The “higher education bubble”–ready to burst?
More and more it is becoming clear that a college education isn’t all it was cracked up to be in terms of guaranteeing a better lifestyle. So is it worth the money and the debt? Some are wondering:
The Project On Student Debt estimates that the average college senior in 2009 graduated with $24,000 in outstanding loans. Last August, student loans surpassed credit cards as the nation’s largest single largest source of debt, edging ever closer to $1 trillion. Yet for all the moralizing about American consumer debt by both parties, no one dares call higher education a bad investment. The nearly axiomatic good of a university degree in American society has allowed a higher education bubble to expand to the point of bursting.
Since 1978, the price of tuition at US colleges has increased over 900 percent, 600 points above inflation. To put that in number in perspective, housing prices, the bubble that nearly burst the US economy, then the global one, increased only fifty points above the Consumer Price Index during those years. But while college applicants’ faith in the value of higher education has only increased, employers’ has declined. According to Richard Rothstein at The Economic Policy Institute, wages for college-educated workers outside of the inflated finance industry have stagnated or diminished. Unemployment has hit recent graduates especially hard, nearly doubling in the post-2007 recession. The result is that the most indebted generation in history is without the dependable jobs it needs to escape debt.
I was struck by the 900% increase since 1978. I’ve certainly not seen anything in particular from our college grads – as opposed to those who graduated in 1978 – that would make what they received as a degree worth 900% more than it was in ‘78, have you? And certainly nothing worth 600% above the inflation rate.
Frankly, the institutions of higher education have been scamming Americans for quite some time. And this is just my opinion, but many of the colleges and universities in this country are a bit like some college sports teams – they don’t care if you graduate, they just want you to play well for them for 3 or 4 years. Change “play” to “pay” and you describe many of the schools I’m talking about. They really don’t give a rip about graduation rates.
And of course, when you have institutions get into marginal study areas like “gender studies”, etc., then it’s no longer about education so much as it is indoctrination. Or at least that’s been my experience and the experience of many I know. And things like this only reinforce that belief. As for the tolerance for different ideas? Eh, not so much. Occurrences like this aren’t as uncommon as one might think.
The question more and more are asking then is whether higher education worth the bucks? There are plenty of studies that continue to show that college students earn more than their counterparts with a high school education – at least in gross pay. But in net pay, is it enough to justify the expense? Maybe not:
Derek Thompson explains:
Here’s the problem. The college premium isn’t consistent across all industries. Some salaries have flat-lined, while other jobs have simply disappeared thanks to off-shoring and automated technology. Meanwhile, over the same time that the wage premium has doubled, the cost of a four-year college education has more than doubled. Student loan debt is near $900 billion, more than credit card debt in this county.
College education is an effective elevator to bring workers to higher-skilled, higher-paying levels in the labor force. The question is whether the ride is efficient. Today the elevator is so prohibitively expensive that students and workers are uncertain whether the floor they’ll be dropped off justifies the cost of the ride.
That wage premium makes it questionable as to whether or not the cost of the education is worth the investment and debt. And it is likely to get worse, not better. So are we in an education bubble? And if so, when the bubble finally bursts, will a college education again justify the expense relative to the net pay they can expect to earn over and above those without such education?
Maybe in China. Because with the highest corporate tax in the world and politicians trying to find a way to raise taxes for everyone, the jobs they do find here aren’t going to be paying that well.
Yup, the more you look around, the bigger and bigger you realize the mess is. And it isn’t going to get much better anytime soon.
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