The College Apocalypse is finally becoming visible...

This report just dropped, in mid March 2024.  Is a college degree really worth the time, work, and cost in today's world?  Obviously, for some careers, you absolutely need a degree.  But the number of college grads in the workforce has exploded, and the financial cost of college degrees is higher than ever.  There's a drop in enrollment in many colleges now, even at large universities.  The whole idea of college is in for some major changes in the next several years.  I've been saying this for years, and this issue is now... finally... just starting to make it into the mainstream news.

Let me begin by saying that I have never taken a single college course.  I have nothing against college, I just didn't have the money to go to college when I graduated high school, so I took a year off, and then another year.  I didn't have a real strong drive for any career that needed a degree when I was 18.  My high school friends, who were not BMX guys, were all outdoorsy guys.  We all talked about becoming wildlife biologists, because that seemed to be the one career where spending a lot of time out in the mountains seemed possible.  But I didn't take that path.  BMX freestyle riding soon led me down a different road, and college never happened for me.  It just wasn't my path, I don't hate colleges in general.  

That said, back in 2017, I had lunch with a friend in North Carolina, and his friend, who was an American living in Denmark.  We talked about all kinds of things, many comparing life in the U.S. to the culture of Denmark and Scandinavia.  The subject of college, and student debt came up, and we all wondered why student debt had exploded to the ludicrous amount (then) of $1.3 trillion dollars or so.  

When I got back home after that lunch, I was curious, so I looked it up.  It took me about 10 or 15 minutes of Google searches to find the answer.  From about 2009 on, student loans had been bought and packaged into huge bundles, just like high quality and subprime mortgages had before the Great Recession.  It turns out that from 2009 to about 2020 , U.S. public student loans were bundled into SLABS, which stands for Student Loan Asset Backed Securities.  

They are virtually identical to the Mortgage Backed Securities (MBS), that helped spark the 2008 financial crisis.  Here's the classic Margot Robbie bathtub scene from The Big Short movie, explaining Mortgage Backed Securities.  Here's a Linked In article explaining and comparing SLABS and CMBS (Commercial Mortgage Backed Securities).  When I looked this up, and discovered that SLABS existed, I had already seen the movie, The Big Short, about the guys who bet against the U.S. housing market in 2008-2009.  So I knew what happened when enough people didn't pay their loans, which the MBS or SLABS are made out of.  Here's the Jenga Scene from The Big Short, explaining these mortgage bonds, and this whole idea, with the visual metaphor of a tower of Jenga blocks.  

After 15 minutes of Google searching in 2017, and finding out about SLABS, I did some very simple thinking.  At the time, there were around $1.3 trillion in public student loan debt.  After the collapse of subprime mortgages in 2008, regulators came down on Wall Street for the Mortgage Backed Securities made out of subprime loans (loans where people didn't really qualify).  So Wall street financiers just took the same idea, and did it with student loans.  They made tons of money on fees for making the SLABS, and selling the various levels of investments created from the SLABS.  They needed lots of new student loans, so the loan brokers had major motivation to make lots of student loans, regardless of whether the students could really afford to pay back the loans or not.  

After all, people are not allowed to get out of their student loans, even if they go bankrupt.  So the amount of student loans exploded from 2009 until 2020 or 2021.  Wall Street also bundled, made bonds, and sold investments, made out of commercial mortgages, like those on office buildings (Commercial Mortgage Backed Securities-CMBS), business loans (Collateralized Loan Obligations-CLO's), and even auto loans and credit card debt (Asset Backed Securities).  

All of those debt bubbles kept growing larger and larger from 2009 until 2020, until the pandemic hit.  Guess what's happening right now?  Thousands of people and businesses are having trouble paying many of the underlying loans that the SLABS, CMBS, CLO's, and ABS are made from.  That means all those investments are falling in value.  Some investors, like major banks, hedge funds, pension funds, and other institutional investors, own those investments that have dropped in value.  The rise in interest rates over the last two years made this even worse.  

