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HIGHER EDUCATION BUBBLE UPDATE: As HELOC Delinquency Rates Hit A Record, Are Student Loans Next?

HIGHER EDUCATION BUBBLE UPDATE: “For years, Silicon Valley has failed to breach the walls of higher education with disruptive technology. But the tide of battle is changing. A report from the front lines.”

HIGHER EDUCATION BUBBLE UPDATE: Higher Education Bubble Spawns Demographic Decline Among Educated Americans.

As college costs and student loan debt soar (partly due to opulent university spending) and unemployment rises, young college graduates, crushed by student loan debt, are deciding not to have kids, resulting in demographic decline among the educated in America. In recent years, student loan debt has skyrocketed from $100 billion to nearly $1 trillion, creating a potential debt bomb for the American economy.

France and England now have higher birth rates than America. College-educated people in their 20s are definitely more likely to have kids there. “American fertility is now lower than that of France” and the United Kingdom, notes The Economist, even though American fertility was higher than France or England in 2007.

Why the recent change? Could it be because college graduates in England and France have less student loan debt? Tuition is lower there. Per capita expenditures are lower at their elite schools. France and England spend much less on physical plant for colleges and universities. Faculty salaries don’t get as high there.

Note that this is one area where the usual suspects aren’t calling for us to be “more like Europe.”

UPDATE: Stereotyping all men as sexual predators in need of re-education probably doesn’t help, either.

HIGHER EDUCATION BUBBLE UPDATE: Niall Ferguson: College Becoming the New Caste System. “The real problem is not that our college system is failing. The problem is that it is succeeding all too well—at ranking and sorting each cohort of school-leavers by academic performance. . . . In 1997, just over a hundred elite colleges, which admitted fewer than a fifth of all freshmen, also accounted for three quarters of the ones with SAT or ACT scores in the top 5 percent. Meritocracy in action? The problem is that this cognitive elite has become self-perpetuating: they marry one another, live in close proximity to one another, and use every means, fair or foul, to ensure that their kids follow in their academic footsteps (even when Junior is innately less smart than Mom and Dad). Paradoxically, our universities now offer social mobility mostly to foreigners. For Americans, they risk creating a new caste system.”


The cost of a college education has soared far in excess of the cost of health care. This is in spite of — or, more accurately, because of — massive government involvement in subsidizing and running schools. On the one hand, we have President Obama, who wants to double down and have Uncle Sam play a larger role in the classroom. On the other, we have reformers like presumptive GOP vice-presidential nominee Paul Ryan, who wants to limit the growth of Pell grants while ensuring the neediest students still have access. . . . College tuition grew at almost 7.5 percent annually between 1980 and 2010, when average inflation was 3.8 percent. At less than 6 percent annually, even health care costs grew at a slower rate than the university tab.

Young people aren’t getting much in exchange for this huge outlay. While enrollment has increased, completion rates remain dismal. Barely a third of students complete their degrees in four years, and less than 60 percent earn their degree in six years, according to Mr. McCluskey. That means at least two out of five enrollees don’t finish and fail to reap the benefits of a post-high-school education. Even those who complete their programs of study and are fortunate enough to find employment find that in one out of three cases, their degree isn’t required for their work.


HIGHER EDUCATION BUBBLE UPDATE: Morris Brown College Files For Bankruptcy.

HIGHER EDUCATION BUBBLE UPDATE: Pennsylvania Universities Expect Declining Enrollment. “The projected loss of roughly 1,500 students is modest for a system with more than 118,000 students, and not every campus says it expects to see a decline. Still, it is a significant departure from a trend that over 14 years lifted State System enrollment by 28 percent, from 93,711 to 119,513 students. And it is adding uncertainty to campuses already dealing with rising costs and a state appropriation that is 20 percent smaller than two years ago. Student tuition and fees, along with state funds, are the two principal sources of State System revenue. If both take a hit simultaneously, there is only so much schools can do to offset the loss.”

Who could have seen this coming?

UPDATE: Sallie Mae Survey Highlights Changing Marketplace, Students.

College administrators are justifiably worried about whether they’re going to be able to balance their budgets in a changing economic landscape, and a survey released by Sallie Mae last month didn’t do much to put them at ease.

The report’s headline finding is that spending on colleges — a number that includes parent and student income and savings, federal and private loans, grants and scholarships, and money from friends and relatives — by traditional-aged students and their families dropped over the past two years, a 13 percent decrease between 2009-10 and 2011-12.

A 13 percent drop in spending across all institutions types would represent a dramatic shift in the market indicating that large numbers of students and families had chosen less-expensive institutions over costlier ones, opted to live at home instead of on campus, or made other choices that cut their own spending — and, in turn, colleges’ revenues. That is revenue that tuition-dependent institutions of all types would have a hard time replacing. . . .

Despite its headline-grabbing nature, the Sallie Mae survey doesn’t paint quite as dramatic picture as it seems on first read. That’s partly because the two-year drop begins after a large spike in spending in the 2009-10 school year that coincided with the recession. The study’s findings are also tempered by other trends such as increases in college-going rates and shifts in who pays for college. While the findings of the Sallie Mae study still portend financial difficulties for some colleges in the years ahead, they don’t signal quite the sea change that they seem to at first glance.

Hmm. Well, possibly.

ANOTHER UPDATE: Applications are up at Illinois, though.


Students voted disproportionately for Barack Obama in 2008, and Obama, as president, reciprocated by nationalizing the student loan program that allowed private banks to offer government-insured loans (“Sallie Mae”). The federal government now issues about 85 percent of student loans. And he more recently pushed Congress to keep the interest rates on those loans from going up to the rate Congress had planned at the time of nationalization.

But this has only intensified a problem inherent in this program from its inception: moral hazard. It has proven powerful at inducing rationally self-interested people to behave badly – in this case, to pile up debt pursuing degrees that are often of dubious worth. . . .

To begin with, the student debt load has skyrocketed. There are now more than 3 million households with debt of more than $50,000, an almost four-fold increase over a decade ago (in inflation-adjusted dollars), and 10 times higher than in 1989. And the debt is rising most quickly among the upper-middle-class households.

Because taxpayer-backed student loans cannot be discharged in bankruptcy, an especially worrisome unintended consequence has emerged: Student loan debt is hurting Americans entering into retirement. The Treasury Department has recently confirmed that it is garnisheeing seniors’ Social Security income for unpaid student loans. And this practice is growing: Only six seniors had student loan debt payments withheld from their Social Security checks in 2000; by 2007 it rose to 60,000 seniors; and it hit a record 115,000 seniors last year.

Gee, if only there were a concise, easy-to-read description of this important national problem.

HIGHER EDUCATION BUBBLE UPDATE: College diploma suddenly worth less on Obama site.

A college degree just lost some value, according to the Obama-Biden campaign website.

Overnight, the expected income of a degree touted by the campaign dropped $5,000, to just $45,000, hardly worth it some might say when up against the median family income average of $45,800.

The changes hit the new Obama education webpage without notice and followed another that removed the word “expensive” from a sentence on where children want to go to school. The opening line used to read: “My child wants to go to an expensive college. