Understanding the Economics of Education

Nearly 200 private colleges borrowed from their own restricted endowments last year. That number was 131 just four years ago. The Wall Street Journal reported this week on a growing pattern: financially stressed colleges are raiding restricted endowment funds to stay open. Some are spending those funds outright. Others are borrowing against them, and in most of those cases, there is almost no reasonable scenario where the college can repay those loans. Ohio's attorney general sued 14 Notre Dame College trustees and officers for allegedly improperly using more than $2 million of restricted funds. That's one state, one college, one lawsuit. The actual scope of this problem is much wider. Matthew D. Hendricks and I talk about this regularly on the weekly College Financial Health Show on the College Viability YouTube channel. We keep seeing the same pattern in the audited financials: colleges that can't sustain operations on tuition revenue alone, turning to their endowments like they are big-dollar piggybanks. And it doesn't stop there. The large tuition discounts these colleges offer, what they call unfunded scholarships, are yet another desperate attempt to fill seats and stay open. Students attending these financially stressed colleges run an increased risk of a lower quality college experience. Here is what families need to hear. Before you look at campus tours, dorm rooms, or Division III athletics, your first checklist item should be financial health and viability. Can this college stay open for the four years it takes to earn your degree? There are hundreds of public and private colleges with strong operations, strong finances, and strong graduation rates. Put those at the top of your list. They are much more likely to be around in four years than colleges raiding their restricted endowments to survive another semester. The College Viability Inspection Reports at MyCollegeViability.com are free. Use them.

Big shifts are happening in Career & Technical Education. The national framework is moving from 16 Career Clusters® to 14 Career Clusters® — a streamlined model designed to better reflect today’s workforce and tomorrow’s careers. For years, the 16-cluster model (developed by Advance CTE) has guided CTE programming across states, including here in West Virginia. But industries evolve. Technology reshapes jobs. Career pathways blur. And our frameworks must evolve too. So what changed? The updated 14-cluster framework: ✔️ Reduces redundancy ✔️ Better aligns with high-growth, high-demand industries ✔️ Integrates emerging fields (AI, cybersecurity, advanced manufacturing, sustainability) ✔️ Strengthens connections between academic standards and real workforce skills ✔️ Makes pathways clearer for students and educators This isn’t just a numerical adjustment. It’s a recognition that: • Energy and environmental systems are transforming • Digital technologies cut across every industry • Health sciences and human services increasingly overlap • Business, entrepreneurship, and innovation are embedded everywhere For educators, this means: – Revisiting course alignment – Reviewing pathway maps – Updating advisory councils – Rethinking how we communicate options to students and families For students, it means: Clearer pathways. Stronger alignment to real careers. More flexibility to move between related industries. For states and districts, it’s an opportunity to reexamine how we design programs — not just to “fit the cluster,” but to truly prepare learners for the modern workforce. As someone who works at the intersection of STEM, CTE, and place-based learning, I see this as an invitation. An invitation to: • Integrate industry context more intentionally • Build stronger employer partnerships • Design learning experiences that reflect the actual economy our students are entering Frameworks matter. But how we bring them to life in classrooms — that matters even more. What are your thoughts on the move from 16 to 14 clusters? How is your state responding? #CTE #CareerClusters #WorkforceDevelopment #STEM #EducationLeadership #ACTE #WVACTE

The classroom was silent. 30 students, heads down, writing answers they memorized late last night. I was one of them many years ago, and many of our kids remain today such students. Education systems are mostly built for a world that no longer exists. A world where intelligence was personal, not widely accessible. We continue to assess students fine-tuning an industrial-age model. Prioritizing recall over reasoning, structure over adaptability, compliance over curiosity. In an AI-powered world, following instructions and repeating facts are no longer competitive advantages. Some educational systems are taking bold action: -         Finland has replaced subject silos with environments where students explore complex, real-world, topics across multiple disciplinary lenses -         Singapore aims to evolve its national curriculum beyond traditional academic knowledge by embedding 21st Century Competencies through its Social-Emotional Competencies framework and the EdTech Masterplan 2030 initiatives -         Khan Lab School lets students progress based on true mastery, not arbitrary term limits These initiatives and others will lead kids to: • be able to think critically and ethically • get comfortable with ambiguity • develop skills in collaborating with intelligent systems • build confidence in applying knowledge in unstructured, real-world scenarios We do not need another curriculum update. We need a fundamental rethinking of what education is for. AI is currently rewriting the rules of work, creativity, and leadership. It is time our schools started reflecting on and preparing for that new reality. To education leaders, policymakers, and innovators: What bold moves are you making to prepare students for a world shaped by intelligent machines?

