The Higher Education Bubble: Ready to Burst?

Townhall.com ^ | September6, 2010 | Michael Barone

[Kaslin]

Imagine that you have a product whose price tag for decades rises faster than inflation. But people keep buying it because they're told that it will make them wealthier in the long run. Then, suddenly, they find it doesn't. Prices fall sharply, bankruptcies ensue, great institutions disappear.

Sound like the housing market? Yes, but it also sounds like what Glenn Reynolds, creator of instapundit.com, writing in The Washington Examiner, has called "the higher education bubble."

Government-subsidized loans have injected money into higher education, as they did into housing, causing prices to balloon. But at some point people figure out they're not getting their money's worth, and the bubble bursts.

Some think this would be a good thing. My American Enterprise Institute colleague Charles Murray has called for the abolition of college for almost all students. Save it for genuine scholars, he says, and let others qualify for jobs by standardized national tests, as accountants already do.

"Is our students learning?" George W. Bush once asked, and the evidence for colleges points to no. The National Center for Education Statistics found that most college graduates are below proficiency in verbal and quantitative literacy. University of California scholars Philip Babcock and Mindy Marks report that students these days study an average of 14 hours a week, down from 24 hours in 1961.

The American Council of Alumni and Trustees concluded, after a survey of 714 colleges and universities, "by and large, higher education has abandoned a coherent content-rich general education curriculum."

They aren't taught the basics of literature, history or science. ACTA reports that most schools don't require a foreign language, hardly any require economics, American history and government "are badly neglected," and schools "have much to do" on math and science.

ACTA's whatwilltheylearn.com Website provides the grisly details for each school, together with the amount of tuition. Students and parents can see if they will get their money's worth.

That's also a goal of Strive for College, which encourages young people of minority backgrounds to go to college. Its Website lets students look up the percentage of similarly situated applicants admitted to each college -- and, perhaps more important, the percentage who graduate.

Transparency could also undermine the numerous dropout factories, public and private, described and listed by the liberal Washington Monthly. More than 90 percent of students there never graduate, but most end up with student loan debt.

Increasing transparency is hitting higher education at the same time it is getting squeezed financially. Universities have seen their endowments plunge as the stock market fell and they got stuck with illiquid investments. State governments have raised tuition at public schools, but budgets have declined. Competition from for-profit universities, with curricula oriented to job opportunities, has been increasing.

People are beginning to note that administrative bloat, so common in government, seems especially egregious in colleges and universities. Somehow previous generations got by and even prospered without these legions of counselors, liaison officers and facilitators. Perhaps we can do so again.

Presidents and politicians of both parties have promised for years to provide college opportunities for everyone and measure progress by the percentage of students enrolled. But it's becoming increasingly clear that college doesn't make sense for everyone. Some simply lack the necessary verbal and math capacity. Others are interested in worthy non-college careers like carpentry.

Still others wonder whether the four-year residential college model is worth the investment when you can spend much less on two years in community college and then transfer to a four-year school.

A century ago, only about 2 percent of American adults graduated from college; in 1910, the number of college graduates nationally was 39,755 -- smaller than the student bodies at many campuses today.

Higher education expanded when the G.I. Bill financed veterans' education after World War II and then expanded further with postwar growth. Government's student loan subsidies have enabled institutions to grow faster over the last three decades than the economy on whose productivity they ultimately depend.

As often happens, success leads to excess. America leads the world in higher education, yet there is much in our colleges and universities that is amiss and, more to the point, suddenly not sustainable. The people running America's colleges and universities have long thought they were exempt from the laws of supply and demand and unaffected by the business cycle. Turns out that's wrong.

[Sgt_Schultze]

And the federal government recently nationalized the education loan business. If a future student should need to enter into bankruptcy, the government loan will follow them until their deaths, not being dischargable in bankruptcy proceedings.

[J Edgar]

“higher education” should be renamed “higher cost ripoffs”

[Kaslin]

I agree

[Oceander]

The government has thoroughly distorted the market for higher education just as it distorted (and continues to distort) the market for residential real estate. As a result, many schools have become nothing more than prostitutes, arbitraging the government-caused market distortions to rent-seek and get more money than they would otherwise be able to earn on their own merits in an undistorted market.

On top of which, in many fields of endeavour, a college degree is just not that useful - provided you got a decent education in high school (an unfortunately dubious proposition if you went to any school system that is too infested with liberals and public-sector unions, case in point, NYC). Furthermore, many professions that currently require some sort of degree for entrance into that profession (I am thinking primarily of law) impose that requirement solely as a means of restricting the number of practitioners in order to obtain a guild-like quasi-monopoly on the services rendered.

For example, only a real idiot would seriously think that a J.D. was the only means of ensuring that lawyers were competent. The requirement that wanna-be lawyers obtain a graduate degree before being able to sit for the bar is nothing more than a rank obstacle to admission and not a legitimate means of enforcing minimal professional standards.

On top of which, if one surveys the real winners throughout history - the folks who built business empires out of nothing, many of them either had no degree beyond high-school, or else had degrees that had very little relevance to the industry in which they succeeded.

It is high time that the government stopped distorting the higher education market.

[wac3rd]

Another aspect of the Cloward-Piven strategy.

[Carry_Okie]

The simple way to destroy the education racket is through developing effective testing, thus robbing them of control of the credentialing process.

It's very simple, really. It would eliminate completely the need for "schooling" as we know it.

[RachelFaith]

I managed to get my BS/BA and JD without any debt. But it was NOT easy. And I had a Basketball scholarship for my Freshman year but a knee injury ended that. Blessedly I had a great part time job. That is the problem with most kids. They expect that money is free so they borrow and go tens of thousands into debt and then are slaves to the system from then on. As with most government programs, I remain sure that they do this intentionally.

[Minn]

The Higher Education Bubble: Ready to Burst?

I sure hope so; before my kids get out of high school. It would be real interesting to know where all the money is going. Just one more example of how government largess breeds corruption and economic distortions that eventually lead to disaster.

[The Black Knight]

I have a crazy way of going through school debt free. It’s called the Post-9/11 GI Bill and Tuition Assistance. I have two associate’s degree, a Bachelor’s degree, and just finished my Master’s Degree. All on military tuition assistance, and I’m less than 30. Haven’t touched any of my GI Bill money, which I plan to use for a Doctorate.

[dr_lew]

After that he had thoroughly broke his fast, he went to church, and they carried to him, in a great basket, a huge impantoufled or thick-covered breviary, weighing, what in grease, clasps, parchment and cover, little more or less than eleven hundred and six pounds. There he heard six-and-twenty or thirty masses. This while, to the same place came his orison-mutterer impaletocked, or lapped up about the chin like a tufted whoop, and his breath pretty well antidoted with store of the vine-tree-syrup. With him he mumbled all his kiriels and dunsical breborions, which he so curiously thumbed and fingered, that there fell not so much as one grain to the ground. As he went from the church, they brought him, upon a dray drawn with oxen, a confused heap of paternosters and aves of St. Claude, every one of them being of the bigness of a hat-block; and thus walking through the cloisters, galleries, or garden, he said more in turning them over than sixteen hermits would have done. Then did he study some paltry half-hour with his eyes fixed upon his book; but, as the comic saith, his mind was in the kitchen. Pissing then a full urinal, he sat down at table; and because he was naturally phlegmatic, he began his meal with some dozens of gammons, dried neat's tongues, hard roes of mullet, called botargos, andouilles or sausages, and such other forerunners of wine. In the meanwhile, four of his folks did cast into his mouth one after another continually mustard by whole shovelfuls. Immediately after that, he drank a horrible draught of white wine for the ease of his kidneys. When that was done, he ate according to the season meat agreeable to his appetite, and then left off eating when his belly began to strout, and was like to crack for fulness. As for his drinking, he had in that neither end nor rule. For he was wont to say, That the limits and bounds of drinking were, when the cork of the shoes of him that drinketh swelleth up half a foot high.

Rabelais, GARGANTUAL AND PANTAGRUEL, Book 1, Chapter XXI, The study of Gargantua, according to the discipline of his schoolmasters the Sophisters. Circa 1532.

[thecodont]

Was he the inspiration for Mr Creosote?

[The Antiyuppie]

I think that anyone getting a degree in political science or “interdisciplinary studies” had better plan on marrying someone with an engineering degree, and MBA, and so on. And, there aren’t enough of those to go around. Looking at in a purely cost-benefit light, probably 70% of degrees aren’t worth getting now. I can’t believe how expensive college is.

What the heck are the schools doing with the money?

I hate to write this, but it is fact that “fluff” degrees at one time existed primarily for:

1. “co-ed’s” (see above, and they would not need to work after they got married);

2. Students who were not too bright but they were going to get into their dad’s business anyway.

3. Athletic scholars.

None of the above actually thought for a moment that they were going to step out of school into a selection of high-paying jobs in their fields of study (unlike now, apparently). The one that really kills me is how much (really expensive) education it takes to land a 30K/year position as a social worker. I think the break-even point on that degree extends past the Sun’s red giant phase.

[businessprofessor]

A college professor should be strong supporter of higher education. I cannot in good conscience support a failed system. Higher education in its present form is unsustainable with rising costs and shrinking value. I strongly believe in post secondary education and training but the current model of higher education is a failure. The education bureaucracy is in full attack mode to defend the status quo.

Here is a glaring example of the deception in higher education. My business school is moving to a renovated building in a year or so. The administration put a banner on the building with a photo of a recent MBA graduate. She works as a graduate school counselor with the business school however. Her position is not promoted as a career path for MBA graduates. I am not criticizing her work or position choice. I am criticizing the deception of the business school.

The biggest obstacle to a revised model of higher education is the public’s expectation. The public wants a traditional higher education experience although the public is now alarmed at the costs and difficult employment prospects. The public does not see an alternative. Breaking the public’s expectation of higher education requires large marketing investments as well as a good alternative higher education package. I think it is much easier to develop an alternative education package than change the public’s perception.

[RobbyS]

I agree. Back in 1981, when my daughter was ten, I began setting aside tuition money for her to attend Duke. I had it in an account with a good rate of return. But by the time she graduated from high school, what she had in the account was far less than she needed tuition, not to speak of greatly increased living expenses. So she ended up going elsewhere. I think it was that beginning more than ten years before, college presidents began counting on federal money in the form of federally backed loans. They planned ahead , seeing another event like that after WWII when the GI Bill pumped so much money into the colleges and schools. Where federal money fell short, they just hiked the tuition rates and began adding “fees” on everything under the sun. Textbook publishers also got in on the action, and their prices went way up.

[exDemMom]

I have a crazy way of going through school debt free. It’s called the Post-9/11 GI Bill and Tuition Assistance. I have two associate’s degree, a Bachelor’s degree, and just finished my Master’s Degree. All on military tuition assistance, and I’m less than 30. Haven’t touched any of my GI Bill money, which I plan to use for a Doctorate.

Depending on the subject, it is possible to go to graduate school, and get a stipend as well, without incurring any debt. I got a PhD in Biochemistry and Molecular Biology, which was paid from various private fellowships and federal and state grants. I did incur a bit of debt during undergraduate school, but I paid it off fairly quickly once I got a job after graduating with the PhD.

For graduate students, there are typically a number of "assistantships" available through the school, making the student a university employee.

[pieceofthepuzzle]

“The simple way to destroy the education racket is through developing effective testing, thus robbing them of control of the credentialing process.”

I absolutely agree that universal testing is a great idea to allow credentialing and to allow comparisons between schools.

[HiTech RedNeck]

Sounds like the author of this had no little axe to grind about a certain church, but similar buffoonery seems apt for our august institutions of “higher liberal education” as well.

[dr_lew]

Very possibly! Never thought of it.

[dr_lew]

Rabelais honed no axes, but cast thermonuclear weapons right and left with abandon. His book is the most amazing thing ever written, many agree.