Summary: Yesterday’s post discussed the broken business models of the mainstream print media. Other institutions suffer from similar problems, as American undergoes massive financial, social, and technological shocks. Such as colleges. Institutions providing undergraduate education — specifically, 4 year non-technical degrees — have priced themselves out of their market, except for those few elites institutions with massive endowments (and rich alumni). The consequences for America might be large — both in terms of lost global competitiveness and decreased social mobility. This is the first post in a series about education; at the end are links to the other posts.
For a generation or two college costs have risen faster than both US household incomes AND government tuition support. This year is no exception:
With families facing one of the worst economic crises in the nation’s history, private, nonprofit colleges and universities have responded with the smallest average increase in tuition and fees in 37 years, according to the final results of a membership survey conducted by the National Association of Independent Colleges and Universities (NAICU). The 4.3% increase for 2009-10 is the smallest since 1972-73 … Over the past 10 years, the average annual increase in tuition and fees at private colleges has been 6%. (source: NAICU)
The effect of rising costs was muted by increased borrowing by parents and students. This is classic rent-seeking by colleges, described by Wikipedia:
{R}ent seeking occurs when an individual, organization or firm seeks to earn income by capturing economic rent through manipulation or exploitation of the economic environment, rather than by earning profits through economic transactions and the production of added wealth.
A college diploma has value unconnected to anything actually learned by the student, as it became the key component of American’s social allocation system — by which a new generation was steered into the job market. Colleges extracted. Colleges charged excess tuition to skim off as much of this as possible, expanded their costs to the maximum extent the market would bear.
Now that structure has crashed. People are less willing to borrow for college; lenders are less willing to lend to parents and students. Students and parents know a liberal arts education is seldom worth the cost either financially or intellectually. Now they increasinly wonder if the diplomma is worth the cost.
Colleges are left with broken business models: large inflexible cost structures, and disenchanted clients. Much like newspapers and airlines. And like them, those working in colleges only slowly realize the grim outlook. Their first response is to hope the good times return. The adjustment process probably will be long and painful.
- “Measuring Up 2008“, National Center for Public Policy and Higher Education
- “Will Higher Education Be the Next Bubble to Burst?“, Joseph Marr Cronin and Howard E. Horton, The Chronicle of Higher Education, 22 May 2009
Also, but with no excerpt: “Transformation 101“, Kevin Carey, Washington Monthly, Nov/Dec 2008 — “Technology is driving down the cost of teaching undergraduates. So why are tuition bills going up?”
Excerpts
(1) “Measuring Up 2008“, National Center for Public Policy and Higher Education — Excerpt from page 8:
The deterioration of college affordability throughout the United States has contributed to the disparities in higher education opportunity and attainment. There are several dimensions to this national and state problem.
First, college tuition continues to outpace family income and the price of other necessities, such as medical care, food, and housing (see Figure 5). Whatever the causes of these tuition increases, the continuation of trends of the last quarter century would place higher education beyond the reach of most Americans and would greatly exacerbate the debt burdens of those who do enroll.
Second, the erosion of college affordability has been exacerbated not only by increased tuition, but also by relatively flat or declining family incomes. As a result of these trends, the financial burden of paying for college costs has increased substantially, particularly for low- and middle-income families, even when scholarships and grants are taken into account (see Table 1).
Third, students who do enroll in college are taking on more debt to maintain their college access. More students are borrowing (see Figure 6), and they are borrowing more. Over the last decade, student borrowing has more than doubled (see Figure 7).
Another dimension of the problem of college affordability involves the financial aid priorities of colleges and universities, which are not in synch with public policy priorities. Currently, students from middle- and upper-income families receive larger grants from colleges and universities than students from low-income families receive (see Table 2).
(2) “Will Higher Education Be the Next Bubble to Burst?“, Joseph Marr Cronin and Howard E. Horton, The Chronicle of Higher Education, 22 May 2009 — Excerpt:
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.
Consumers who have questioned whether it is worth spending $1,000 a square foot for a home are now asking whether it is worth spending $1,000 a week to send their kids to college. There is a growing sense among the public that higher education might be overpriced and under-delivering.
In such a climate, it is not surprising that applications to some community colleges and other public institutions have risen by as much as 40 percent. Those institutions, particularly community colleges, will become a more-attractive option for a larger swath of the collegebound. Taking the first two years of college while living at home has been an attractive option since the 1920s, but it is now poised to grow significantly.
