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Higher Education "Bubble"
Dec. 5th, 2011 02:46 pmSo, assorted Very Serious People (VSP) are talking about a "higher education bubble." (Put that phrase in a google and you'll see what I mean, or go here.) These VSPs note that many students are graduating with crippling amounts of student loan debt, and even in a good job market, the chances of finding a job that pays enough to retire said debt is slim. Now, VSPs, not knowing (or caring) that the plural of anecdote is not data, will couch this discussion in terms of the MFA in Creative Writing flipping burgers at McDonalds. The suggestion made by these VSPs is that we're sending too many kids to college.
Now, I for one will be the first to admit that college is not for everybody. Somebody needs to install my hot water heater, and that's exactly the kind of job that can't move to India. But ignoring the fact that the average high school graduate would need to take some kind of specialized training to get a job installing hot water heaters, the real data is that college tuition has shot up at a much higher rate than inflation.
When the price of something increases faster than inflation, and increases despite economic cycles, that is usually the sign of a bubble. But just because it has a bill, swims in water and lays eggs doesn't mean it's a duck. It could be a platypus.
In this case, two non-bubble factors are driving tuition increases, and one non-bubble factor is enabling them. The non-bubble drivers are found here. They are (from the article):
1) Tuition costs are going up just because state subsidies are going down. Every time there’s a state fiscal crisis, subsidies get cut; once cut, they never get reinstated. And so the proportion of the cost of college which is borne by the student has been rising steadily for decades.
2) the ever-increasing amounts of money being spent on administration rather than instruction.
The enabling factor is federal student aid. As tuition rises, the amount of available federal aid rose as well. States and college administrators paid no price for not keeping costs down. This is not a bubble - this is just bad management. The good news is that bad management can be fixed.
Now, I for one will be the first to admit that college is not for everybody. Somebody needs to install my hot water heater, and that's exactly the kind of job that can't move to India. But ignoring the fact that the average high school graduate would need to take some kind of specialized training to get a job installing hot water heaters, the real data is that college tuition has shot up at a much higher rate than inflation.
When the price of something increases faster than inflation, and increases despite economic cycles, that is usually the sign of a bubble. But just because it has a bill, swims in water and lays eggs doesn't mean it's a duck. It could be a platypus.
In this case, two non-bubble factors are driving tuition increases, and one non-bubble factor is enabling them. The non-bubble drivers are found here. They are (from the article):
1) Tuition costs are going up just because state subsidies are going down. Every time there’s a state fiscal crisis, subsidies get cut; once cut, they never get reinstated. And so the proportion of the cost of college which is borne by the student has been rising steadily for decades.
2) the ever-increasing amounts of money being spent on administration rather than instruction.
The enabling factor is federal student aid. As tuition rises, the amount of available federal aid rose as well. States and college administrators paid no price for not keeping costs down. This is not a bubble - this is just bad management. The good news is that bad management can be fixed.
