• Sharebar

While it has been widely known that the student loan debt is affecting graduates, the effects that it has on universities is starting be get attention as well. According to a study by Richard Kneedler many colleges have more debt than cash, with one even having a balance of negative $400M. The universities are insolvent and over time will have to close their doors.

"Inadequate-capital institutions are less prepared to absorb potential revenue losses from drops in enrollment, alumni giving or investment income. They are less able to meet increased demands for financial aid for students or higher interest payments on variable rate debt. From whatever direction trouble arrives, these colleges may lack resources to weather the crisis, and their difficulties will tend to compound faster than will those of their better-off peers because they have less cash to spend, fewer assets to sell, and less budget "fat" to trim.

It was found that colleges that have financial issues attract and admit financially at risk students. More than half of these colleges have 25% of the student body that is eligible for financial aid under Title IV of the Higher Education Act. Many universities will have issues providing even partial financial aid to students that require it and will lead to a decrease in incoming class sizes.

When these institutions are no longer able to stay open should they just be closed down? Is it more important for Congress to take action to help the universities or the students that are struggling?

http://finance.yahoo.com/blogs/daily-ticker/studen...

Comments (7)

  • AndyLouis's picture

    ha had a fun time looking for images for this post, whatever you do don't search on google images for "university bubble" NSFW. you have been warned...

  • manbearpig's picture

    holy terrible grammar batman!

    -MBP

  • Cmoss's picture

    I think you will see the classes seperate as fewer and fewer people can afford to go to college. Those that are on the fence (not seeing a cost benefit of taking on the ever increasing cost of secondary education) may ultimately forego their education.

  • trailmix8's picture

    i dont get why the universities are going bankrupt? dont they receive the money that the students borrow? what is the problem that is causing them to be low on cash?

  • In reply to AndyLouis
    BTbanker's picture

    AndyLouis wrote:
    ha had a fun time looking for images for this post, whatever you do don't search on google images for "university bubble" NSFW. you have been warned...

    My curiosity overpowered me. Are you referring to the students with caps over their shlongs?

  • In reply to trailmix8
    BTbanker's picture

    To unlock this content for free, please login / register below.

    Sign In with Facebook Sign In with Google

    Connecting helps us build a vibrant community. We'll never share your info without your permission. Sign up with email or if you are already a member, login here Bonus: Also get 6 free financial modeling lessons for free ($200+ value) when you register!