Is The College Bubble Next?

From The Chron­i­cle of High­er Edu­ca­tion:

Is it pos­si­ble that high­er edu­ca­tion might be the next bub­ble to burst? Some ear­ly warn­ings sug­gest that it could be.

With tuitions, fees, and room and board at dozens of col­leges now reach­ing $50,000 a year, the abil­i­ty to sus­tain pri­vate high­er edu­ca­tion for all but the very well-heeled is ques­tion­able. Accord­ing to the Nation­al Cen­ter for Pub­lic Pol­i­cy and High­er Edu­ca­tion, over the past 25 years, aver­age col­lege tuition and fees have risen by 440 per­cent — more than four times the rate of infla­tion and almost twice the rate of med­ical care. Patrick M. Callan, the cen­ter’s pres­i­dent, has warned that low-income stu­dents will find col­lege unaf­ford­able.

Mean­while, the mid­dle class, which has paid for high­er edu­ca­tion in the past main­ly by tak­ing out loans, may now be pre­clud­ed from doing so as the pri­vate stu­dent-loan mar­ket has all but dried up. In addi­tion, endow­ment cush­ions that allowed col­leges to engage in steep tuition dis­count­ing are gone. Declines in hous­ing val­u­a­tions are mak­ing it dif­fi­cult for fam­i­lies to rely on home-equi­ty loans for col­lege financ­ing. Even when the equi­ty is there, par­ents are reluc­tant to fur­ther lever­age them­selves into a future where job secu­ri­ty is uncer­tain.

Is this more doom and gloom­ing? Or is this some­thing to wor­ry about? Your thoughts?
via Andrew Sul­li­van’s Dai­ly Dish


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Comments (4)
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  • Lura says:

    Yes, the edu­ca­tion bub­ble is about to burst.
    The actu­al edu­ca­tion you get in col­lege is a stan­dard­ized com­mod­i­ty. Is there real­ly a dif­fer­ence in Econ101 at Har­vard vs. Econ 101 at a com­mu­ni­ty col­lege? No, prob­a­bly not.

    Addi­tion­al­ly, aver­age Col­leges were spend­ing far too much on ivory tow­ers and per­fect­ly man­i­cured quads. Not every school is an ivy-league school… so why look like it; and more impor­tant­ly: why pay for it?

    The mar­gin­al val­ue of one school vs. anoth­er is in the oth­er stu­dents and access. If you go to Yale, you might gain entree into Skull and Bones. But, if you are hon­est with your­self, prob­a­bly not your kid. Your kid isn’t that stel­lar & does­n’t already have the social con­nec­tions that would get him/her into the elite social groups any­way.

    As an aside: the biggest mis­take I ever made was spend­ing as much on my edu­ca­tion as I did. I was $100K in debt with two MAs in his­to­ry on my wall. What a waste! I work in IT now. I love it, but I also had to… I would have nev­er been able to pay that debt by work­ing in the field of his­to­ry.

    Edu­ca­tion is great… over­pay­ing for it is stu­pid.

  • Sandra Foyt says:

    It took way too long, and cost way too much, but I earned a BA and grad­u­ate degree from Colum­bia Uni­ver­si­ty. I trea­sure that expe­ri­ence, and would­n’t deny a sim­i­lar expe­ri­ence to my kids if the oppor­tu­ni­ty presents itself.

    How­ev­er, I will encour­age my kids to con­sid­er oth­er options, includ­ing non-tra­di­tion­al edu­ca­tion options. It’s cer­tain­ly pos­si­ble to learn a lot, and gain valu­able expe­ri­ence, with­out ever step­ping foot on a col­lege cam­pus.

  • Rob Moore says:

    This whole “bub­ble” debate only focus­es on one type of insti­tu­tion (pri­vate elites) and ignores a whole raft of oth­er fac­tors, includ­ing a tuition dis­count rate that aver­ages near­ly 35% nation­al­ly, a life­time-earn­ings ratio of 1.75/1 when com­par­ing bac­calau­re­ate hold­ers with those whose edu­ca­tion stopped at high school, and the pletho­ra of strate­gies for gain­ing a good degree at an afford­able cost. To call it a bub­ble equates it with mort­gage-backed deriv­a­tives, Bernie Mad­off, and oth­er exam­ples of irra­tional exu­ber­ance in the mar­ket — when, in fact, a col­lege degree is still the best path to finan­cial secu­ri­ty (not to men­tion the pos­si­bil­i­ty of a broad­er per­spec­tive) that any­one has. And I speak as the hold­er of three degrees — all from mid-tier pub­lic uni­ver­si­ties. For more com­ments and links, see my blog at http://www.lipmanhearnecommons.com.

  • Mark says:

    The inter­net cur­rent­ly does­n’t do one thing uni­ver­si­ties do, and that is cer­ti­fy that the stu­dent has com­plet­ed a pro­gram of study. We will see a major change in uni­ver­si­ty edu­ca­tion in the next 10 years, with less depen­dence on build­ings, more on tech­nol­o­gy, and a move­ment to bet­ter teach crit­i­cal think­ing skills and offer a broad edu­ca­tion. We do have to get our costs under con­trol while still offer­ing a use­ful prod­uct.

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