Could this bring reform to university administration, pay, tenure, and the general bloat that most universities have to carry?
I participate in the research side of universities in various ways and this is exactly how it happens. The bureaucracy is absolutely the enemy when trying to get research done or preventing some arsehole in management from removing a useful service.
I am currently trying to get hired as a research assistant (basically a vague title covering people who do research as part of a lab but without the ambitions of an academic) and lab heads will routinely try to source talent in a way that avoids the official university hiring policy. They do this because the official way is slow, stupid, and gets administration people involved who just get in the way. Not only that, they deal with plenty of university administration already, and they think it is mostly useless or needlessly complicated.
Losing a year of revenue will straight up kill a bunch of universities, just like it would kill most businesses. However, the following year there will still be the same number of 18 year olds who want to go to college as usual, and so surviving universities will grow much bigger.
Bigger universities will grow bigger administrative arms, which will further isolate the leadership from students and academic and enable even more extractive policies, both because increased social distance makes cruelty more thinkable, and because the loss of competition makes it harder for students and academics to find an alternative.
In other words, wiping out a bunch of businesses reduces competition, and less competitive markets are more monopolistic.
That’s by no means certain at all. It’s plausible that many will realise that the degree isn’t as valuable as it once was and pursue a trade instead.
Administrative bloat? Some of it, like the diversity infrastructure, is mandated from without (regulations and/or legal concerns). Some, like vanity recycling programs, will indeed get whacked.
In truth, though, the reforms that would really matter are (1) reduce college loan subsidies to a rational level, and (2) increase state funding of public universities.