Go back and watch that Jenga Scene from The Big Short again.  That is what is happening to all of these investments right now, in 2024.  Commercial Real Estate (CRE) is the biggest worry right now for regional banks, but all of these debt bubbles could crash.  That's where we are right now.  But now there's another $400 billion in student loan debt, it's over $1.7 trillion now, far more than the $1.3 trillion in subprime loans that collapsed the economy back in 2008.  The other debt bubbles add up to hundreds of billions of more debt.

Way back in 2017, I started thinking about this, and concluded that there would be a huge crash in the student loan SLABS system at some point.  The easy financing provided by those SLABS led to much more money going to colleges and universities, which is part of the reason tuition could increase so much from 2009-2020.  My thinking, back in 2017, was that when the SLABS market crashes, it would cut the number of people who could get student loans, and therefore, there would be far fewer people who could afford to go to college.  Here's a blog post, from November 2017 where I mentioned the student debt issue, commenting on a Rolling Stone article about the huge debt burden student loan debt poses.

I began to see a College Apocalypse coming in the 2020's because of the inevitable (as I saw it), collapse of the student loan financing system.  When financing collapsed, far fewer people would be able to go to college, enrollment would drop, and colleges and universities would begin to struggle financially.  My belief in a coming College Apocalypse was tied entirely to the economics of student loans and the SLABS system, regardless of other factors.    

Later on, I dug into this idea more, and found that many small colleges had been closing down since about 2000.  Around 100 small colleges have already closed down since then, or merged with other schools.  Then I learned that there's also a demographic issue with young people.  Fewer families had kids after the Great Recession of 2007-2009.  That turned into a drop in the population, and that age group with fewer people will start hitting college age in about 2025.  So that's another reason for a drop in enrollment, one that colleges themselves have had an eye on for years now.  Oddly, no college seems to have figured out that the SLABS system will eventually crash, as well.  

Here's the real kicker, it looks like we are in, or headed into, a serious recession right now (March 2024, as I write this).  A deep recession will amplify the economic effects, and speed up the drop in enrollment, due to financial condition of potential students.  In a weird bit of synchronicity, the breakdown in the SLABS bubble looks like it will happen right before the demographic wave of fewer students happens.  It's like a Perfect Storm of negative events for colleges in the next few years.  

I first described my thoughts on the "College Apocalypse," in depth, in my online book/blog,  Welcome to Dystopia: The Future is Now, chapter 14, written around March or April of 2020.  It's down near the bottom of this post.  

My take is that we will see many more small colleges close or merge over the next 5-10 years.  We will see major colleges begin to struggle financially, and will likely see closures of some of the less popular campuses in the major systems over the next several years.  All in all, I wouldn't be surprised to see 20% to 30% of all college campuses close down. Think about the Retail Apocalypse.  We've had somewhere around 30,000 retail stores close down since about 2015.  But we still have many brick and mortar stores.  The Retail industry had to adapt and re-invent itself, to go forward, and become viable, in the Information Age.  The same kind of dynamic is happening now for colleges and universities.  The entire college and university system has to re-invent itself, to become viable and functional, in the emerging Information Age.  That means a lot of change to come, and less school campuses overall as time goes on.  A driver to much more online courses seems to be a huge part of this transition, which has been happening for some time.   

I've been waiting for the College Apocalypse to start becoming visible for seven years now, and a couple of articles or news clips mentioned it.  But now even Cal State, a major university, is seeing declining enrollment, before the student loans system crashes.  Here are several news stories and videos on this subject, most of them from the last year or so.  

KPIX: California colleges grapple with drop in enrollment - February 2024

Gen Z is souring on college degrees as a path to success - September 2023

CNBC: What more and more colleges are closing down in America - June 2023

Borrowed Future: How student loans are killing the American Dream - March 2023

Forbes: The Future of Colleges and Universities - April 2023

Don't go to college: Watch this instead - November 2023

CNBC: Why college is so expensive in America -  Spring 2019

Closed Colleges- lists and statistics - March 2024

U.S. New & World Reports: The Higher Education Apocalypse - March 2019

There are no paid links in this post.

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The College Apocalypse is FINALLY creeping into mainstream news

CNBC segment on the large number of small colleges closing down, June 20, 2023.  

