Like any industry, it has people--honest and otherwise--who depend on it for a living. And, like any complex, it is vulnerable to those who have no interests but their own, and those of their cronies, in mind.
One result is that many families and communities depend upon educational institutions for survival. In America, we have the "college town": something I've seen in no other part of the world. It almost goes without saying that if the college or university in the town closes, stores, restaurants, bars, and offices offering all sorts of services would die with it. Also, the value of homes would plummet, or those homes would become completely unsellable.
Really, the effects would be no different than those of an industry leaving another kind of town. That's what happened, for example, to Camden, New Jersey (a.k.a. Newark Without The Charm) after RCA and Campbell's Soup left town. Now the town doesn't have even a single movie theatre or auto dealership, supermarket or department store. It's not hard to imagine the same thing happening to Ithaca, NY if Cornell were to close down, or even Princeton if its eponymous university were to shut its doors.
Although Cornell and Princeton don't seem like likely candidates for closure in the immediate future, even they might not be safe if the financial industry or other sectors of the economy were to collapse. Sure, some schools--including, possibly, Cornell and Princeton--would survive, if very reduced and forms different from their current ones. After all, if tuition were to go high enough, some students who currently attend and pay for it would be priced out of it.
More to the point, other schools would be devastated by a collapse of the financial industry and a loss of government largesse. Think of how many students wouldn't be able to attend those schools lower in the pecking order than the Ivies. Sure, there are some professors who don't teach, whose careers are all about research. If the institution isn't being sustained by tuition (paid mainly through loans) or other forms of government funding, how many of those professors would keep their jobs?
If there aren't students to teach, and research can't be done, what is the raison d'etre for a university?
But if there is no college or university, all of those professors and administrators will have nowhere to go. Contrary to what job-placement officers and other shills like to say, most of those professors' skills and work experience aren't "transferrable." And, even though many administrators pride themselves on bringing a corporate mindset to higher education, the truth is that in the larger economy, academic administrators don't garner nearly the respect their counterparts in the corporate world enjoy. So it would be difficult for many of them to find other employment.
Things would be worst of all for the students who were displaced. Most 18-year-olds aren't trained for anything at all; if they are, the end-result of their training is that they can pass tests and complete assignments that have no bearing on anything outside the school walls.
Imagine what would happen if State College, PA became Benton Harbor, MI, or if College Park, MD were to turn into East St. Louis, IL. The way things are now, most Americans still see the so-called "dead" cities (Detroit being perhaps the most egregious example) as "pockets" of poverty and decay. The hope has been sucked out of them; at least a generation has grown up in each of those cities knowing that there simply is no future for them. On the other hand, if whole communities full of people who've tasted hope and cultivated their dreams and aspirations suddenly has those things taken away from them--and that scenario is played out in hundreds of communities across the country--will they be so placid?