Higher education's bubble is about to burst

[I AM NOT THAT GUY 5,715]

College has gotten a lot more expensive. A recent Money magazine report notes: "After adjusting for financial aid, the amount families pay for college has skyrocketed 439 percent since 1982. ... Normal supply and demand can't begin to explain cost increases of this magnitude."

Consumers would balk, except for two things.

First -- as with the housing bubble -- cheap and readily available credit has let people borrow to finance education. They're willing to do so because of (1) consumer ignorance, as students (and, often, their parents) don't fully grasp just how harsh the impact of student loan payments will be after graduation; and second, a belief that, whatever the cost, a college education is a necessary ticket to future prosperity.

Bubbles burst when there are no longer enough excessively optimistic and ignorant folks to fuel them. And there are signs that this is beginning to happen already.

But bubbles burst when people catch on, and there's some evidence that people are beginning to catch on. Student loan demand, according to a recent report in the Washington Post, is going soft, and students are expressing a willingness to go to a cheaper school rather than run up debt. Things haven't collapsed yet, but they're looking shakier -- kind of like the housing market looked in 2007.

So what happens if the bubble collapses? Will it be a tragedy, with millions of Americans losing their path to higher-paying jobs?

Maybe not. College is often described as a path to prosperity, but is it? A college education can help people make more money in three different ways.

First, it may actually make them more economically productive by teaching them skills valued in the workplace: Computer programming, nursing or engineering, say. (Religious and women's studies, not so much.)

Second, it may provide a credential that employers want, not because it represents actual skills, but because it's a weeding tool that doesn't produce civil-rights suits as, say, IQ tests might. A four-year college degree, even if its holder acquired no actual skills, at least indicates some ability to show up on time and perform as instructed.

And, third, a college degree -- at least an elite one -- may hook its holder up with a useful social network that can provide jobs and opportunities in the future. (This is more true if it's a degree from Yale than if it's one from Eastern Kentucky, but it's true everywhere to some degree).

While an individual might rationally pursue all three of these, only the first one -- actual added skills -- produces a net benefit for society. The other two are just distributional -- about who gets the goodies, not about making more of them.

Read more at the Washington Examiner: http://www.washingtonexaminer.com/opinion/columns/Sunday_Reflections/Higher-education_s-bubble-is-about-to-burst-95639354.html#ixzz0qC90msTc

[Niels Bohr 72]

Burst because of going to a cheaper school?

The author is essentially putting down state universities. However, state universities has the same admissions criteria for their colleges as well. If you graduate from a state school, it doesn't mean you will not be able to work at Bell Labs, Jet Propulsion Laboratory, Raytheon, MIT Licoln Laboratory, etc...In fact working in some of those places, many people came from state schools.

I agree with his three reasoning. Engineering is a rewarding discipline as society depends on them. However, not many people could get accepted into an Engineering program.

[ScottThuy 140]

Private institutions have felt the recession since the same loans that were being made to finance houses to those that could not repay, were also being made to students who could not repay.. stock prices of private institutions are down as a result..

I wish I knew where the money was going when it comes to both state and private universities... the faculty pay is not great at many of them and they have included an online component which runs at such a high profit margin if students knew they would freak out...

My neice is starting state college and she will go to orientation soon.. I have not seen my brother as stressed as he is now.. its a huge hit given the down economy.

[BishopM 114]

My son has just finished his freshman year of college. I'm glad that he's going (at my urging) to a junior/community college. The tuition is 30% of a standard state university and he can fully transfer the credits to the state university when he finishes his next year of college. I mean, why pay big bucks for basic English/Science/History/Band Class/etc when you can take them at the local junior/community college for much less and then transfer? At the end of the 4 years, he'll still have a diploma that says 'State College'. I really don't understand why more students don't follow this path...but...maybe its because other parents aren't a big of a cheapskate as I am

[I AM NOT THAT GUY 5,715]

I had to pay my own way, and that is the route I took. But, then again, I went a completely different way than my degree path, so I don't feel as bad as some, that pissed away a ton of time and money, for a degree they will never use, yet still get the pleasure of paying for.

[BishopM 114]

I had to pay my own way, and that is the route I took. But, then again, I went a completely different way than my degree path, so I don't feel as bad as some, that pissed away a ton of time and money, for a degree they will never use, yet still get the pleasure of paying for.

My route is similar to yours...paid my own way (which is probably why I insist on frugality with Son's education) and I never ended up working in my degree field (first degree was BS of Business). However, I must admit that I really never was a good student at that time...

However, as a side benefit of the degree, which is inline with what this original posting was about...my degree did help me get the jobs I do have and I never would have got these jobs without it. So, in an odd twist it was worth it in that light...

[Niels Bohr 72]

Some of you can pay your own way, some of you can't.

College nowadays costs so much more than 20-30 years ago.

[BishopM 114]

Some of you can pay your own way, some of you can't.

College nowadays costs so much more than 20-30 years ago.

That is so very true Brother NB. When I paid for my own college it was in the 80s...and tuitions were still relatively low. If I had to pay for my same degree today, from the same university, probably with the same teachers and rooms....it would be impossible.

Honestly, I don't know how many kids coming out of school manage it today, with the huge loans. What a burden for them to bear!

[I AM NOT THAT GUY 5,715]

Some of you can pay your own way, some of you can't.

College nowadays costs so much more than 20-30 years ago.

Was it that long ago? Man, I really feel old now! Thanks a lot!

[ScottThuy 140]

I would love to know how many people are out there with 100k+ student loans outstanding...

I told my brother to have her go local for two years... His response was that she needed that time in college as a life experience... #######? Life experience is every day... teach her to be thrifty and stay home for a couple of years and save a boatload...

[BishopM 114]

Was it that long ago? Man, I really feel old now! Thanks a lot!

We're Old Bastroids now...so...STAY OFF OUR LAWNS OR !

[IndigoSkies 168]

Let's blame GW Bush. Somehow this is his fault. I know. I just know it.

[BishopM 114]

I would love to know how many people are out there with 100k+ student loans outstanding...

I told my brother to have her go local for two years... His response was that she needed that time in college as a life experience... #######? Life experience is every day... teach her to be thrifty and stay home for a couple of years and save a boatload...

You gave the right advice Scott.

So, my sister's daughter just graduated from high school and is looking for a college. She's been telling me some of her experiences...what a rip. I think that 'advisors' are now really 'marketers', working on commission, and are more interested in making the university $$ than they are in helping the students.

[Ban Hammer 13,400]

We're Old Bastroids now...so...STAY OFF OUR LAWNS OR !

[BishopM 114]