The Education Bubble
With the increased pressures on youth to attend college or suffer at the hands of a dry job market, many compare higher education to the disastrous housing and dotcom bubbles. Rising tuition and dependence on student loans creates a real threat of a depreciation in the value of a college education. Still, some see education as fundamentally different than previous boom markets in that it is nontransferable and has traditionally been stigmatized in US culture. De-emphasizing the necessity of a college degree, redesigning colleges to make them more accessible and offering institutions incentives for student performance are just some of the ideas geared at curbing the increasing cost of education. All college students should be aware that although a degree does open doors it loses much of its value as more and more people achieve this accolade. With their workplaces under fire administrators and faculty should understand the factors at work in how their programs are depreciating. Everyone should be concerned, since if the market for college degrees becomes over-saturated we will all pay the price of meaningless degrees, poor opportunity for many in the workplace and a staggering burden of student loan debt.
Arguing the Bubble Exists
While the examples of the dot com bubble, or the collapse of the real estate market are commonly acknowledged, fewer people recognize the current education bubble. A solid belief in education as an investment continues to lure students into more schooling. Increasing tuition coupled with a crowded job market may mean that additional higher education is not for you. Thiel claims that Ivy League schools, and universities in general, are exclusionary and elitist institutions. As the economy falters, is additional debt accrued during school worth the education?
Having risen by 440 percent over the past two decades, the cost of tuition continues to increase. What is perhaps more appalling is that recent research suggests college students do not learn nearly as much as is believed. Given these two findings, it is hard to accept that the increased cost warrants the product. Alternative resources such as online college courses and other modes of distance learning are often more economical choices. An increased emphasis on attending college, paired with astronomical tuition rates may push things too far.
The process of taxing and lending which resulted in the mortgage bubble is strikingly similar to that seen in student loans. Students are increasingly paying more for an education, but the return for that investment is debatable. Critics claim that the resulting product from higher education, in many cases, is not worth the time or cost. Considering the average cost of private universities over the necessary amount of time to earn a degree, is time spent in school worth more than what you could be making as an employee?
Even though we may want to believe that attending college will result in a better job and more money, is it possible that we may be better off entering the work force early? Analyzing the tremendous debt incurred through student loans, the average wage for many degree holders does not even out. Census data, tax data, and student loan information indicate that currently most people would be better off saving money. At the unbelievable rate at which tuition is increasing, these findings only become more true.
Disagree with the Idea of a Bubble
Whether or not there is an education bubble, there remains a number of problems with American perceptions of higher education. Education can be an enriching and valuable experience, but financial incentives must also be considered. When determining whether or not to attend graduate school, how can you be certain that it will actually help you? Even though students may consider their endeavors personally enriching, the financial restraints placed upon them may be severely limiting.
Despite the sometimes grim prospects that students are faced with after graduating, a college education remains valuable. Often comparing the education bubble to real-estate, many fail to see that a college education is not quite a commodity. Unlike housing, it is not possible to sell off your education, and debt must be paid for. Both factors mean that such a bubble could not truly burst. Research indicates that college educated individuals still enjoy higher employment rates. Ultimately, what it comes down to is the amount of debt students are willing to accept.
The argument that an education bubble could burst is a tempting one. Sharing many characteristics with the recent real estate disaster, people are afraid that they will be victims in the next great economic collapse. Despite these many similarities, the education bubble situation is drastically different. A college degree operates differently in an economy than real estate. Education is not susceptible to the same economic pitfalls that resulted in the the real estate crash
Given the rate of increase in college enrollment, it is unlikely that any sort of collapse will occur. The perceived prestige of a diploma is so high that colleges and lending companies can depend on income. Having a revenue stream that is nearly guaranteed means that these institutions can rest easy. A culturally engrained belief in college education continues to fuel higher learning, with no indication of stopping any time soon.
Separated by extreme viewpoints, debate surrounding the education bubble mostly remains stagnant. It is important to consider why the analogy of a bubble is not appropriate for higher education. While many attempt to impose economic qualities which simply do not apply to education, few consider the institutional issues at play. The cultural understanding of higher education as a commodity has lead to a huge oversight.