With a drift toward higher enrollments in public institutions, all but the most competitive highly endowed private colleges are beginning to wonder if their enrollments may start to evaporate. In an effort to secure students, some institutions, like Merrimack College near Boston, are freezing their tuition for the first time in decades.
Could it get worse for colleges in the coming years? The numbers of college-aged students in the “baby-boom echo,” which crested with this year’s high-school senior class, will decline over the next decade. Certain Great Plains and Northeastern states may lose 10 percent of the 12th-graders eligible for college. Vermont is expected to lose 20 percent by 2020.
In the meantime, online, nontraditional institutions are becoming increasingly successful at challenging high-priced private colleges and those public universities that charge $25,000 or more per year. The best known is the for-profit University of Phoenix, which now teaches courses to more than 300,000 students a year — including traditional-age college students — half of them online. But other competitors are emerging.
.. Moreover, increases in federal financial aid and state scholarships have been unable to keep up with the incessant annual increases in tuition at traditional four-year colleges. For example, Congress has raised the Pell Grant limits from $4,731 to $5,350 a year by scrubbing the federal loan programs of bank subsidies thought to be excessive. But $5,350 pays for only about four to six weeks at a high-priced private college.
… What can they do to keep the bubble from bursting? They can look for more efficiency and other sources of tuition. … Colleges can also make productivity gains by using technology and re-engineering courses.
… The economist Richard Vedder of Ohio University, a member of the federal Spellings Commission, offers more radical solutions. He urges that university presidents’ salaries include incentives to contain and reduce costs, to make “affordability” a goal. In addition, he proposes that state policy makers conduct cost-benefit studies to see what the universities that receive state support are actually accomplishing.
Joseph Marr Cronin is the former Massachusetts secretary of educational affairs, and Howard E. Horton is the president of New England College of Business and Finance.
Afterword
Please share your comments by posting below. Per the FM site’s Comment Policy, please make them brief (250 words max), civil, and relevant to this post. Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
For information about this site see the About page, at the top of the right-side menu bar.
For more information
To read other articles about these things, see the FM reference page on the right side menu bar. Of esp relevance to this topic:
Posts about America’s education system:
- College education in America, another broken business model, 3 July 2009
- The secret about our universities (seldom even whispered among Professors), 5 July 2009
- Women dominating the ranks of college graduates – What’s the effect on America?, 7 July 2009
- A better answer to “why women outperform men in college?”, 8 July 2009
- Is a college education worth a million dollars?, 10 July 2009
- What should a student learn from college? Why go to college?, 1 November 2009
As someone who has just completed a $100K MBA, the question of value (Undergraduate or Graduate) is very valid. Many of the professors lacked deep world experience and much of the curriculum, cases, text books etc. were uniform across all universities, elite or otherwise.
While the material wasn’t bad, the real value came in the University selection criteria and the opportunity to interact and build a network with a “selected” group of people. The value of the network isn’t so much given as certain individuals figure out how to leverage it. Not many students, undergraduate or graduate, have the insight or the wherewithal to take advantage of what is an elite University’s greatest asset.
Like most valuable things, it is not taught in class. The connections, directions and opportunities to get questions answered that are not objectively answered elsewhere is worth it, if you know how to cultivate the connections, know the direction and know the questions you want answered.
A university degree is like a key, but you better know where you want to go and what door you need to open. Otherwise, it’s nothing more than a cover charge to get into a four-year (or more) bar. That is not a sustainable business model. Especially as most undergraduates paying $50K a year (or more) are not getting jobs paying anything like that. In my graduating MBA class (2008) I can only think of a handful of people who increased their opportunities/salary. Many, many more either lost jobs the had or haven’t been able to find positions. At the elite University I got my MBA from, only about 60% of students who graduated in 2009 actually have jobs. Published statistics are much higher and all those number are deceiving because a good number of those “jobs” are not going to become the careers people envisioned.
There is both an expectation problem and a reality problem that it will take a long time to correct. However, applications for the class starting this fall are at an all time high. Things that are deeply ingrained change very slowly.
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Fabius Maximus replies: Thank you for your 1st person observations. As an MBA, why does analysis of colleges so seldom mention college’s rent-seeking behavior — skiming the cream of the “selection advantage” confered by a degree? It’s basic economics, and explains much of the rapid increase in college costs.
