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Inside the Higher Education Bubble

For the last several months, an increasingly hot topic of popular discourse has been the higher education bubble. With many of the same characteristics as the housing bubble that collapsed several years ago, the higher education bubble features rapidly rising college costs, unrealistic expectations for the future value of that education, and people going to college who should not be doing so. And, oh yes, just like the housing bubble, the government is part of the problem.

In 2008, CNN pointed out that from 1985 to 2005, college tuition had increased more than four times faster than the consumer price index. Late last year the Los Angeles Times reported that in spite of the overall collapse of the economy, college tuition was still rising rapidly -- a 7.9% increase at public schools, and a 4.5% increase at private schools.

Some degrees are certainly going to pay for themselves. Students with degrees in electrical engineering, computer science, and some of the other demanding technical fields have a realistic hope of paying back their student loans. But even an optimistic evaluation, such as this one from the National Association of Colleges and Employers, admits that 2010’s graduates with bachelor’s degrees in psychology averaged just over $32,000. (Because that is the average, it means that just under half of those psychology graduates started at a lower salary.) For a student who accumulated $30,000 in student loan debt, servicing that debt is going to be painful, if at all even possible. And, of course, these are the graduates who were actually offered jobs. A bachelor’s degree is no longer the path to a certain job that it was, even in 2008.

Perhaps most troubling to me, as an adjunct history instructor at a community college, is the situation faced by college students who are like the housing speculators of 2005 and 2006. (These speculators bought houses to “flip” because everyone knew the housing market would always rise. If you had a few million dollars in savings, or you had a six-figure income, you could afford to make the payments on houses that you were not going to occupy or rent.  Wealthy housing speculators could afford to get their fingers slammed in the door when the bubble collapsed, but most speculators could not. This frenzied speculation drove some buyers out of the market by making prices artificially high, which in turn encouraged a building boom far exceeding genuine demand. Today the whole economy is suffering the hangover.) What I am seeing -- and what other faculty I talk to are seeing -- shows that something similar is going on today with college. There are students attending college who are clearly there for all the right reasons and with the necessary skills. It does not bother me that the government is subsidizing them through taxes and grants; these students are likely to more than pay back the government’s investment in the form of increased income taxes once they graduate. (Of course, they will be better citizens as well, because they have me teaching them history!)

I also see students who know that they are deficient in some basic skills, but are prepared to work hard at correcting these weaknesses. I respect these students; they try and often succeed in overcoming past mistakes and failures because they want to make something of their lives.

There are, however, a disturbingly large number of students who are wasting resources. Not surprisingly, there are students who lack the emotional maturity to be in college. They are unable to focus their time and energy on studying for tests and completing assignments. Many of these students have the skills; a few years at minimum wage asking “Would you like fries with that?” will probably fix this. (If not, there really is no hope.)