An NYU professor of business surmises that because of the effects of the coronavirus, anywhere from one-quarter to almost one-half of universities in the nation may go out of business in the next five to ten years. NYU professor Scott Galloway also admitted that foreign students paying full tuition are the “cash cow” for universities and “might decide not to show up.” He commented, “What department stores were to retail, tier-two higher tuition universities are about to become to education and that is they are soon going to become the walking dead.”
Speaking with Hari Sreenivasanon on PBS’ “Amanpour and Co.,” Galloway spoke of the impact of the coronavirus on colleges and universities, forcing them to hold their classes over the internet, and how that may catalyze flight from the universities and the universities’ subsequent downfall. Galloway stated, “Students I think across America along with their families listening in on these Zoom classes are all beginning to wonder what kind of value, or lack thereof, they’re getting for their tuition dollars … There’s generally a recognition or disappointment across America, and I would argue that it’s not that they’re disappointed in the Zoom classes, it’s more the recognition that Zoom has uncovered how disappointing college education is. I think there’s a lot of households saying, ‘This is what we’re paying for?’”
Sreenivasan asked, “What happens when some of these students decide, ‘You know what? This doesn’t really make sense for me to pay this much; I think I’m going to drop out?’ And let’s say they decrease revenues, or they’re decreasing revenues from the dorm fees they’re not getting or the sports teams that might not be having nice lucrative contracts?”
Galloway replied, “Yeah, or going further than that, one of the secrets of higher education is our cash cow is foreign students, and you can see that maybe foreign students decide, because they pay full tuition, they might decide not to show up … It’s a nuanced argument: the elite, truly high-end universities are gonna be fine; the head of Harvard admissions has stated publicly that he could double the size of his freshman class and not sacrifice any quality. So it’s a great time to be on the waiting list of a top-tier university ‘cause you’re probably gonna get a call.”
Speaking of the fact that many students might take a “gap year,” Galloway posited, “There’s gonna be a waterfall; there’s gonna be demand destruction because more people are gonna take gap years, and you’re gonna see increased pressure to lower costs. So just as equity analysts are looking at which companies have cash on balance to survive this shock, you’re gonna see an incredible destruction among companies that have the following factors: a tier-two brand; expensive tuition, and low endowments. There are 4,500 universities in the U.S., you could see a thousand to two thousand go out of business in the next five to ten years. What department stores were to retail, tier-two higher tuition universities are about to become to education and that is they are soon going to become the walking dead.”
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