FM: an interesting comment; I recommend reading it!
FM, an excellent article about a timely and under-reported subject. Your analyses are correct, but please add another reason for skyrocketing tuition rates, the presence of a thirdd party payor, the federal government. I have no examined the historical data on when and how college tuition costs have increased, but it would not be a surprise if the sharp trend in cost corresponds closely to the time inwhich the government became heavily involved in funding college via Pell grants, FAFSA loans, and the like. To paraphrase the old proverb, “money always spends better when it comes out of someone else’s pocket.”
There is a very real social and economic cost to the broken model of education we have, namely that colleges and universities are now the de facto gatekeepers to the employment market. They have a vested interest in making education more lengthy, more expensive and more time-consuming, and little incentive to reduce these inefficiencies. A friend is a physical therapist; he notes that it use to be sufficient to hold a bachelors to get licensure and practice, in many states a masters is now required, and there is talk of requiring a Ph.D. as a pre-requisite to practice.
The same pattern is repeated across many fields. Call it the “government-educational complex.”
The social and economic costs are significant, because movement from one career field to another now requires, in many cases, complete re-education and retooling, at enormous expense of time and money. There are many barriers in place hindering the movement of labor from areas of the economy with a labor surplus to those in need of people. The cumbersome nature of our higher educational system only worsens this problem.
We might do well to adopt a European-style system – such as that used in Denmark – whereby young people at roughly 10th grade level take a series of nationally-administered exams, which determine who is eligible for university and who is not. Those who pass and wish to pursue university, can do so; those who do not are strongly encouraged to pursue a career in a skilled trade, vocation or other field. In the U.S., such a system might be made less compulsory, but the idea has merit. Not everyone should go to college; there are many rewarding, lucrative and useful careers that do not require a university education.
Lastly, while attending college or university after high school is beneficial to students possessing direction and sufficient maturity, doing so only prolongs adolescence for many others, delaying entry into adulthood that much longer. Can’t speak for anyone else, but I’d have grown up much faster if I had joined the military after college, or worked in a trade for a while – before going to college. Some types of knowledge come from a book or a lab, others can be learned only by doing them out in the world in what my late father (a survivor of the Great Depression) used to call “The School of Hard Knocks.” The point is that a well-rounded education consists of both kinds of knowledge, and our universities increasingly deal only in the former – theoretical, book knowledge – and not the latter.
Last point: universities have depended for years on vast armies of graduate students to teach U/G courses, serve as research assistants, and the like. Moreover, most faculties are two-tiered, with tenured people getting secure employment with often quite-decent pay and benefits, and adjunct faculty getting part-time work, few or no benefits, and no tenure. Status and promotion are achieved by being a rainmaker, by doing research that secures government funding, and not by teaching students. In fact, excelling at mere teaching is considered the “kiss of death” in some departments for tenure consideration – a fact that illutstrates very well the skewed priorites of the higher education system. R&D is rightlyfully important, but should not be so at the expense of teaching undergraduates.
FM: Another interesting comment; I recomment reading it!
I’ve been studying college costs and benefits quite a bit lately because I’ve got a kid that’s getting to that age. I feel the situation is both better and worse than FM indicates.
It is worse because I’ve found that over the last 25 years the state schools that used to be relatively low cost (but don’t provide the valuable network of connections that Andrew Meyer mentioned) have become average cost. One state school provided me with enough information to calculate that their tuition has gone up roughly 625% in the last 25 years vs. FM’s 440% for all schools. There are NO cheap alternatives for higher education these days, regardless of the quality of the education.
Another area of concern is a more psychological one. When my father went to college 50 years ago he could pretty much pay for his own education by working his butt off all summer and then controlling costs during the school year. When I went to college 25 years ago I could substantially contribute to college expenses by working 40 hours a week at a minimum wage job during the summer and part time during the school year. My kid can’t even find a job because the current crisis and so is volunteering all summer just to get out of the house.
The net effect of the above situation is a tremendous loss of freedom. My father had to work hard but totally controlled his own destiny, he knew his fate was in his own hands and it shaped a lot of his decisions and taught him a lot of things about life that he’d use later.
I had to work just as hard but had much less control. I couldn’t afford to go to as good a school and had my well-meaning father yanking my chain with his financial control to steer my life in some directions I didn’t want to go and it is still a source of friction between us 25 years later.
