Skip to comments.Will Higher Ed Be Next Bubble To Burst Open?
Posted on 07/20/2011 5:11:16 PM PDT by Kaslin
When governments want to encourage what they believe is beneficial behavior, they subsidize it. Sounds like good public policy. But there can be problems. Behavior that is beneficial for most people may not be so for everybody. And government subsidies can go too far.
Subsidies create incentives for what economists call rent-seeking behavior. Providers of supposedly beneficial goods or services try to sop up as much of the subsidy money as they can by raising prices. After all, their customers pay with money supplied by the government. Bubble money, as it turns out. Sooner or later, bubbles burst.
We are still suffering from the bursting of the housing bubble created by low interest rates, lowered mortgage standards and subsidies to Fannie Mae and Freddie Mac. Those policies encouraged the granting of mortgages to people who should never have gotten them and when they defaulted, the whole financial sector collapsed.
Now some people see signs that another bubble is bursting. They call it the higher-education bubble.
For years, government has assumed it's a good thing to go to college. College graduates tend to earn more money than non-college graduates. Politicians of both parties have called for giving everybody a chance to go to college, just as they called for giving everybody a chance to buy a home. So government has been subsidizing higher education with low-interest college loans, Pell grants and cheap tuitions at state colleges and universities.
The predictable result is that higher education costs have risen much faster than inflation, much faster than personal incomes, much faster than the economy over the past 40 years.
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Nothing the Government subidizes decreases in cost as far as I’ve seen.
UW Madistan just bumped up their tuition 5.5%...blamed our new Governor Scott Walker (R, WI) for cutting funding, don’t ya know! ;)
This...is a bubble I could get behind 100% - pop it, bring the cost of education back down to reality and limit the degrees to x number of graduates per field per year based on future job availability actuarial estimates. Now we’re talkin...
Employers need to stop worshipping the diploma.
oops - bubble s/b ‘bubble burst’
I hope so.
My daughter is going to be college age very soon.
“The governments view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
I have a BS in engineering and an MBA, (Old joke, we all know what bs means, MS means more of it, and phd is piled higher and deeper) from days long ago. Today, I’d tell the kids to NOT go to college. What’s the point of liberal indoctrination after HS indoctrination, for a 100K bill that gets you NOTHING. They’ll learn more life lessons from roofing from the construction owner than from the prof. The only college worthy is Hillsdale. If kids can make admissions, poorly taught students don’t have a chance. My kids are looking at home school and other options other than government run indoctrination centers.
This is something that has stuck in my mind for years, even though I'm not a college person (a few classes here and there).
Our local newsies did a worthwhile report, years ago, on escalating college costs. While the inflation rate was 2-3%, University of Arizona was tacking 8% onto college costs, year after year.
The newsies concluded it was because of cheap loans.
And then, along came Her Highness, Queen Pelosi, election night 2008, and I remember one of the first things out of her mouth, was that they were going to make it easier for students to attend college.
Whenever a slimy pol says "make it easier", watch out for your wallet.
I knew instinctively that she meant that they would further cheapen college loans, but didn't know there would be, essentially, a government takeover of loans.
Cheaper loans meant that a student could go even further into debt, and become even more a government slave to that debt.
At the same time, our Leftist government makes it harder and harder for that student to find a decent job, in order to relieve themselves of that increased debt.
Waiting for the next shoe to drop, in my conspiratorial mind. Want to get out from underneath that debt? Well maybe you could join the Civilian National Conspiracy Corps, uh I mean the Civilian National Security Corps, and have that debt forgiven!
Naaah, wouldn't happen...our President wouldn't think like that.
Totally agree. I run into many higher (supposedly) educated stupid people.
Sounds like a job for government.
Nutty with a taste of delusion.
Another case of easy credit with minimal standards. Will have the same effect as the housing bubble - the dupes (in this case, marginal students who get a boat load of debt) will pay lots of penalties and then default. One may not be able to discharge these loans in bankruptcy, but one cannot get money they don’t have, so after paying lots of penalties, they will default and the originators will have to write off the loans. Since these are federally guaranteed, we taxpayers will get the bill..
There are a LOT of unemployed / grossly underemployed 20-something college grads with huge student loans.
It’s even possible they won’t vote for Baraq next time.
No, no - I think 2000 dollars to crowd in to a class of 100 people taught by a tired Grad Student so that some college professor can work on their book and live in a beach house is a steal.
my thinking is, if you limit the number of degrees per year (like nursing/med schools have done for decades), then you don’t have 500,000 people with psychology degrees oweing the taxpayer $150K+ in federal student loans apiece, they likely will never repay (and in fact, may tend to be ‘professional students’).
Somebody wants to get a psych degree anyway in spite of a 30-yr flood in the jobmarket, let them pay for it themselves and they can be very happy with their $18K a year career.
It is about time they go after this artifical maket. Make the colleges use all that tax exempt endowment money they have been sitting on and stashing away for years. Get all the political castoffs off of the college payrolls for doing next to nothing... Make professors actually teach classes again.
Read "Faculty Lounges"--this Barone does not put enough on the shoulders of the Parasites Hunting Dinner who rip us off, work 11-2 on Tues, Wed, Thurs, let grad students to all the teaching.
After seeing a few kids through college, college professors are starting to look a lot like ambulance-chasing lawyers.
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