I am bewildered that this is not on the front page of every media outlet. Why would Australia turn away from a $22 Bill oppportunity? Two new reports from Learning Creates Australia reveal just how much potential our current education system leaves on the table by focusing too narrowly on traditional academic achievement: 💡 $22Bill in future value is within reach if we commit to improving social & emotional skills in every Australian child. That’s the net present value added to our national economy through better earnings, productivity & workforce participation over coming decades. 💡For every $1 invested in building these capabilities, Australia could see a return of $4. 💡Beyond the numbers lies a compelling human story: tackling disengagement, boosting wellbeing & genuinely preparing all young people for a thriving, adaptable future. Report 1: The Economics of More Capable Young People This first report exposes the myth that “soft skills” are a luxury. In reality: - Social and emotional skills such as emotional regulation, resilience, teamwork & collaboration are increasingly rewarded in the modern economy. - Meta-analyses of school-based social & emotional learning (SEL) programs show significant and lasting gains: - Improved attention, behaviour, academic outcomes. - Boosted adult earnings, higher status jobs & better health in later life. - Priority equity groups,students from disadvantaged backgrounds,stand to benefit most from investments in social & emotional learning. Report 2: The Economics of Improving Transitions Shifting how we recognise learning, beyond just ATAR and test scores can deliver: - Up to $27,200 extra/year for individual young people, especially those facing the greatest barriers. - System-wide benefits: $2.1 to $5Bill higher GDP annually thanks to better job matches, faster transitions from education to work & a more skilled workforce. - Real world stories show broader recognition drives school engagement, reduces suspensions, and increases students’ optimism & prospects. 🔥 TAKE ACTION 🔥 ✅️ Integrate, don’t isolate. Academic skills & broader capabilities must be developed together. Australia’s education debates need to move past either/or thinking. ✅️ Prioritise equity. The most transformative impact is seen for students who start with the least advantage. Systemic recognition of diverse skills can level the playing field. ✅️ Invest in schools & teachers.Strong implementation through explicit SEL teaching, whole school strategies & professional learning is critical for impact. ✅️ Redefine success. Universities & employers are already shifting what they value. Education policy must catch up, not just for economic reasons but for national wellbeing & cohesion. By recognising & building young people's academic, social & emotional capabilities, Australia can unlock transformative gains for individuals, communities & the economy. The $22 billion opportunity is real, and so is the urgency.

The African proverb, “When the music changes, so does the dance,” is highly relevant to this situation, emphasizing the need for adaptability. In a rapidly evolving world, the ability to adjust is crucial, especially in management education, where traditional methods quickly become obsolete. Developing ‘adaptive capabilities’ is essential for staying relevant and thriving amidst constant change. As Charles Darwin famously noted, “It is not the strongest or the most intelligent who will survive, but those who can best manage change.” Leading business schools exemplify this adaptability by rapidly incorporating contemporary subjects like artificial intelligence, sustainability, and ethical leadership into their curricula. These advancements not only align with global trends but also cater to the specific needs of local ecosystems. A striking example of adaptive agility was seen during the recent pandemic, as top-tier business schools transitioned seamlessly to hybrid learning models. These institutions creatively combined virtual platforms with experiential learning tools, ensuring academic continuity without compromising quality. The crisis stimulated educators to adopt innovative approaches such as virtual simulations, flipped classrooms, and AI-driven learning analytics, effectively preparing students to tackle challenges specific to India’s rural markets, SMEs, and urban industries. Real-time learning initiatives, like Industry-Academia Labs pioneered by institutions, emphasize the critical importance of experiential education. These programs bridge the gap between theoretical knowledge and its practical application in dynamic business contexts. Recognizing the need to refine skills, many institutions have invested heavily in digital infrastructure, cutting-edge pedagogical tools such as case-based learning, design thinking labs, and advanced simulation exercises to equip students with competencies demanded by Industry 4.0. Government policies like NEP-2020 emphasize holistic, interdisciplinary, and skill-based education, fostering lifelong learning. This adaptability parallels the resilience of organizations like Reliance Industries, Mahindra & Mahindra, and Amazon have successfully diversified into new domains, demonstrating the resilience captured by the idiom, “The bamboo bends but does not break.” Flexibility and innovation remain essential for long-term success. Management education must prepare students with adaptive capabilities to address both foreseeable and unpredictable challenges. By nurturing agility, innovation, and resilience, institutions equip future leaders to thrive in uncertainty and master the shifting dynamics of a globalized world. As the African proverb aptly notes, “When the music changes, so does the dance,” emphasizing that adaptability is not just vital for survival but is the cornerstone of sustained growth and leadership in the 21st century.