I came to the conclusion that a "College Apocalypse" was coming in 2017.  After a conversation about student debt with a college educated friend, and his friend who lives much of the time in Denmark, I looked up student loan debt online.  I was just curious why student debt had skyrocketed so much in recent years.  It took about 10 minutes of Google searches to learn about SLABS and how student loan debt had changed since the Great Recession.  The new model just seemed unsustainable to me.  I self-published my ideas on this in the spring of 2020 in the bottom of this chapter of my book/blog about the 2020s,  Welcome to Dystopia: The Future is Now.  

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Back in 2017, when I first got on Google to learn why there was so much student debt (then about $1.3 trillion, now over $1.8 trillion (see here) I knew nothing about the demographic issues or that small colleges had already been closing down at a high rate, for several years, by that time.  I came to the idea of a College Apocalypse just looking at the economics of student debt, the SLABS business model, combined with a little bit of common sense, and just projecting those trends into the future.  It appeared to me that the next recession would cause a major issue for many colleges and universities.  And no, the irony of a lowly, if relatively intelligent, high school grad explaining this idea isn't lost on me.  Like several things I blog about, no one else seemed to be paying attention to this issue, so I dug into it, and wrote about it a little. 

Here's what I see happening in the next 10 to 15 years for colleges and universities.  First of all, do you know what SLABS are?  I believe we will see a major breakdown of the SLABS (Student Loan Asset Backed Securities) market over the next year or two, which is the primary way student debt has been financed, particularly since 2009.  SLABS are a student loan version of the MBS (Mortgage Backed Securities) and CDO (Collateralized Debt Obligation) business model that helped crash the U.S. economy in 2007-2008, leading us into the Great Recession.  

Since 2009, many more student loans have been bundled and resold as derivative investments, as have commercial loans (CLO's), commercial real estate loans (CMBS- crashing as we speak), car loans and credit card debt (ABS- Asset Backed Securities- also crashing now) and some other forms of debt.  This is an unsustainable model, for any kind of debt, and all of these types of financing are now, or at some point will have major repayment issues, in this coming recession.  When enough people or businesses can't pay their loans, then the securities created from all those loans lose value.  When that happens, those securities (MBS, CDO, CLO, CMBS, SLABS, ABS) go down in value.  At some point, the institutions holding those securities (banks, foreign governments, cities, pension plans) have to mark down their value, and take a big loss.  This is part of what happened to Silicon Valley Bank in March.  That's what happened with home mortgages in 2008.  Now it's happening with about every other type of debt, even credit card debt.  

Even if the demographics issue, the fact that a college degree no longer guarantees a high paying job after graduation, pandemic related issues, and the crushing student debt load for 40 million plus Americans didn't exist, the college system would see a massive crash of the current financing system.  It will be harder to finance students going to college at today's higher interest rates.  This crash will lead to many colleges losing revenue, and having to cut back.  In time, some more colleges, and larger ones, will be closing down.  My best guestimate is 20% to 40% of all colleges (over 4,000 exist now) will close in the next 10-20 years. That estimate is based on looking how the Retail Apocalypse has played out so far, over about 20 years now.  This will force a complete re-invention of the American higher education system.  This is what is going to happen over the 10 to 20 years, regardless of any actions taken by the government or college and university leadership in the next few years.  They can help make the process easier, but most likely won't, for a variety or reasons. 

Let me make clear here that I'm not against colleges and universities as institutions.  We need them to teach and train people to work in many different types of careers.  No, I didn't go to college, at all.   I'm completely self-taught since graduating from Boise High School in 1984.  I've never taken a single college course.  That's just the way my young adult years worked out.  

My family always struggled with money, there was no money set aside for me to go to college after graduating high school.  So I "took a year off," 39 years ago (shit I'm old).  The $1,000 that I saved the summer after I graduated high school, working for $2.10 an hour, was needed by my family to move back into our Boise house that Fall.  My mom and sister moved to Virginia, where my dad had taken a high paying, two year job.  The job, several months in, suddenly ended one afternoon, a couple months after my mom and sister moved to Virginia, and bought an apartment full of new furniture.  They needed my savings to catch up on bills and get back to our house in Boise.  And yes, if was cool living alone, as an 18-year-old, in a three bedroom house for 3 or 4 months.  Good thing I wasn't that big of a partier.  

