POPPING THE HIGHER EDUCATION BUBBLE:

In the private sector, bubbles, like those in the housing or stock markets, usually lead to “crashes” and sharp falls in prices along with diminished volumes of activity. In higher education, massive government subsidies mute the decline in volume (enrollment) and prevent big price (tuition fee) crashes, but some sort of correction is nonetheless observable.

Lots of signs show the bursting of the bubble is underway. Enrollments are down, lower today than six years ago –a first decline of that duration in modern peacetime American history (including the Great Depression). Tuition increases are moderating and a few colleges are even starting to cut published tuition fees (sticker prices). Even some prestigious schools such as Oberlin College are having financial problems because their freshman class is smaller than anticipated. Student loan delinquency is high and rising, remarkable since the economy has been having the best performance in years, with real output growing at over a three percent annual rate and the unemployment rate at a very low 4.1 percent. . . .

Even more ominous is a clear decline in public support for colleges. This is critical because higher education depends on governments, directly through grants or indirectly through the student financial assistance programs, for a large portion of their financial support. If higher education loses political appeal, declining public financial subsidies will quickly follow. Three surveys in 2017 show many are skeptical of higher education’s contribution. For example, a Pew Research Center survey showed 36 percent of Americans believed higher education had a “negative effect on the way things are going in this country.” A strong majority (58 percent) of Republicans had that opinion, which is no doubt one reason why a number of provisions in the recent Republican-led tax reform bill adversely impact on universities.

There are even potentially some legal clouds on the horizon. Universities are populated by lots of attractive young persons, so the possibility of sexual harassment lawsuits is certainly high. To cite an example, at my own school, Ohio University, an English professor recently lost his job (after a good deal of legal maneuvering), and the university faces potential meaningful damages in civil proceedings brought by female graduate students who allege they were sexually harassed and that university officials did nothing to stop it. Prominent faculty at other schools (for example, Columbia) are facing accusations of misconduct. Also, as evidence mounts that football head injuries have significant long-run adverse effects on human cognitive function, the potential of expensive lawsuits against universities rises dramatically.

Enrollment demand is not likely to surge soon, in large part because of a demographic reality: a stagnant population in the 18 to 24 age group, along with a longer-term problem of general declining population growth.

Nope.