College Bubble Bursts After Decades of Extravagance

Townhall.com ^ | May 9, 2013 | Michael Barone

[Kaslin]

Markets work. But sometimes they take time.

That's the uncomfortable lesson that proprietors of America's colleges and universities are learning.

For many years, market forces didn't seem to apply to them. There was a widespread societal consensus that a college education was a good economic investment.

Politicians gave lip service to the idea that everyone should go to college. No one should be stopped by a lack of money.

There was historic precedent. The G.I. Bill of Rights vastly expanded college populations and helped build prosperous post-World War II America. Putting even more through college would make us even more prosperous.

So Congress passed student loan and grant programs to make it easier for people to pay for college and university tuitions. That increased potential higher education revenues.

Surprise! Over the last three decades, tuitions rose faster than the economy grew.

For a long time, that didn't seem to be a problem. College still seemed like a good investment during the quarter century of low-inflation economic growth from 1982 to 2007. You could pay off those loans with earnings increased by your degree.

Meanwhile colleges and universities -- and not just the highly selective ones -- competed for students whose test scores would improve their ratings in the U.S. News College Guide by giving "scholarships" that actually were discounts on the tuition list price.

To attract these students, the educational institutions built fancy dormitories, gymnasiums and student centers. And they vastly increased the number of administrators, to the point where colleges and universities had more administrators than teachers.

Government helped to produce an ever-increasing demand for higher education. So higher education administrators saw no need to compete on price. Higher tuitions just gave your school more prestige.

Now the higher education bubble has burst. The Wall Street Journal reported this week that that the average "tuition discount rate" offered incoming freshmen last fall by private colleges and universities has reached an all-time high of 45 percent.

At the same time, their "sticker price" tuitions have increased by the smallest amount in the last dozen years. Tuitions for in-state students at public four-year colleges and universities also increased by the smallest amount during that period.

Applicants are negotiating bigger discounts than they used to. Market competition has kicked in.

What has happened is that in a recessionary and sluggish economy, potential customers have been figuring out that a college diploma may not be a good investment -- particularly if it entails six-figure college loan debt that cannot be discharged in bankruptcy.

The Millennial Generation that voted so heavily for Barack Obama -- 66 to 32 percent in 2008, 60 to 37 percent in 2012 -- has had a hard time finding jobs, even with diplomas in hand. Especially if their degrees are in gender studies or similar fields beloved of academics.

In even worse condition are those students who never get a degree, a disproportionate number of whom are blacks and Hispanics admitted under affirmative action programs who prove unable to keep up with the pace of instruction at schools where most students enter much better prepared.

We see in higher education something like what we saw in housing. Government programs aimed at increasing college education and homeownership, particularly among minorities, turn out to hurt many of the intended beneficiaries.

The intentions of the people who created these programs were good. The results -- well, not so much.

Home ownership is a good thing generally, but it's not good for everybody. The young and transient, for example, are often better off renting.

Higher education is a good thing generally too, but again not for everyone. People whose talents are more artisanal than academic are often better off getting a job or vocational training than seeking a degree that guarantees them student loan debt but not a job.

College and university administrators are not used to being disciplined by market forces. For years, they thought they were above all that.

Many got into the habit of producing a product that didn't serve their consumers' interests well. In a prosperous and growing economy, there seems to be no penalty for doing so.

In more straitened circumstances, they are discovering that, sooner or later, markets work. Their old business model is no longer working.

Colleges and universities have been doing a good job of meeting their administrators' needs. Now, in the new normal economy, they're scrambling to serve society's needs, as well.

[conservatism_IS_compassion]

I just put a roof on my house. I try not to think about how much I paid for it.

However, when I watched the guys humping 80# bundles of shingles up 12 or 15 or 20 feet of ladder, I thought, "they're earning their money."

In that sense, yeah - but when I had my roof done about 6 years ago, they had a gasoline-powered elevator raising the shingles up to the roof.

In fact, IMHO it should be pretty easy to design a system for doing most of the shingle-laying work by machine, too. Never having done the job myself, I may be naive about that, tho . . .