In addition, I didn't really have a strong direction in my life at age 18, except BMX racing and freestyle.  Like several of my friends, becoming a wildlife biologist, kind of sounded like a cool idea, but not that cool.  We were all outdoorsy guys in Boise, and looking for a career where we could be outside as much as possible.  So we all thought about becoming wildlife biologists.  

The way things worked out, I got a job at BMX Action and FREESTYLIN' magazines a month after my 20th birthday, replacing a guy with an English degree.  With a week and a half of training by him, and the MLA Handbook, I was suddenly proofreading two magazines that were leaders in their field.  Yeah, it wasn't Time or National Geographic, but while my former high school classmates were entering their junior year of college, I was actually working in the publishing world.  That job changed the course of my life, and I'm really glad I took the path I did.  

Within a few months, I knew I wanted to run my own business some day, and I didn't need a degree to hire myself.  So the idea college, in my life got paused, and then just drifted away, as I began to work around a bunch of really entrepreneurial people in the BMX and skateboarding industries.  

My younger sister, Cheri, on the other hand, wanted to be a teacher since she was a little kid.  That takes a degree, and she worked her ass off to put herself through college, get her bachelor's degree, and become a teacher.  I'm proud of her for that.  She went on to get her masters degree, and every possible credential, which is great.  Different people have different paths in life. 

I'm not writing this post because I have any beef with colleges in general.  I've come to believe, through my own personal learning and research, that we are in the late stages of what I call The Big Transition.  My Big Picture is that we are about 3/4 of the way through a long transition period between the fading Industrial Age and the emerging Information Age.  This is based on the work of futurists Alvin and Heidi Toffler, and Alvin's 1980 book The Third Wave.  Their theory just made sense to me, but Alvin's last book came out in 2006, and he died in 2016, and his great work has been largely forgotten at this point.  But the long period of change between the Industrial Age and the Information Age, that he first described 43 years ago, has continued to play out.  

I started calling it The Big Transition in my personal writing and blogging 7or 8 years ago, as I was trying to figure out where things were going in the world, due to my own futurist tendencies.  In the mid 2010's, I came to the conclusion that every single business, industry, institution, and person would have to make this transition from and Industrial Age model to an Information Age model.  We've seen this transition happen in telecommunications, computers, music, publishing, TV/movies/video, and in recent years in retail stores.  The College Apocalypse, which is really just beginning, is the old college and university system moving from an Industrial Age based model into an Information Age based model.  That's really what this is all about, and why it was predictable from my Big Picture of where society is going. 

Like for all the other industries and institutions that have largely made the transition, the long process of completely changing how higher education works and operates will be messy, controversial, and catastrophic to those who cling to "the way things have always been done."  The transition was really hard on all the other industries, as well.  We once paid $15 for a ten song record album on "vinyl," now we stream music, and have access to tens of thousands of songs for free or close to free.  But now the live concerts are really expensive.  We once had three channels of pretty bad TV shows to watch.  We can now stream millions of shows and videos on a supercomputer we can carry in our pocket.  We've survived those transitions.  We will survive the College Apocalypse, but there will be a lot of carnage along the way, that's the nature of major transitions.  Well over 100 smaller colleges have already closed down, since about 2005, or been absorbed into larger schools.  Many more will close smaller campuses, or close down completely.  The rest will work out new models that work much better in today's world.  

So how does this play out?  First, let's look at the headwinds for colleges right now.  Well over 40 million Americans have student debt loans that they are supposed to begin paying again in September.  Most of those people will struggle to try and pay those loans.  A huge percentage, probably well over 50%, simply won't be paying their student loans a year from now, as this coming recession sinks in.  

