Glenn Reynolds: Higher education's bubble is about to burst

The Washington Examiner ^ | Jun 6, 2010 | Glenn Harlan Reynolds

[decimon]

SUNDAY REFLECTIONS CONTRIBUTOR — It's a story of an industry that may sound familiar.

The buyers think what they're buying will appreciate in value, making them rich in the future. The product grows more and more elaborate, and more and more expensive, but the expense is offset by cheap credit provided by sellers eager to encourage buyers to buy.

Buyers see that everyone else is taking on mounds of debt, and so are more comfortable when they do so themselves; besides, for a generation, the value of what they're buying has gone up steadily. What could go wrong? Everything continues smoothly until, at some point, it doesn't.

Yes, this sounds like the housing bubble, but I'm afraid it's also sounding a lot like a still-inflating higher education bubble. And despite (or because of) the fact that my day job involves higher education, I think it's better for us to face up to what's going on before the bubble bursts messily.

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 (2) a belief that, whatever the cost, a college education is a necessary ticket to future prosperity.

[Paved Paradise]

I love it!

[FoxPro]

pingaling....

[freespirited]

[A college degree] 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

All true, but I submit this matters primarily for your first job. Having a degree from a fancy business school might get you in the door in the business world. But if you dont and you get in some other way, once you show that you can produce, an employer would be very foolish to stay hung up about your educational credentials.

[GOP Poet]

great point.

[PugetSoundSoldier]

The only companies that care about a degree once you’ve been working for a while are typically the huge, unionized companies. And those are the ones that are being nationalized explicitly (GM, Chrysler) or implicitly (via over-regulation).

Obama will require this large companies to ever-up the educational requirements of new hires so as to keep funding the government-educational complex and further entrench liberalism.

Small business? It’s a thing of the past, it’s being eliminated via Obamacare and dozens of other regulations (like the new 1099 requirement starting next year). If Obama and the Slavery Party (democrats) continue on for 3-4 years there will only be large businesses, and you WILL have to get Government loans to go to Government schools so you can be hired by Government companies.

[decimon]

...an employer would be very foolish...

That could sum up my experience with the corporate world.

[raybbr]

Just like every other bubble it's a result of marketing. The general public have been told that a degree makes you worth more. Just like housing was supposed to increase in value forever.

The education industry, subsidized by tax dollars, is mostly vastly over rated.

[Anti-Bubba182]

"...A New York Times profile last week described Courtney Munna, a 26-year-old graduate of New York University with nearly $100,000 in student loan debt -- debt that her degree in Religious and Women's Studies did not equip her to repay..."

Pffft!

[x_plus_one]

Fill out a govt application for employment and see how the feds value extended education. Points for every degree obtained puts you ahead of the next guy in line. The rats nest called academia is a godless camp filled with unskilled labor who pursue job security with any bureaucracy but preferably the government.

[centurion316]

A New York Times profile last week described Courtney Munna, a 26-year-old graduate of New York University with nearly $100,000 in student loan debt -- debt that her degree in Religious and Women's Studies did not equip her to repay.

My dog Bert does not have a $100,000 student loan debt, but he knows as much as your average Women's and Religious Studies Major, and he has some real world skills that guarantee him job security: He can catch a rabbit and he diligently stands guard against marauding UPS drivers. I'd say that Bert made the better career choice.

[BooBoo1000]

My old boss said, “ a degree might help you get a job but it won't help you keep it”

[Aria]

If you want to be an engineer or an accountant, for instance, you need the degree.

However, I have my doubts about the value of the Ivy League except for the connections who agree with you in thinking that you’re better than everyone else.

[nkycincinnatikid]

Years ago I felt that a college degree at least assured that the applicant was literate.
Now, Not so much.

[parisa]

All so disheartening and true.

It is truly beyond me that useful idiots of this world — such as my brother and his stupid wife! — don’t see the chimera of liberalism. It is nothing but doom and gloom for everyone...SLAVERY as you put it.

[okie01]

But if you dont and you get in some other way, once you show that you can produce, an employer would be very foolish to stay hung up about your educational credentials.

As one who entered the business world with a Geography degree from a cow college -- and competed with the MBAs from Harvard, Penn and Dartmouth -- I can attest to that.

[decimon]

Just like every other bubble it's a result of marketing.

I think Reynolds has the order correct in first listing the easy money (easy credit). That's like the blood in the water attracting the marketing sharks.

[Comparative Advantage]

Higher education has become a racket, even at most state universities. Unless you plan to acquire a marketable skill, you are wasting your money in most cases. College is way over priced and has doubled healthcare costs over the last 30 years.

[SERE_DOC]

Yea! I paid $30,000 for a piece of paper that hangs on the wall.

And it says MASTER in Information Technology.

And now I can work in any third world country that I can find a job in, because unless I want to become a government whore there ain't no freakin jobs in the states. And quite honestly it ain't the pResident it is those idiots in both houses and both parties that have rat f&^$ked the country into a 2010 version of 1930's economic toxic waste dump.

And the some of the blame can go back to you and me who didn't hold these idiots to task as they were pimping their butts and our future

Sure the crooks in big business helped but if the SEC was doing their job instead of surfing porn sites, gee I don't know, Bernie Madoff may have only gotten away with 25 billion dollars.

How about this for a new law:

You become an elected official, if by the time you leave your elected position and your a millionaire you go to jail and all your assets are seized. this of course applies to past, present and future elected officials.

Don't try to hide it by putting it into a trust or transferring it to you dead gopher Bob, or your family, or any shady business dealings. You draw a salary from taxes you don't get to draw a salary from anywhere else. Say that ain't fair, neither is forcing a free people to buy healthcare.

[abbi_normal_2]

Now, Not so much.

ahem - check above ;)