Skip to comments.Tech bubble, busted. Housing bubble, busted. Education bubble, coming soon to a university near you.
Posted on 07/26/2011 9:38:10 AM PDT by tysonbam
Imagine a product where sky-rocketing prices outpace the growth of inflation and personal income. These prices are fueled by government subsidies, favorable taxation and cheap credit. The peddled product is highly priced and considered a signal and source of middle class prosperity. Those who have it are successful. Those who don't have it are left in the dust and both political parties in Washington, D.C. push relentlessly to expand the products availability to all Americans. No, this is not about the housing bubble. This is the higher education bubble.
According to the College Board, tuition and fees at public universities increased 130 percent from 1988 through 2008. Inflation adjusted median income over the same period actually declined slightly. This explosion in costs is disturbing in and of itself but more so when observed with other indicators.
When you look at high school graduates in 1988, 87.1 percent of Americans ages 16 to 24 received a high school diploma or some equivalent according to the National Center for Education Statistics. That number rose to 92 percent by 2008, which, at face, value would seem like a good thing.
In 1988 the National Assessment of Educational Progress showed 17-year-olds scored an average 290 in reading but by 2008 that score declined to 286. In 1990, average math scores were 305 (1988 scores not available) and 306 by 2008, virtually unchanged.
At the same time the National Assessment of Educational Progress shows that in 1988, 58.9 percent of high school graduates went on to college. By 2008, that number had climbed to 68.6 percent.
Over a period of 20 years of spending countless dollars and attempted reforms, academic achievement arguably declined while high school graduation rates increased five percent and college enrollment jumped almost ten percent.
What about the quality of college students over this time period? Developmental education expenses, mostly remedial education for students not ready for college, have dramatically increased.
The Texas Higher Education Board reports, "General revenue appropriations for developmental education increased from $38.6 million in the 1988-89 biennium to $172 million in the 1998-99 biennium." Their latest numbers estimated total developmental education expenditures for the 2010-11 biennium to reach $392 million (this includes state appropriations, student tuition, fees and additional university expenditures).
That's right, high school graduation rates are up, high school educational attainment is at best flat, college enrollment is sky high and we are spending more money than ever on students who are in college but not prepared for it.
Universities are digging deeper into a pool of less qualified high school students who would never have been admitted to college in the past, while the costs of a college degree are increasing at a considerable rate.
An abundance of college graduates combined with a stagnant recovery pushed the unemployment of Americans with a bachelor's degree or more to an all-time high of 5.1 percent last November.
The New York Times ran a piece this week titled, "The Master's as the New Bachelor's." So is the bachelor's degree the new high school diploma? Probably not yet, but it's looking like a serious possibility in the near future.
Many graduates are finding themselves peddling résumés from their parent's house while working as servers and baristas. Student loans, which don't even die in bankruptcy, are coming closer to being due. Without serious economic growth, the higher education bubble could be careening toward a devastating pop.
This is terrible news for current students and recent graduates who have paid astronomical prices for an education in a terrible job market. While some majors would be hit harder than the rest, the overall picture isn't pretty.
If the bubble bursts, many degrees may not pay for themselves. This isn't your mom and dad's America. College degrees aren't a golden ticket to a house in the suburbs, a white picket fence and two kids.
It's looking like the main difference between a high school diploma and a college degree could soon be mountains of debt.
“Universities are digging deeper into a pool of less qualified high school students who would never have been admitted to college in the past, while the costs of a college degree are increasing at a considerable rate.”
At the U of Washington they are skipping over in-state Valedictorians to go after lesser kids from out-of-state. Higher tuition from them. Makes me mad to think of my tax dollars going to the UW, but my straight A kid may not get in.
I think my case is typical of most of the work force.
If a cap is placed on the total number of dollars available to the student loan program, then this will create a naturally competitive environment between colleges to contain their tuition rates.
The second deflation would come by way of the Pell Grant. This should be used only for US Citizens who are pursuing degrees that are of “hard” classes and can demonstrate through testing, their preparedness for college. Also, these would be given only to students pursuing professional degrees such as medical, engineering, computers, science and mathematics. No more Pell Grants for liberal arts, poly sci, business, education, etc. I would also require that those who receive Pell Grants be available to fill government jobs for 4 years if there is a need that is not being filled. Sort of a repayment program based upon the need to fill critical government jobs in exchange for the government paying for the degree.
The third deflation would be more of a structural change by allowing businesses to provide tuition assistance to their employees and take 100% of the cost as a business deduction without a cap or limit of the deduction. This will create a natural tendency to align the education programs with the needs of business. This will allow businesses to shop between college vendors and create a far more financially minded customer base. This will further push colleges to be competitive with each other by competing for the business customer.
It will also lay the ground work for moving the deduction to 105%. The additional 5% deduction would be offset by reductions spread across Pell Grants and Student loan risk program. The goal should be to move the population to seek employment and take advantage of their employers benefits.
How’s that Doctorate in Social Justice working for you, job seeker?
Don’t be so mad. The out-of-state students return a profit for the university, allowing in-state students to attend more cheaply. My concern would be the effect of lower-quality students on the academic reputation of the school.
My question is what do the universities look like after the bubble? Will universities close? Will they scrape ever deeper?
Khan Academy is nothing short of incredible....
A degree at one time was an investment. Since they started proliferating, the investment is devalued (monetarily, anyway- people derive whatever benefits they wish from their education.) A lot of young people would be better served by going into trade schools, apprenticeships, or just plain picking up a mop. The idea that everyone should go to college is idiocy. Probably less than a third of a random group of 100 people is actually should. And if this bubble should pop, well, maybe we can get back to a point where someone can go to college and actually work their way through.
I was going to pose the same question....let me know when you/we get a definitive answer.....
Easy money in the form of student loans is what is causing the cost of college to skyrocket and the quality/value of a college degree to plummet.
We now owe more student loan debt than credit card debt.
Americans owe almost $1 trillion in student loan debt... and as the article says, it’s almost impossible to get out of paying them back.
Not that anyone should be able to walk away from their obligations, but they should be well-aware of what they are getting into before signing on the dotted line. And that goes for the co-signor on student loans too! They are treated the same when it comes to repayment.
Defaulted federal student loans will haunt you forever.
We are literally turning our kids (and many of their parents) into indentured servants of the government. They are indebted to the gov’t for 100s of billions of dollars in student loans... all in order to finance the liberal elite’s lifestyles.
Yep. I’ve been brushing up on my math and learning to program (python) with his videos and absolutely love the way he teaches. He is the best teacher I have ever had.
From the article: “This isn’t your mom and dad’s America. College degrees aren’t a golden ticket to a house in the suburbs, a white picket fence and two kids.”
Not as many young men & women strive for the American Dream as described. IIRC, the median age for marriage and childbirth has increased from early 20’s to late 20’s.
When the economy was humming along.
Young, single adults borrowed money for college.
Young, single adults borrowed money to buy homes.
Young, single adults are losing their jobs, their houses and returning to their parents’ homes. With no spouse or children to support; this depressing situation could last for a long time.
And here is another bubble about to bust that no one is paying attention to. Not even our congresscritters.
Looks impressive hanging on the wall in the toilet.
My college experience was from the early 80s’. The money racket for the schools then wasn’t so much from the student loan side but from the financial aid angle. At the beginning of the term there was always huge lines at the financial aid office. What was notable was that the faces always changed with each new term. The majority of those getting the free money rarely lasted to the end of the first term. Looking back, I think the school had a strategy to target financial aid “worthy” students to get the cash knowing full well that most wouldn’t last but a few weeks.
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