My kid is totally dependent on external sources for funding and has much less control over his future than either of the two preceding generations. I don’t know what will happen when he goes to college but I’m sure it will be a less satisfactory experience simply because he’s got far fewer options.
On the “better” side, families are well aware that the younger generation cannot do well without a college education. The last estimate I saw was that the average college graduate earns roughly $1 million more over their lifetime than the average person without a college education. It’s hard enough to make ends meet with a college education, I can’t imagine what it will be like in the future without skills and social connections gained in college. I suspect that in 25 years the average life of a non-college graduate will be rather unpleasant.
The above means that parents are increasingly willing to over-leverage their finances (kind of like the banks but without the federal bailout) to get the kids into good schools and gives the colleges more room to push up costs without completely breaking the system.
I will finish on two notes:
1. The problems with college are small when compared with the problems with the public school system.
2. Per Pete’s comment above, I saw a study a couple of years ago (not sure who funded it, I can’t find it again) that concluded that although Universities are frequently used for R&D, they aren’t particularly good at it for many of the reasons that FM mentioned above, and that companies would be better off creating single-focus limited-liability corporations to do their research for them.
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Fabius Maximus replies: About a college degree being worth a million dollars — for more about that see Is a college education worth a million dollars? (10 July 2009).
This is more than a broken business model: It challeges the basic premise of Brown v. Board of Education of Topeka Kansas
We might hypothetically conceptualize some sort of Horatio Alger universe or perhaps some other sort of universe in which education would not play such a major role. But by the 1950’s education had, as a practical matter, become the central vehicle for American social mobility. Those who opposed equal schooling were talking practical nonsense given the realities of postwar America.
Now, for reasons in general accord with what FM and commenters above are stating, education itself is becoming practical nonsense. And we do not have waiting in the wings a credible Horatio Alger or some other alternative myth to carry us on.
And therefore this is more than just a burdensome challenge to the younger generation – although it is that indeed – it is a challenge to the the very warp and woof of American social structure as it has been for the past fifty odd years.
The Universities may well be the next bubble to burst. I had taught at a University when I was younger, and then moved to a profession. After retirement, I returned to teaching at a large state university. I was amazed with the changes in colleges between when I first taught and now. Faculty are now a small minority of the employees. Administrators abound…it is amazing the overhead that has developed. Tasks such as advising once done by faculty are now done by special staff. Support staff (public relations, lobbyists, lawyers, police) is everywhere. It is amazing the overhead that has evolved. The cost structure is becoming prohibitive. When is most interesting is that all this additional expense has not improved the quality of education students are receiving.
The entire education system is a disaster! Easy money, the root cause of much of our issues, has jacked up the price of a college education. We demand every one must have a college education when in reality only 25% to 30% of the citizens should go thru college.
In public education we pay more per student than any where in the Western world for quality that seems to be in decline. Paying for a Cadillac and getting a used Yugo. The top three systems in the west use some version of vouchers but mention that word here and you get blasted by the administrators, school boards, and of course teachers unions.
My kids graduated from the same high school I went to. They had to take advanced placement and honors courses just to get the same standard education that I had. Their AP geometry courses had the same book I had for regular geometry!
The people have got to quit allowing the elites to run on autopilot. If the people want a better future they will have to demand it. {FM: bold emphasis added}
Apologies, all, my typing in post #2 was atrocious… perhaps I ought to..er… return to school!
Another interesting bit of data about colleges and universities… I haven’t the precise figures handy, but the general trend is that university-level U/G and post-graduate education are becoming more heavily weighted towards female students. Many American men are opting out of college entirely, because of cost, lack of interest, or other reasons. What are the implications of this trend? I do not like thinking about a future America in which there are large numbers of young men, under-educated or unemployed – diaffected and angry about their lot in life. Sounds like trouble to me. At the very least, what does the trend of men opting out of college, if it is real, tell us about post-secondary education?
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Fabius Maxmius replies: I agree, this is an interesting and important question. See Women dominating the ranks of college graduates – What’s the effect on America? (7 July 2009).
Fx hit a very good point .. the devaluation of courses. We are seeing an inflationary spiral here, more cost to deliver at best the same, but often poorer outcomes.
I remember comparing a friend daughter’s coursework with what I got at school 40 years earlier. Basically she was 1-2 years behind me at virtually every age. Oh yes there were computers, but there was no real usage of computers, such as programming, database use, analysis, etc. Rather computers are just the new and far more expensive pencil.
