About four years ago, the Association has discussed the future of student loans in the US.  Our assessment based on simple hypothesis in that future resources may not always increase parallel with time (Adam Smith, Malthus).  Uncle Sam may not have the resources to keep up with increasing demand for student loans.  However, some of these loans can be minimized, if US colleges are managed professionally, effectively efficiently and guidance by data-driven strategic information.  Our analytical analyses have shown that demand for student loans is affected by the following factors (please click here).   Today, we learned how the new administration will cut some of these loans in their budget plan.  If the law makers pass it, then demand for higher education services will decrease, at least in economic theory as shown below.  We have mentioned that such a change will have more negative effects on non-state owned higher ed institutions.  It could well be the final blow to the for-profit universities and colleges as well.  In particular, small Liberal Arts colleges or for those private institutions where their operating cost exceeds revenue.

The dire picture of private higher ed organizations in the US will even more gloomy due to the market forces.  When federal funding got chopped, less demand for higher ed will occur.  Tuition-dependent institutions such as non-state owned higher learning institutions will try to increase student enrollment to boost their tuition revenue by reducing the price.  This policy will be followed by others, for sure.  As results, tuition or price war.  The bad news is that, even after the tuition got chopped, demand may either slightly increase, constant or possibly decrease–depending on the elasticity of demand facing each institution.  The end results, as has been predicted by AAEA analytical model are that college closures and mergers will increase which are happening, right at this moment.  Limited resources, but need help?:  Click here.