Higher Education Bubble

Posted on May 7, 2008
Filed Under Politics |

The higher education bubble? (HT: Instapundit) “Over the last 10 years, after adjusting for inflation, tuition is up 48% at public schools and 24% at private schools.” Are people with credit risk borrowing a lot of money to pay for something that doesn’t offer the returns necessary to pay off those loans?

It’s an interesting question since the cost for an education is often not that different whether you get an engineering degree or an English degree. Yet the return on investment is quite different.

Added into all this is that the “ethos” of education is such that it values education for its own sake - often disparaging more pragmatic uses of an University education. Now I’m a big proponent of “useless knowledge.” Or just learning to learn. However at the same time young people need to keep in mind the problem of a job. I was pretty clueless when I was in school. I think that were I to magically be 18 or even 21 again I’d do things quite differently.

Now I’ll ignore, for now, all those who pursue academic careers. Mainly because it’s a pretty unique job market. But also because frankly you’ll be living in poverty until you’re 30 - 38 doing doctorates, post-doctorates and so forth and hopefully will get a reasonable job at a college. But more likely won’t end up with any job in academics at all. Then when you get you’re job you’ll probably spend more time grading papers and so forth than doing the kind of research that made academics so interesting to you in the first place. (Yeah - I’ve no regrets for seeking mammon and not going further in academics. And I often think I get to study academics more than some of my friends in the academy)

Anyway, the problem is that many people who aren’t independently wealthy (which changes the rules) go after degrees in fields less likely to provide a job. Further many obviously try and do this at rather expensive colleges. Add into this that so many jobs now just demand you at least have a Bachelor’s (whether the job really requires it or not) and that increases the number of students seeking education. Which tends to promote all this.

There are of course more reasonably priced but good colleges around. And then, for many, I suspect lower tier more laid back colleges are probably the better choice. But can all this college debt continue to build without something breaking?

I managed to pay for all my college myself without taking out any loans. Yeah there were a few months of living on vitamin pills and ramen noodles more than I should have. But overall it worked out pretty well. But I keep hearing from friends who are in their late 30’s and still haven’t paid off their student debts. Get a bunch of people in that situation and add on other stresses and you could end up with a problem.

Of course the big difference from the housing boom is that you don’t have people depending upon equity for other loans. People may have wasted a ton of money and time on college degrees that don’t improve their economic standing. But ultimately is that so bad? Probably most things people spend money on are ultimately useless - far more useless than a college degree. Was spending an extra $10,000 more on a nicer car worth it, for instance? (And that’s not including interest)

Comments

One Response to “Higher Education Bubble”
1 Gerald Smith on May 8th, 2008 10:05 am

US News and World Report does an annual Best Colleges report. This year they did it differently. They did a Best US Jobs report. Why? Because so many positions are now being outsourced overseas that just getting a degree does not guarantee any kind of job whatsoever. For example, I spent 20 years in the USAF, 16 in computers. I figured I’d have a nice $100K/year job afterward, especially given the growth of tech jobs in the 1990s. Unfortunately, I retired in 2002, at which time companies were telling me I was too expensive for them; and they were outsourcing to Russia, India and China. I’m now working in a different field, which I enjoy, but no where near the money I expected to be bringing in.

Which jobs did USNWR recommend? Electrician, plumber, welder, nursing, etc. The majority of the jobs required some trades skills, but few required a degree (most of them were in the medical field).

Even with medical, it won’t be long before we outsource much of it to other countries, or “in-source” foreign workers to fill positions at a lower wage.

In my view, our education bubble is about to pop. Since “free trade” means competing against subsidization and no environmental requirements, American job seekers will find it more and more difficult to find decent paying jobs here.

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