The US started this trend years ago. I remember a study comparing our Scottish physics degrees vs the US in the 70’s. Our bachelors were equivalent to the US’s masters. Trouble is that everyone has started to copy the US model with the attendent increasing cost.
Melbourne University is now introducing wholly the US model. A general 3 year bachelor degree, then another 2 years to get a masters …5 years to teach the same content that you can do in 3! Of course there is now 5 years of yummy fees.
Now that is inflation and price gouging.
As for the collapse of science and technical education, one thing that is forgotten is that kids are not stupid. Why take a hard and risky (e.g.) physics degree with (in my day) a 40% failure rate. Have a huge loan on your back (depending on where you are) whether or not you pass or fail. Very risky. Better to take something safer (ie a 100% pass rate, some courses will pass you if you have a pulse and pay the bills) that will give you a good chance of getting you a job. Plus modern uni’s now hate physics, chemistry, etc, small classes expensive equipment. Better to offer an Aromatherapy (not kidding you can get one at a Uni here) course. One badly paid, short term contract, lecturer with several hundred or more students … money for old rope.
Pity about the economy and the future though.
OldSkeptic – I’m not surprised by your class in Aromatherapy. Twenty years ago I ran across a small college that offered a bachelor degree in Recreation. I’m not making this up.
Fabius Maximus, You’ve understood that the post WW II geopolitical regime has ended, but your post today makes me wonder if you’ve understood the full implications.
The WW II soldiers subsequently went to college largely, I think, at public expense; and the continuation of victories in the oil wars and cold wars provided an exorbitant previlege. For two generations Ordnary Americans, even without exceptional academic accomplishment could reasonably have been able to spend 4 or more years full time on education; with perhaps a part time job during those years. That has changed.
With the exception of what the IMF calls ‘traditional industrial countries’, there aren’t any geographies without such a historical ‘past glory’ advantage; where large chunks of the ordinary folks can spend enough time in a college to become neurosurgeons; and come out with little more to show for it than the ability to make complex-sounding arguments for (largely non existent,IMHO) advantages derived from their so-called education.
My perception is that if America manages to avoid child labor in the coming decades, that will be a complete miracle for which people need to be grateful.
Your post here complaining that ordinary Americans aren’t able to afford college education – something that President Obama also stressed in his campaign – reflects an unrealistic expectation coming from the general experience of past generations of Americans; and indicates the inability to accept the inevitably higher bar for those who would occupy high-skill positions in Ordinary America in future.
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Fabius Maximus replies: Your assumption about the “unrealistic expectation” of ordinary Americans affording college is factually incorrect. Many nations with lower levels of national income provide low-cost or free university education. For examples ee the Wikipedia entries on the UK, France, Germany, and Japan. If they can do it, so can we.
In the Seattle area, there is a program called “Running Start” where the school district pays community college tuition while in high school. It is therefore possible to get an Associates before graduating from high school! osts are too high, but there are alternatives.
You left out that legal requirements keep requiring more college. For example, now pharmacists and nurse practitioners need doctorates, or legally they cannot practice their trades.
For what logical reason does someone need to go to 7 years of college and spend another year to pass the bar exam to advise people on a last will and testament, especially since in Louisiana civil can advise and draft will with only a high school diploma?
The colleges are abusing their privileged as gate keepers.
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Fabius Maximus replies: Those requirements are imposed by the guilds, not by the universities — who are collateral beneficiaries.
FM, The countries you listed are all ‘traditional industrial countries’ – a euphemism for the major participants in the barbarian WW II. Germany and Japan didn’t fritter away their advantage on further and further public outlays on expensive foreign campaigns, and they have local real industries that can profitably operate in an environment of international competition. So they’re much better off, though I wouldn’t say that for the UK. I don’t know much about France, sorry. What you’re missing is that the change that is on is much much bigger than indicated by the appearance and disappearance of the airplane rotor. the plane is burning, with the soldiers that are already on it jumping out, and the others are just awestruck, standing still on the stairs.
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Fabius Maximus replies: Why do you post these comments about things you obviously don’t understand? They’re too bizarre to warrrant rebuttal. To mention just one: calling Japan “better off” than the US is nuts. After 20 years of economic distress (which continues today), it has a government debt almost 2x GDP. Combined with a demographic death-spiral, their prospects are bleak.
