Skip to comments.Why College Isn't a Bubble
Posted on 10/03/2012 12:11:20 PM PDT by SeekAndFind
College skeptics are whipping out the B-word. Many students are bulking up on loans and coming up empty on the job market while schools keep hiking tuition. Pretty soon, critics say, the bubble has to burst.
My former colleague Megan McArdle lays out a thoughtful version of that argument in the most recent issue of Newsweek. She's correct that there are lots of people now who aren't benefiting much from their education. But in spite of the country's growing load of education debt and the rough job market for recent grads, most students who make it through with a diploma are getting their money's worth. The problem isn't that higher ed has turned into a bubble that's ready to deflate as the market sours on its prospects; it's that the system might be working just well enough to continue business as usual without some much needed changes.
Tuition isn't soaring like you've heard.
It's conventional wisdom by now that college tuition costs are rising and taking a greater and greater bite out of stagnant middle class incomes. How bad is it? Here's McArdle:
"The price of a McDonald's hamburger has risen from 85 cents in 1995 to about a dollar today. The average price of all goods and services has risen about 50 percent. But the price of a college education has nearly doubled in that time."
Talking about "the price of a college education" is like talking about "the price of a car." Just as it's not so useful to discuss the cost of a BMW Z4 and a Ford Focus in the same breath, it's hard to put Harvard and Iowa State in the same discussion about tuition, because they operate on very different economic rules. Beyond that, your average undergrad probably won't pay the full sticker price
(Excerpt) Read more at theatlantic.com ...
So what’s a fair way to judge the cost of college?
Consider an upper-middle-income student at a typically-priced public college. In 1995, that student would have paid an average of $12,618 in 2007 dollars, including room and board, according to the College Board. By the 2007-2008 academic year, the cost would have been $15,489.* A 23 percent increase over 12 years is a big deal for struggling families. But it’s not a doubling, and for lower-income students, the cost has risen less.
HE ALSO ARGUES:
College grads aren’t doing that poorly on the job market
53 percent of young graduates are either unemployed or working in jobs that don’t require a bachelor’s degree, and of Ohio University’s Richard Vedder, who found that, in 2008, 35 percent of all working college graduates were in jobs that didn’t need a BA.
Those numbers aren’t factually wrong, but they do require some context. First, recent college grads almost always have high levels of under-employment. At the peak of the dotcom bubble, 41 percent of new grads were still without work, or in a gig that supposedly didn’t require their education, according to Sum.
Second, as Stephen Rose of Georgetown University’s Center on Education and the Workforce explained to me, the over-qualification problem is easily exaggerated. The BLS collects reams of data on different occupations and categorizes them by how much education you need to do the job. Both Vedder and Sum use those definitions to determine which jobs are college-grad appropriate, and which ones fall into the “barrista” category. But Rose argues that the BLS numbers are out of date, and don’t give a realistic picture of which jobs really require higher education.
Take insurance agents, he argues. According to the government, that job only requires a high school degree. And in 1960, that was true. Back then, only 20 percent of insurance agents had a BA, and those that did only took home 10 percent more pay compared to their colleagues. Today it’s a different story. Half of all insurance agents now have a BA, and they make 40 percent more than their high school-educated peers. For men, that means a median salary of $78,000.
You see similar patterns with professions like police work and nursing, jobs that traditionally didn’t take a four-year degree, but where having one can now mean higher pay and a better career path. Rose is working on his own estimates of college graduate underemployment, but says his preliminary estimate is that 15 percent of bachelor’s holders are working in jobs that don’t require their skills. Still not an ideal situation, but not disastrous, especially when you consider that many of those people may be moonlighting as they pursue other careers.
I have $1 Trillion in student-loan debt that says they are wrong...
The cost of college is a massive bubble inflated by guaranteed loans. Who cares if students ever pay it off? The companies are guaranteed payment by you and me. And it's not discharged by bankruptcy, or possibly even death - IE: If you co-sign on a college loan, and the student dies, you still get to pay back the loan.
The ‘typical’ college professor maintains 9 hours of classroom instruction per week. Nine. Want to slash the cost of college, and increase the amount of students who can attend? Simply ask those college professors to double their classroom time each week, to a whopping 18 hours of work.
Worse, the public’s being robbed blind by those who are using public facilities and public money to fund their research, which they then privately patent and profit from.
And in another year and a half (or now, if you count unpaid contributions), the UC California system will be paying more for retired employees than their active payroll. The single largest expense for the UC system will be paying people not to work. That's incredible.
This absolutely is a bubble, and you'll see Greece like riots just as soon as the money train hits the final station.
RE: oh, plus an extra $1500 a year for a mandated health plan that very few students have a need for.
Well, we might have to add to that cost if Sandra Fluke gets her way...
I beg to differ. The (public) university I go to jacked up the tuition rates $700 this year. On top of a $800 increase last year. My brother's (private) college jacked up the rates by $1200.
Its almost not worth the price of the ticket.
Sounds like more of a black hole to me.
You for got to add in the army of university administrators that either have over-lapping responsibilities or have no value whatsoever (E.G. diversity administrators).
Most... but not all, and what about all the bad loans to students who don't make it to graduation and are now debt slaves to those loans?
Oh, and all those nurses with bachelors and masters degrees, they drive up the cost of medical care and they don't want to change bedpans, do bedbaths or change linens.
Paid more to work less is not a benefit to either society or the economy.
The author only looks at a part of the problem to diagnose the entire problem. Instead, you need to look at universities structurally.
Many of the large state universities have been on an explosive growth track for decades. In effect, it they just grow at a normal rate or not at all, the bubble collapses.
Much like subprime home prices. The scheme only works when the price continues to rise a lot. If it doesn’t then a lot of people are left with underwater mortgages.
Likewise, two generations ago, people would graduate from college penniless. But everything they earned after that, less taxes, was theirs. Today, just starting out deeply in debut throws off the entire timetable of family and prosperity.
Even if you do have a child and scrape by for two decades to pay off your student loan, is there any way for your child to attend university without economically crippling themselves as well? It is unsustainable.
>>I have $1 Trillion in student-loan debt that says they are wrong...<<
You might want to get a good job to pay that off. One million dollars a day and you can have it paid off in 2700 years.
What these discussions tend to miss is that regardless of how expensive or, in many cases, worthless, higher education has become, a BA remains the entry requirement for most jobs beyond food-service, construction, or factory work. While there is nothing wrong with any of those as a professions, if you seek something different you had better have the degree(s).
As long as employers require the degrees you will have what the great economist, Steve Young, called (in reference to the NFL referred strike) inelastic demand.
The dismal state of higher education pretty much confirms the inevitable failure of allowing the government and liberals to run anything.
It would be easy enough to say we don’t need the colleges or the degrees. But that attitude will be small comfort in the unemployment line. (And yes, you will be joining a bunch of college grads in the same line, but that is a different problem, related, but different.)
HA! Obama's gonna write it off for me!
The author misses a very important aspect of the ‘cost’ of college. People are using the student loan program just like a credit card, and paying for living expenses with the loans. The price of college may not be growing out of control; but, the loan debt accrued while in college is.
At the end of the day, I fear normal responsible people will foot the bill.
I saw a whole bunch of similar articles denying the real estate bubble just before the crash.
Must be written by an academic or the spouse of one...
I was right.
He's an adjunct professor.
Jordan Weissman - Adjunct Professor USC
College is a waste of money and a total scam. Most incoming freshman have to take remedial courses in simple things they should have learned in the 8th grade.
Showing my age: I started at the Univ of Arkansas in 1977 and the cost for one year (tuition/dorm room and cafeteria/books) was only about $3,500-$4,000.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.