Conceding that some similarities between mortgages and student loans are valid concerns, the situation is not as grave as it seems. Real estate collapsed because of the emphasis placed on credit, and hypothetical funds that were dolled out en masse. Having no turn around value means that college educations can not be openly traded or sold. Low cost, high quality alternatives for students mean that they can attain a valuable education at a fraction of the price.
What's Going on in Higher Education in other Nations?
The education bubble may be in the foreground of many American's minds, but countries like the United Kingdom show no signs of such phenomenon. Strict regulations prevent fees from exceeding the cost of delivery. Educational institutions in the UK have effectively incorporated a massive number of students, while maintaining a relatively low cost. The financial figures surrounding higher education show no indication of a bubble in the UK.
Currently, events in Tunisia provide valuable insight into our own higher education concerns. A relatively mild dictatorship and strong economy make Tunisia an above average political and economic environment. Regardless of the apparent success of this country, its citizens are attempting to overthrow the government. Boasting a hugely successful educational system for years, the lack of employment opportunities for educated individuals is abysmal. Nearly half of recent college graduates are unable to attain jobs, while the government spends an almost unprecedented amount on education.
Having once experienced severe restrictions on political, social, and educational freedoms, higher education is a dream for many in South Africa. Facing unique challenges, the higher education system responds to a blurred mixing of the developed and undeveloped world. Some students seeking higher education are those who have attended schools that are as good as, or even better than some schools in the US. Also among them are those which come from institutions with severely limited resources. Beyond education, the economic environment displays a lack of entrepreneurship. The high unemployment rate, and sometimes impractical attempts to achieve a college education could be countered through entrepreneurial endeavors.
Possible Solutions to the Bubble
Concepts surrounding the education bubble display universities as elitist and exclusive institutions which take advantage of cultural assumptions and perspectives. If people are concerned that a higher education bubble (being based upon traditional educational systems) may threaten the economy, why not just change those educational systems? It is entirely possible to create systems of learning which utilize established knowledge through cost effective alternatives. Motivated students who do not wish to steep themselves in debt may do well in universally accessible modes of education.
Assuming there is a higher education bubble, what can we do to prevent it from exploding in our faces? What factors are contributing to its growth? While enrollment is increasing, the data indicate that college remains important in helping graduates secure employment. The increased demand for higher education greatly effects related policy. As a result of this demand and the American concept of college as social entitlement, federal subsidies are put into place. These subsidies essentially guarantee money to educational institutions, which allow universities to operate ineffectively.
In the same way that many Americans believe that attaining a house of their own is the ultimate achievement, students place an extraordinary emphasis on attending college. In the face of ever-increasing tuition, students are crippled by debt. The problem with higher education in America is that though many involved are truly passionate, interested individuals, a number of students only attend because "they are supposed to." College can be an enriching and beneficial experience, but not when those involved are only interested in getting a diploma.
Easy access to subsidized government loans can be helpful, but they are also partially responsible for the housing bubble of the 2000s. In an environment which shares some key similarities with the mortgage crisis, for-profit colleges are akin to loan companies which took advantage of eager buyers. Even within the last decade, demand for attending college rose by over 400 percent. Of that number almost one quarter attend for-profit institutions. These students go on to make up the majority of those who default on their loans, while the institutions they attend often see absurdly high profit margins. Reforming policies governing such institutions are essential in preventing negative repercussions.
The possibility of an education bubble poses serious questions of the higher education industry. The current situation would lead many to believe that change needs to occur. One solution to these problems is to utilize cost effective practices such as distance learning. With evidence pointing to the degradation of college degrees, the available data suggest that the current higher education system is ineffective. While institutions work to maintain the status quo, how are they supposed to enact this change?
Individual motivation may be more significant to the return of an educational investment than the prestige of an attended learning institution. Programs that reward student performance may result in better taxpayer payoff. Further, high quality non-traditional institutions will result in better values for taxpayers. Instating policies which reward such institutions will lead to a system that is able to consistently contribute greater return.
Overview of the Decreasing Value of a Degree
The Value of a Degree The John William Pope Center for Higher Education Policy, Jenna Ashley Robinson, 2011
The costs associated with higher education and attaining a degree are quickly exceeding the financial value of education. Despite the popular thought that a college educated individual earns a million dollars more in their lifetime, research suggests that the cost of education and foregone wages may bring that figure down to $150,000-$500,000. Academic performance has noticeably decreased over the years, while costs continue to rise. Many recent graduates experience lower employment rates than before, and overall perform poorly on learning assessments.
The Cost of the College BubbleThe John William Pope Center for Higher Education Policy, Jenna Ashley Robinson, 2011
Financial rates associated with higher learning have dramatically increased across the board. When compared to overall inflation, as demonstrated by the Consumer Price Index, the rate of increase for college education is on a whole different level. Even within the span of a single year the average debt owed by students has increased significantly. Institutions which receive federal student aid are required to provide data which indicates their overall cost of attendance. In time this data will inform us of the true cost of attending college.
Many individuals plan on saving money in order for their children to attend college, but at the rate at which tuition is increasing it is becoming nearly impossible to actually save enough for a college education. National policy is such that not even bankruptcy can save graduates from the exorbitant fees of student loans. The current trends in education are unsustainable, and this is only made worse by government intervention in funding.
Long revered internationally as some of the greatest universities in the world, America's higher education system dominates the ratings tables. With such perceptions come increased demand. This increased demand fuels the analogy of the educational bubble. While median income has seen a modest increase over the past forty years, the cost of attending higher education facilities has increased by a factor of 15-24 depending on type of university.
Nearing $1 trillion, student loans are currently the country's largest source of debt. The education bubble is significantly larger than that of the housing bubble, boasting an increase which is approximately eight times greater. Government subsidies and monetary guarantees have resulted in many primary lending agencies aggressively marketing to college students. Earlier programs such as the Federal Family Education Loan Program provided government backing of private student loans, which made money lending especially enticing. Though you may think that increases in tuition would result in better instruction, the money often goes to the wages of administrators and other figureheads.
Given the turbulent times faced by students and recent graduates, what exactly does a diploma mean? Americans are forced to re-evaluate their concepts regarding higher institutions and their role in the marketplace. When alternatives are so much more cost efficient, it is difficult to rationalize spending what is presently demanded. The concept of a diploma as a credential is a misguided one, even if it does carry a certain weight.
A weak economy, and few job prospects force us to ask ourselves about the true value of a college education. As college graduates have remarkable difficulty in attaining employment, those with jobs are often working in positions which do not require diplomas. Further, many of the skills that are gained during a traditional college education are not relevant to these jobs. Others maintain that the higher education sector remains valuable for its ability to allow students to discover their interests while improving those skills. The challenge presented to us by the presence of this educational bubble is to ascertain the strengths, weaknesses, and appropriateness of college for different people.
While the data surrounding college education are overwhelming, the topic is receiving relatively little attention. If skyrocketing fees and tuition marks college education as a scam, how can we benefit from this? Often graduating into a hostile environment that sees students accrue hundreds of thousands in debt, it is difficult to justify the practice of attending college. In the world of education, individual motivation and hunger for knowledge trump prestige and financial investment.
Ideas about the Future of Education in Light of the Bubble
The model of the university has remained almost unchanged for hundreds of years, championing the value and scarcity of knowledge and authenticity. At a time when information is massively available, how can this model persist? Further challenged by fees which have reached an all time high, and decidedly decreased results, it simply cannot. New educational models which take available resources into consideration must be formulated. As we face different challenges and society emphasizes different kinds of knowledge, we must also create appropriate curriculum and modes of learning.
The current higher education environment is a terrible convergence of debt, record enrollment levels, and institutions which are strapped for cash. Limited resources force universities to cut valuable programs, ultimately resulting in lower quality institutions and education. Schools are therefore forced to make drastic changes in their approach to education. Solutions may involve simply becoming more efficient in the distribution of funds, or establishing sound investment strategies.
While many may feel pressured to attend college, it really is not for everyone. Exorbitant increases to cost have made even more people realize this. The idea of college as social entitlement is a dangerous one which fuels increasing tuition and student fees. For some, community college provides a less expensive educational opportunity. Requiring less financial investment and time commitment, community college may be the answer to other four-year options.
As a society, we are approaching "the end of work." Automation and online business is shifting the American economy and educational system. Traditional models of business and education have reached their end, and are no longer appropriate for the current economic climate. Perhaps more than anything else, consumers are becoming burdened by their interactions with the educational system. Decentralization of institutions may be the change needed in order to improve education.
Prospective & Current Students
© 2012 Online Graduate Programs