FM: “Those requirements are imposed by the guilds, not by the universities — who are collateral beneficiaries.”
You are wrong. For example, as far as the states are concerned, a nurse practioner only needs to go as far as a Master degree, but the CCNE, a US Department of Education approved accreditor, eliminated STOPPED approving the accreditation of Master programs and will only approve doctoral programs, thus de facto making people who want to the enter the field spend 120% more money. If there are no Master programs, everyone must get a doctorate.
The CCNE is an association of colleges, so it is the colleges that are artificially raising the bar. The colleges are the corrupt guild. http://www.aacn.nche.edu/accreditation/
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Fabius Maximus replies: It’s customary on this site to present some evidence when you say somebody is wrong. First, you do not show who controls the CCNE. Most professional eduation systems are controlled not by the universities, but my the members of the profession (through various organizations).
Second, I don’t see anything supporting your contention that nurse practioners or registered nurses require a Master’s degree today, or will require a doctorate in the future. This document appears quite clear about the future of graduate nursing education: DNP Roadmap Task Force Report, American Assn of Colleges of Nursing, 9 August 2006. It expressly contradicts your assertion. From page 20:
From Wikipedia:
For more information I suggest starting with the Wikipedia entries on education requirements for and licensed practical nurses and RN’s.
We have decided to fund war and prisons instead of colleges
Excerpt from “The Volunteer Army: Who Fights and Why?“, Michael Massing, New York Review of Books, 3 April 2008:
FM: “calling Japan ‘better off’ than the US is nuts.”
There are at least a billion people in Asia who are nuts, then.
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Fabius Maximus: Do you have any evidence for the assertion that a billion people in Asia consider Japan “better off” than the US, economically? I dobut it.
Interesting book about the college education business
Going Broke by Degree Why College Costs Too Much, By Richard Vedder (Prof Economics at Ohio U), AEI Press, 2004 — For a summary see the AEI website. Excerpt:
“The last estimate I saw was that the average college graduate earns roughly $1 million more over their lifetime than the average person without a college education.”
Taking your unsourced assertion at face value, let’s use our college educations to do a little high school algebra. 30 year treasury bonds most recently sold paying 4.25%. So $30K / yr (WAG @ tuition)* 5 yrs (don’t kid yourself, only foreign kids on 4 yr visas actually get an undergrad degree in 4 years, by taking 20 credit hours a semester or more) gives $150K to “invest” in education or bonds. 1.0425 to the 40th power (40 year career) times the 150K gives a maturity value of $792K. So your kid faces the choice of getting a 50 hr/wk “career” and working 40 years to make an extra $200K (a mere $5K/year more), or buying bonds and having the time and energy to run their own part-time business after their shift is up at Burger King. College is dangerously close to being like a lottery, a tax on the innumerate.
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Fabius Maximus replies: Thank you for catching this (I missed it). For more about this, see Is a college education worth a million dollars? (10 July 2009).
If college education is a bubble it won’t burst anytime soon. More people will be going back to school and extending their education because the job market is so bad (and will get worse). The administration has committed to throwing gobs of money at making higher education affordable and has goals of expanding enrollment percentages big-time. Good or bad? not for me to say. But any bubble is years off IMO.
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Fabius Maximus replies: Do you have any evidence that the Obama Administration plans to increase college aid sufficiently to offset the collapse of student lending and home equity lending — and reduced State aid? I doubt that.
“The Debt Crisis at American Colleges“, By Andrew Hacker and Claudia Dreifus, The Atlantic, 17 August 2011 — “Borrowing looms large in American life from homes to cars. But the explosion of student debt in the last decade is a pernicious trend that the colleges themselves are encouraging.” Excerpt:
A must see graphic at “Exposing the Student Loan Racket“, by HealthcareAdministration.com.
It provides a wealth of information about trends in student loans, an obvious bubble waiting to burst. Education loans are now $830 billion — exceeding credit card debt. Some large fraction of this cannot be repaid. But student loans are unique in that they cannot be forgiven via bankruptcy. This is a conflict that will be fought out during the next generation, another example of America’s dysfunctional political and financial system. Another of these problems in the US that are easily avoided by our peers.
“Back to the School of Hard Knocks? The Education Industry Faces A Multi-Decade Peak“, Alan Hall, Socionomist, February 2011 — Opening: