The Coming Burst of the College Bubble

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I began teaching college before I completed my Ph. D. After 25 years, family  reasons led me to take early retirement from being a Full Professor. So I know something about America’s colleges and universities.
In my long years of college-university teaching, at least a quarter, if not as many as 40%, of undergraduates are really not college material. I am not alone in that assessment.

Higher education’s bubble is about to burst

By: Glenn Harlan ReynoldsWashington Examiner – June 6, 2010
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.
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.
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. Payments on the debt are about $700 per month, equivalent to a respectable house payment, and a major bite on her monthly income of $2,300 as a photographer’s assistant earning an hourly wage.
And, unlike a bad mortgage on an underwater house, Munna can’t simply walk away from her student loans, which cannot be expunged in a bankruptcy. She’s stuck in a financial trap.
Some might say that she deserves it — who borrows $100,000 to finance a degree in women’s and religious studies that won’t make you any money? She should have wised up, and others should learn from her mistake, instead of learning too late, as she did: “I don’t want to spend the rest of my life slaving away to pay for an education I got for four years and would happily give back.”
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.
Yet today’s college education system seems to be in the business of selling parts two and three to a much greater degree than part one, along with selling the even-harder-to-quantify “college experience,” which as often as not boils down to four (or more) years of partying.
Post-bubble, perhaps students — and employers, not to mention parents and lenders — will focus instead on education that fosters economic value. And that is likely to press colleges to focus more on providing useful majors. (That doesn’t necessarily rule out traditional liberal-arts majors, so long as they are rigorous and require a real general education, rather than trendy and easy subjects, but the key word here is “rigorous.”)
My question is whether traditional academic institutions will be able to keep up with the times, or whether — as Anya Kamenetz suggests in her new book, “DIY U” — the real pioneering will be in online education and the work of “edupunks” who are more interested in finding new ways of teaching and learning than in protecting existing interests.
I’m betting on the latter. Industries seldom reform themselves, and real competition usually comes from the outside. Keep your eyes open — and, if you’re planning on applying to college, watch out for those student loans.
Examiner contributor Glenn Harlan Reynolds hosts “InstaVision” on and blogs at He is a professor of law at the University of Tennessee.
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0 responses to “The Coming Burst of the College Bubble

  1. Hey, like Bluto said in Animal house, “Seven years of college down the drain– might as well join the f*ckin’ Peace Corps.” Seriously, it could be called College: High School, Part II any more… I didn’t have to pay tuition and thought it was worth every penny, I’d have actually paid money if they’d have let me just test out, get the credential and go forth with life instead of twiddle my thumbs in a forced left/libtard second childhood “college experience” I didn’t want for a few years.

    • Pardon my whine (I know, I want some cheese with that?) but if everyone goes to college and gets a degree then what’ll it be worth? Why not include that kind of material in high school then? (A hundred years ago, when high school wasn’t required, they sure did.) Pretty soon we’ll all have to have a graduate degree to signify what being a “college graduate” does now or did recently. A bunch of extra years for the end effect upon the person of high school when it was still optional… and having to pay for it, too. (Trust me, anyone who got the equivalent of a good college education by the time they graduated high school is going to royally ticked-off at the waste of having to spend another six years of their life and get hip-deep in debt for two pieces of paper to be given a little credit for what they can already do for getting-a-job purposes and nothing else.)

  2. I remember going to college. My brother, now a retired government lawyer, told me at that time if I did not get a Doctorate’s degree my efforts were nothing more than an exercise in latent juvenile wishful thinking. Kinda like an old man wishing he could make love to that young chick walking down the street.
    I laughed at the analogy but then after seven years of colleges and Universities, I still did not have my Doctorate’s and though I took the LSAT I never entered Law school. In the eyes of the world I was still an uneducated unemployable hopeful. I now understand what he meant.
    One of my sons is in college and I help him with his papers. I read the criteria of the teachers and I wonder – how did they graduate to the degree where they can teach at the University level when the say things like, ‘Please evaluate the following and tell what you think is key points of the arguments.’
    Grammatically, I thought both the structure and the tense incorrect. This is a on line teacher. I would think an on line teacher would be more careful about sentence structure and grammar.
    A few years ago the University of Florida opened up new studies for entering freshmen. The studies were in English and Math. These classes were offered to those individuals who graduated from State High Schools with honors but were unable to enter classes at the college level because they did not understand the two disciplines.
    These were and are students who, after twelve years of education, earned scholarships to the State Universities but could not pass the entrance exams.
    How does one earn an academic scholarship but is unable to pass a university entrance exam. Most of them did not understand English grammar and most of them could not do math at the University level. That’s the equivalent of basic eighth grade arithmetic.
    I found the article extremely interesting and quite disturbing. This is what our government education system is doing for the youth of America.
    The higher education bubble is about to burst because the level of education does not include how to exist in an information society.
    This is an information world. In order to coexist in a world of information one has to be armed with the correct weapons.
    Our students are falling behind the rest of the world because Our schools have failed to properly educate them.

    • Hey, I hear you. One of the annoying things about college was how folk with a dozen or more years of education couldn’t spell the gerund of the F-word correctly in their graffiti; e.g., “fuken”– they and/or their parents wasted a lot of time and money getting there to ’em that point.

      • Dang, I should type when tired and criticizing other’s crappy writing– “getting ’em there to that point,” I should’ve written.


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