In addition to that, colleges no longer guarantee a high paying job after graduation.  The Starbuck's barista with a master's or PhD is an archetype at this point.  Millions of people don't work in the field of their degree, millions more have gone to college but didn't get a degree.  The massive rise in student debt will scare away more and more prospective students as time goes on, as will the much higher interest rates on that debt.  Add to that the demographics wave, a smaller generation, the later Gen Z kids, which will just mean less possible students starting in 2024-2025.  Then we have a recession beginning, which will further financially stress tens of millions of people living paycheck to paycheck already.  

As the next few years progress, many colleges will struggle with fewer students enrolling, and a tougher economic climate overall.  Colleges have their own debts to pay as well, they aren't immune to interest rates.  We will see more and more signs of colleges struggling.  The top ones should largely be fine, just like the high end malls and luxury retailers.  There's plenty of money at the top, we all know that.  On one hand 2/3 of Americans are living paycheck to paycheck, yet Lamborghini has an 18 month waiting list to buy a new sports super car.  That's our world today.  

All of this is what I can see from outside the college and university system, and doesn't include all the internal issues that everyone inside, from deans to professors to students, are actually talking about, like corporatization of schools, tenure issues, today's polarized politics, and all the rest.  

I think we will see more and more talk about higher education, student debt (the U.S. government's going to eat most of that $1.8 trillion, people can't afford to pay it), and the economic struggles of individual colleges and universities, going forward.  Closures will begin to get more press, but they will be slow the next year or two, and gradually increase in frequency.  This will really make news when a major school, a state school, or a big name school with particularly bad financial issues, closes down.  

What schools are most likely to close?  I don't know.  But I would look closest at the schools in the cities that have dead malls, and where the major department stores have closed down in recent years. That's a good place to begin the search.  There will be schools in major metros that close, too.  But I think a lot of closures will be in the places already struggling financially. 

Think of the Retail Apocalypse, the closing down of over 30,000 retail stores in the last 12-15 years.   From 2010 to 2015, maybe a couple of thousand stores closed nationwide.  Malls began to struggle.  Then the number of stores closing really began to grow.  Around late 2016, the term "Retail Apocalypse" was coined.  By 2020, over 12,000 stores closed in a single year.  I think the College Apocalypse will begin to increase in that kind of way.  The coming recession will really put pressure on the whole higher education system.  If the federal government tries a massive bailout of colleges and universities, all that bailout money would increase inflation in the years afterwards, and they're fighting inflation right now.  The U.S. government is already well over a half a trillion dollars (see here) into the 2023 bank bailout, and banks take precedence over colleges.  

What will the long term effects of the College Apocalypse be?  Only time will tell the full scope of effects.  One big effect I see is where most of the schools that close down are located.  I think we will see a lot of colleges, large and small, close down in the small and mid-sized cities, outside of the major metro areas.  Yes, the 2nd and 3rd tier cities that are already struggling, will most likely see the worst effects of the College Apocalypse.  After the loss of much of the U.S. manufacturing sector 20-40 years ago, many of these mid-sized cities are now "Eds and Meds" cities.  That means the local colleges or university, and the local hospitals, are the biggest employers in town.  In many cities, the major hospital is tied to the local university.  So if the university goes, the hospital may go as well, or at least reduce its size.  In the next 10-15 years, we will see dozens of cities lose their major employer, again.  That will financially decimate a lot of the cities and towns who have struggled since their factories closed down in the 1980's, 1990's or 2000's.  So I expect to see a major loss of population in a few dozen cities and towns in the next ten years or so.  

There it is, the most extensive thoughts I've written on a trend I expected to come, for about five years now.  It's my belief that this trend is just getting going, and will become a major issue nationwide, over the next 3-4 years.  These are my thoughts, my personal opinion, and I've linked supporting data for many of the points I've made, where possible.  

Again, I don't expect colleges and universities to disappear, but to change dramatically in the next 10 to 15 years.  I think by 2035 or so, we will have a much more Information Age friendly, more affordable version, of our higher education.  But the transition to getting there will be a chaotic, messy, and heart-wrenching for of many people involved.  The good thing is that we now have seen many industries go through this Big Transition, and have models for how these periods of transition play out.  

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