I think I struck a bit of a nerve when I talked about a trend I’ve covered on U.S. college campuses.
As I noted to my Family Portfolio readers, we’re witnessing one of the most incredible shifts in an industry in just six months.
Not only has the virus led to empty campuses all around the world, but it’s also brought about a reckoning.
Suddenly, students across America – especially in lower-income brackets – are putting off or outright abandoning their college plans.
Freshman enrollment at universities is off by a staggering 16% this year.
But at community colleges – enrollment is off 25%.
I don’t see this coming back in the future. And as I’ll explain to you today, this is an extremely personal issue for me.
Let me outline one of the most important trends of this decade and how you can get out in front of it.
People always ask me how they should start looking for new investment ideas.
The answer is to look around at the things that are critical in your life.
Your refrigerator might have Coca-Cola (NYSE: KO) in it, and your medicine cabinet is likely filled with products from Johnson & Johnson (JNJ) or Colgate Palmolive (CP).
These are all great companies with strong demand and pay great dividends.
For me, however, I’m focusing on big, life-changing trends. They can be a bit harder to identify.
But I still like to start with the people and products around me.
When it comes to college education, I started by tugging on a small thread… and within four months the entire sweater came apart.
I have two sons. One is a senior, and the other is a sophomore. Even though I have the means to send them both to any school that they want to attend, I still had to investigate the product that I might be paying for.
So I started to look into the college education industry the same way I would in healthcare, data storage, and any other industry I might invest in.
What I discovered is an indictment of today’s education system.
Mounting Debt, Lower Quality
Most people are aware that Americans are currently facing $1.6 trillion in student loan debt.
And while politicians have promised to forgive student loan debt, that would simply be a Band-Aid on an ax wound.
Over the last 42 years, the cost of education has increased by 1,412%.
There isn’t an industry on earth where that level of inflation exists. But it happens because the Federal government will allow almost anyone to sign up for loans without any collateral.
There is no audit to determine if you can pay it back.
There is no advising on what degrees will actually lead to jobs that will pay it back.
And there’s effectively no mechanism at all to curtail the runaway rising costs.
This was all happening before the Covid crisis began. But now – more students are waking up to the fact that this debt will chase them for the rest of their lives – especially given that wage growth has stagnated over the last three decades.
A recent report stated that the average student loan recipient can only pay back 3% of their loans EACH year.
Stretch that out – and you’re looking at three decades of loan payment.
The National School Clearinghouse Research Center. says that total enrollment is down 4% this year.
Those numbers of freshman enrollment – down 16% at universities and down 25% at community colleges is stunning.
But wait… there’s more.
It’s not just the students who are facing incredible levels of debt.
It turns out that the universities themselves are facing incredible amounts of debt as well.
Back in 2010, the average total debt liability at public research institutions was $26,615… PER STUDENT.
That figure is according to the Institute for College Access and Success.
The schools themselves are going broke. One Harvard professor predicts that upwards of 200 universities could go broke over the next two years.
Almost every week – since I started paying attention – I’m seeing another school shut its doors.
The latest is just across the border from me.
Southern Vermont College – a private liberal arts school founded in 1926 – has been deemed financially unstable and is back in bankruptcy court.
I’m only scratching the surface here on one of the biggest disruptions that I’ve ever seen.
College was supposed to be an industry that was disruption-proof.
By its definition – dating all the way back to the founding of the University of Karueein in 859 AD in Morocco – college was supposed to be an “in-person” experience. The same goes for the scribe schools dating all the way back to the founding of Rome.
But this year… just 7% of students are actually attending in-person classes, according to Sallie Mae.
The question is whether students will go back due to COVID.
My conviction says ABSOLUTELY not.
The rising costs, the bankrupt universities, the political madness, and the lack of guidance for students will force extreme changes in how we educate students.
No one wants to pay more money for a lower-quality product.
We’re witnessing the start of a major shift in supply and demand, and the whole industry is ripe for disruption.
I’m paying very close attention right now to the technology companies that can help rebuild this industry, slash costs, and bring about a renaissance of our education system in the 21st century.
Look out for a report from me soon on what else I’ve uncovered.