In tough times, consumers tend to trade down on college choices too

CHICAGO - For years, doomsayers have warned that college tuition can't keep shooting up.

Unsustainable. Unaffordable. A bubble.

Yet up it goes, year after year.

With a recession on, you might think bubble-popping time is here.

Not quite, but a more subtle change is under way in the marketplace of higher education.

Just as grocery shoppers trade down to private-label products in hard times, consumers of college services are making a similar value-for-the-dollar transition.

The "Cheerios" in this case aren't the wealthy Harvards, Northwesterns and Chicagos. Those elite schools occupy a separate gourmet category all their own.

Rather, it's the private schools of middling reputation or below that depend most heavily on tuition dollars. They are feeling the biggest squeeze from cheaper competition.

Four-year state schools are the "Toasted Oats" in this supermarket, and their popularity is on the rise. Also appealing are the oft-maligned two-year community colleges, the equivalent of those buy-one-get-one-free generics lining the bottom shelf. On the fringes, for-profit vendors offer an increasingly attractive alternative to the traditional menu.

As in the retail world, much depends on the customer.

"The primary way a bubble bursts in higher education is a reallocation of students," said Andrew Gillen, research director at the Center for College Affordability and Productivity. "The schools dependent on charging students $30,000 a year are really going to be in trouble."

The key problem is the mismatch between college costs and family finances. Recognizing the hard times, most private universities will be boosting financial aid to attract students. But they can't completely compensate for the housing bust, market meltdown and brutal recession.

With household wealth in retreat, the pressure is on to trade down: A recent national survey found that 71 percent of high schools reported more students forgoing their dream schools this year than in the past.

Higher education has done so well for so long, it's hard to believe a shakeout looms. Yet Moody's Investors Service, which tracks the creditworthiness of private colleges, this month warned of a "sharp deterioration" in balance sheets, with endowments taking a beating. Capital projects are being put on hold, staffing levels cut and class sizes increased.

Some schools can't cut it.

The U.S. Education Department this month identified more than 100 private non-profits with finances so weak they failed the government's minimal standards. According to the Chronicle of Higher Education, the troubled institutions in Illinois include several theological schools as well as the less-specialized Kendall College and Springfield College.

It's difficult to gauge their staying power. Springfield College, for instance, partnered six years ago with Benedictine University in Lisle, Ill., to offer junior- and senior-level classes as well as other additional services, a spokeswoman said.

What is its current financial status? "I'm not able to answer that question," she said.

Will it stay in business? "It has a freshman class. As far as I know, it is not closing."

No one expects college to go out of style, not when a degree still translates into higher lifetime earnings.

"It's hard to imagine dramatic changes in family behavior," said Roger Goodman, senior analyst at Moody's. "People won't just throw up their hands and say college isn't worth it."

But as Americans push their shopping cart down the aisle of life, the temptation is becoming irresistible to buy generic.

(c) 2009, Chicago Tribune.

Distributed by McClatchy-Tribune Information Services.