The scarcity of admission rates in premium universities has contributed to the rise in tuition fees by creating a high demand for limited spots. This high demand allows these universities to increase their prices. Additionally, the availability of federally subsidized student loans has enabled these price rises, as students are able to borrow large sums of money to pay for their education. This has led to a significant increase in student loan debt.

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Post Corona: From Crisis to Opportunity

What will the world of business look like after the coronavirus pandemic? The pandemic will accelerate every trend by a decade and redefine entire ind...

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In the past 40 years, college tuition has increased 1400% without any remarkable value addition or innovation. Premium universities have leveraged scarcity(low admission rates) to increase prices. These price rises have been enabled by federally subsidized student loans, leading to a total student loan debt of $1.6 trillion. In 2012, Clayton Christensen predicted that 25% of colleges and universities would go out of business over the next ten to fifteen years. By 2018, he raised the number to 50% pre-Covid.

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Clayton Christensen's predictions about the closure of colleges and universities can relate to the themes of the post-Corona business environment in several ways. Firstly, the pandemic has accelerated the shift towards online learning, which could lead to a decrease in the need for physical campuses. Secondly, the economic impact of the pandemic may make it harder for students to afford tuition, leading to a decrease in enrollment and potentially causing some institutions to close. Finally, the pandemic has highlighted the need for innovation and adaptability in all sectors, including education. Institutions that fail to adapt may not survive.

Clayton Christensen's prediction was based on several factors. Firstly, the cost of college tuition has significantly increased over the past 40 years without any notable value addition or innovation. Premium universities have used scarcity, such as low admission rates, to increase prices. These price rises have been facilitated by federally subsidized student loans, leading to a total student loan debt of $1.6 trillion. This unsustainable model, coupled with the lack of innovation in the sector, led Christensen to predict that a significant percentage of colleges and universities would go out of business.

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