August 2, 2021

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The $670 Billion College-Industrial Complex Is Under Threat From Online School

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The pandemic, and our reemergence from it, are reshaping the economy, government and business in lasting ways. Read more analysis of how Covid has changed the world forever from the Journal’s Heard on the Street team.

College Inc. is facing a reckoning.

American colleges and universities recorded their largest drop in cash inflows in decades this past academic year, thanks to a big drop in enrollment and a lack of room-and-board revenue from the students who did enroll but took their courses online.

But that was just the start. Now that a generation of would-be applicants has grown used to online learning, the business of higher education will likely never be the same again.

The affected schools are mostly not-for-profit, but they represent a huge enterprise with $670 billion in collective revenue, more than $300 billion in debt and about 3 million employees. During the height of the outbreak, between February 2020 and February 2021, they laid off about 13% of their workforces. And researchers at The Federal Reserve Bank of Philadelphia estimate that higher-education institutions will lose revenue of between $70 billion and $115 billion over the next five years as a result of the pandemic.