[sickoflibs]

The past few years certain Asian countries have been launching Cyber attacks on first our US government agencies, and more recently US corporations. This is real war real time.

Much of it is spying. Sneaking info past the firewalls.

So there is big $$$ in being those with technical skills to protect these computer networks.

I personally have my challenge keeping my own owned PC running correctly, so that is not my field.

My main point is there are hot and growing fields and I see so many young adults (social libs) wasting big $$$ of dead end educations.

[steve86]

I was amazed a few weeks ago when my neighbors roof was done start to finish in one day (about 12 hours). Used a crane to lift the squares and surprisingly, a crew of only four with air-powered nail guns. Roof looks fine and has stood up to a couple of good storms since.

[who_would_fardels_bear]

Somebody who has built his own compiler, maybe his own microcomputer, who understands the architecture and software inside and out, etc. is going to be more likely to guess at future attack methods and develop countermeasures before they happen.

Someone who gets a degree in "Information Assurance" will most likely just be presented with a laundry list of current attack methods and countermeasures. There's probably some sort of certification like the good ole' Novell CNE or CNA, or maybe one of those MS certs.

Then a company that pays a security consultant $1 million to tell them that the Chinese are coming, the Chinese are coming can go out an hire a bunch of IA grads who will be able to protect them against all of the threats that Symantec already does out of the box.

[sickoflibs]

RE:”Somebody who has built his own compiler, maybe his own microcomputer, who understands the architecture and software inside and out, etc. is going to be more likely to guess at future attack methods and develop countermeasures before they happen.”

Except my friend's career was exactly as you state for a college and at nights he got his Masters at IA (paid by work) and got a much better $$$ job with a government clearance and he assures me that he learned lots from the course that he needed.

[wbill]

Well....

I did a little roofing in high school. Its a backbreaking job. No way I could do it anymore, I wasn't about to try. I called in the pros.

There is quite a bit of automation available, now. Nail guns, etc. The guys I used had a lift truck to get at least some of the shingles up to the roof, on one side of the house.

One of the main reasons I picked this guy (other than it's a long-standing, locally-owned business) is that they DIDN'T use automation. Took everything off by hand. Swung the hammers to get the shingles on. It was more expensive, but well worth it. And the only issue with the entire project was that the pounding loosened a couple of recessed light fixtures. Two minute fix.

There's no substitute for craftsmanship. I spent too much money, but I'll not need to worry about another roof, again.

[Future Snake Eater]

I didn’t see anything in this article that pointed to specifics on how the bubble has burst. The perception that college isn’t worth the money is definitely growing, but that doesn’t mean the bubble has burst.

[Future Snake Eater]

There are IA degree programs? I bet that could pay off pretty well, especially if you came away with a CISSP cert.

[Utah Binger]

[RedHeeler]

Good for you!

[wbill]

IMHO, the only two certs running that are worth a flip are CISSP, and anything Cisco-related.

The rest are good for bluffing your way past HR weenies, that's about it.

Security is red-hot right now, but I gotta tell ya, I use stuff out-of-the box, and services, and such. Hackers don't attack on a 9 to 5 schedule while you're in front of your machine. It's more about the engineering, than the actual doing. Lots of tediousness and establishing and following good procedures, every single time.

Some online IT college is advertising heavy in my area..."I went to XYZ college and now I stop security attacks in their tracks!". Yeah, like the person is standing in front of their data center with an AR, or something. With all the hacks that I've been involved with (20 years worth), most of the time you don't know its happening until problems start showing up ("Why did our email server just get blacklisted????"). Or, you close the barn door after the horse gets out, and need to figure out what damage was done.

Like I said, it's about the engineering. You do the best that you can, while realizing that you need to be right every single time, while !$#@%$@$@ hackers only need to be lucky once.

Additionally, anything database-related ('big data' is the buzzword) is hot as well. If I had 'SQL' on my resume, at least where I live, I'd be doing very well indeed.

Of course, that can all change, tomorrow. Or, later today.