Many colleges are in trouble—and it isn’t just about declining enrollment. It’s when demographic pressure hits institutions that weren’t prepared for it. In an Education Next article I co-authored with Steven Shulman, we analyze a simple cash-flow model to test the financial staying power of 44 small, private, tuition-dependent midsize colleges in New England. Here’s what we found: ▪️15 of those 44 schools are already facing serious liquidity risks — even without any enrollment decline.  ▪️Some are already drawing down ~12.7% of their quasi-endowments annually just to stay open—more than double what is considered sustainable.  ▪️If enrollment falls even modestly—say 1.25–2.5% per year—many more institutions would exhaust their cash within 5–10 years without dramatic action. The bottom line: For many midsize colleges, status quo is no longer an option. Boards and leaders need to assess and plan for honest downside scenarios—not hope for a rebound that might never come.

I’d put this article squarely in the “must-read” category for every higher ed leader who cares about institutional health and longevity. The article, “A Looming Crisis: New Analysis Shows Dozens of Well-Known Colleges Are Near Financial Trouble,” does something our industry desperately needs: it shifts the conversation from vague worries about “enrollment declines” to a clear-eyed, data-driven look at cash, liquidity, and staying power. A few reasons I think this is essential reading: 1️⃣ It reframes the problem. Instead of focusing on net asset value or headline endowment numbers, the authors zero in on cash flows, liquid assets, and what they call “Baseline” and “Maximum Staying Power.” In other words, how long can a college actually keep the lights on without extraordinary measures? 2️⃣ It challenges the assumption that only “small, struggling schools” are at risk. The analysis looks at 44 private, tuition-dependent New England institutions with 1,000–8,000 students - many of them well-known brands. A meaningful share are already facing serious liquidity issues, and a modest 10–15% enrollment decline pushes many more into truly dangerous territory. 3️⃣ It exposes how current oversight metrics miss the story. The Birmingham-Southern and Brandeis examples are especially sobering. Both looked “fine” on traditional measures or were publicly described as “solid,” even as their underlying cash positions were eroding in ways that, in hindsight, look entirely predictable. 4️⃣ It highlights that “growth” is not a strategy - it’s an assumption. The piece calls out how many institutions have growth baked into their strategic plans without seriously modeling the downside risk. In an environment of flat or declining demand, hoping to be the winner in a zero-sum market is not a risk management plan. 5️⃣ It connects finance to strategic focus. The Jobs To Be Done lens is a critical addition here. The argument that “Comprehensive U” is no longer financially sustainable - because complexity drives overhead, and overhead drives cost - should hit home for any institution trying to be everything to everyone. 6️⃣ It treats mergers and partnerships as tools of stewardship, not failure. One of the most important reframes is around mergers: not as a last-ditch shame move, but as a proactive, fiduciary response to reality while an institution still has leverage, value, and options. Hats off to Michael Horn and Steve Shulman for the depth of the research and it’s analysis, the accessibility of the framework, and the way they’re reframing this conversation away from wishful thinking and toward honest, math-based planning. If you’re a president, CFO, trustee, or cabinet member, this is one of those pieces you print, mark up, and talk about at your next leadership retreat. https://lnkd.in/gyFCbCth

For months, I've mined longitudinal data to assess the financial health of US higher ed, focusing intensively on public and private not-for-profit, four-year institutions. Institutions are assessed with several dozen measures of financial and operational performance, benchmarked against peers, and evaluated against predictive patterns that the analytical engine finds in the data, learns from the next report and from trend data that precede an institution's experience of financial duress. Results continue to evolve as new institutions (e.g., community colleges) and measures are added into the mix. Still, it is time to start sharing – a process I am pleased to begin today with an overview of the industry’s risk profile as seen in the last available IPEDS data for a subset of public and private four-year institutions. The overview - shows how risk is distributed across industry segments (the percent of institutions within that segment that are considered at low, moderate, -explains distinctive risk patterns of individual segments, and - identifies patterns to watch for. I want to be careful and not overplay my hand. Measuring risk is an imprecise exercise, the results of which reflect the underlying methodology, and the assumptions used in its construction (and yes, a methodological treatise is forthcoming). The point of it - at least in this exercise - is to reveal how risk is distributed across institutions, how it varies from one institution (or group of institutions) to the next, and, going deeper, to characterize its architectures and locate predictors. This research is more than a labor of love and academic interest. It is tightly aligned with – indeed grows out of – my own experience, sadly one that seems to be repeated too often, of institutions waiting to address their financial challenges until they become acute. At that point, the institution has vastly less room for maneuver. It is often forced to take drastic actions that negatively impact students, faculty, staff, and communities that often depend so heavily on their local university or college. The work is borne out of a passion to find predictive measures or patterns that enable higher education leaders – boards, executive officers, senate faculty leadership, civic leaders, and policymakers – to intervene and course correct upstream, frankly, before it is too late. Finally, the data do not capture risks resulting from recent changes in the federal compact with US higher education. Those risks are real. For research and doctoral segments that have shown so much resiliency till now, they may be profound. They will also land on an industry that is, as the data reveal, already significantly challenged.

The Current Model of Education Is Broken — Here's What Will Replace It For more than a century, the foundation of our schools has been the same: age-based grades, rigid schedules, and a curriculum designed for the industrial era. That model was built for a time when information was scarce, jobs were predictable, and the primary goal was to produce a standardized workforce. In 2025, none of those conditions exist — yet our classrooms remain locked in a 19th-century blueprint. The result? Stressed teachers, disengaged students, widening equity gaps, and graduates entering a world for which they are fundamentally unprepared. What Comes Next The education system that will replace this outdated model won't be a simple reform — it will be a transformation built around personalization, relevance, and human connection. 1. Learning will be personalized. AI and adaptive diagnostics will create a learning map for every student, adjusting pace and content to their strengths and needs. Seat time will give way to mastery — students advance when they've proven their understanding, not when the calendar says so. 2. Schools will connect directly to the real world. Projects will replace worksheets. Community challenges, industry partnerships, and paid internships will become core components of the curriculum, allowing students to solve real-world problems while building marketable skills. 3. Teachers will become mentors and coaches. Rather than delivering lectures, educators will guide, support, and inspire their students. Small learning cohorts will make space for relationships, emotional well-being, and individual attention. 4. Learning spaces will be hybrid and flexible. Neighborhood learning hubs, virtual collaboration tools, and community spaces will replace the one-size-fits-all campus. The boundaries between school, work, and life will blur into a continuous learning ecosystem. 5. Credentials will be competency-based. Instead of a single diploma, students will graduate with a portfolio of verifiable micro-credentials — tangible evidence of their skills, recognized by both employers and higher education institutions. Why It Will Work This next model isn't hypothetical — pieces of it already exist in forward-thinking districts, innovative charters, and global pilot programs. The difference now is that technology, workforce demand, and public dissatisfaction with the status quo are converging to make change inevitable. Let's build an education system that treats students as individuals, ties learning to purpose, and values relationships as much as results. We will finally replace an industrial relic with a living, human-centered engine for opportunity.

If your child scored straight As tomorrow … … would you let them choose an applied, polytechnic-style degree over a traditional university path? In Singapore, most parents wouldn’t. But China just made that choice strategic. Since 2019, China expanded vocational undergraduate colleges from 15 → 100+. First cohort employment rate: 87.1% — higher than traditional universities. Not because prestige stopped mattering. Because jobs started mattering more. Zoom in on Singapore. We send 40%+ of each cohort into our autonomous universities: * NUS * NTU * SMU * SUSS * SUTD * SIT Polytechnics and ITE are strong. But socially, the hierarchy is clear: University > Polytechnic > ITE And that hierarchy shapes talent flow → industrial capacity → productivity. The uncomfortable truth: - Unemployment is low - Underemployment is invisible Many graduates enter roles that: - Don’t require degree-level abstraction - Offer weak wage growth - Cluster in low-productivity services It doesn’t look like a crisis. It looks like slow wage growth. And in a high-cost economy, that’s dangerous. Even 5–10% of university places misaligned with long-term industrial needs = * Millions in public subsidies wasted * Lost productivity per cohort Over time, that drags national growth. China isn’t downgrading universities. It’s re-tiering its system: 1️⃣ Scaling applied bachelor’s degrees 2️⃣ Embedding colleges into industry ecosystems 3️⃣ Aligning programs with industrial strategy Signal: Education is now a lever of economic resilience. What Singapore should do in 24 months 1️⃣ Fund outcomes, not optics Tie university funding to 3–5 year wage growth + deep industry attachment, not just first-job placement. 2️⃣ Elevate applied degrees in strategic sectors Robotics, green engineering, systems integration. Admit top scorers. Signal parity. Ensure employer recognition + civil service pipelines. 3️⃣ Embed industry in learning Beyond internships: co-designed curriculum, shared labs, industry faculty, guaranteed interview pipelines. Small economies cannot out-scale China. But we can out-align. The question isn’t whether vocational education is “inferior”. It’s whether prestige-driven allocation quietly weakens our competitiveness. If your child qualifies for both paths — what would you choose? That’s the conversation Singapore urgently needs to have.