Moody’s last fall, though the report cautioned about the school’s debt and reliance on its medical center for revenue.

But Moody’s issued a negative outlook for a majority of colleges and universities heavily dependent on tuition and state revenue.

“Tuition levels are at a tipping point,” Moody’s wrote, adding later, “We anticipate an ongoing bifurcation of student demand favoring the highest quality and most affordable higher education options.”…

“We know the model is not sustainable,” said Lawrence T. Lesick, vice president for enrollment management at Ohio Northern University. “Schools are going to have to show the value proposition. Those that don’t aren’t going to be around.”

Posted on May 22, 2012 at 5:28 am in higher education bubble, rising costs of college   |  RSS feed

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4 Comments to “‘bifurcation of student demand favoring the highest quality and most affordable’ colleges”

    
  1. BKM
    May 22, 2012 at 6:04 am

    Yep, students are bifurcating into the elite,who go the the quality schools, and everyone else who must get on a waiting list for a community college. The problem is, the community college model always depended on government support (usually county level) to stay affordable, but that support is drying up, so the CC’s no longer can meet demand. Our babysitter had to wait a semester before she could start at Bronx CC. I know someone who teaches there, who tells me they are slammed.

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  2. Grace
    May 22, 2012 at 12:48 pm

    Hmm, I wonder if most other cc’s are similarly overburdened. I don’t think Westchester CC has the problem of students having to get on a wait list before they can enroll.

    Assuming they continue to be affordable, CCs are actually in the same group as expensive elite schools as far as demand goes. The other group, with an outlook is for decreasing demand, is composed of expensive lower-tier schools. This should make a parent think twice about investing $250,000 in one of those for their kid.

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  3. Grace
    May 22, 2012 at 1:00 pm

    Just added this to the post:

    “We know the model is not sustainable,” said Lawrence T. Lesick, vice president for enrollment management at Ohio Northern University. “Schools are going to have to show the value proposition. Those that don’t aren’t going to be around.”

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  4. Amy P
    May 22, 2012 at 9:41 pm

    “Hmm, I wonder if most other cc’s are similarly overburdened”

    Well, they’re selling education at below cost, so they’re always going to have problems with meeting demand, especially during a recession when there’s a lot of retraining. It’s almost like standing on a corner handing out free $20 bills.

    “If that dries up, either their costs will go up and they will cease to be attractive. Or, they will end up rationing access. That seems to be the course they are taking now.”

    I’ve heard that what’s happening now is that people get turned away from the CCs and then sign up for much more expensive for-profit programs. For certain fields (for instance nursing), the training is very expensive for the CC and the eventual pay is high compared to the cost of CC training. I think for nursing in particular, the CCs should increase the cost of the courses to fix the bottleneck. You could raise the prices at the CCs quite a bit and still be very competitive with the for-profits.

    In general, I think CCs should be able to charge more for courses that are in high demand. It looks “fair” to make everybody wait, but really, it’s not at all fair to a 50-year-old unemployed person. That person has very limited time available to retrain and get themselves employed again.

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