But colleges rarely go under because they are heavily subsidized and regulated by the government. They receive hundreds of billions of dollars in direct subsidies (and indirect tax breaks as non-profits) and the only way to get access to those funds is to be an accredited institution, under a system controlled by the colleges themselves. The story of Sweet Briar College is a perfect example of how difficult it is to put a college out of business, and it had only about 700 students.[…]
“In the absence of a government subsidy, most colleges could not fill up their seats,” Ronald Ehrenberg, a higher-education economist and professor at Cornell University, told me.
Yet the states mostly control what happens to institutions in their backyards, both public and private. A few states have been proactive on this front. The university system in Georgia has approved six campus mergers in recent years, a response to declining state appropriations for higher education. But most states, like Pennsylvania, Maine, and West Virginia, have largely punted on the issue, leaving them with a patchwork of public and private colleges in the face of aging demographics and shrinking financial resources.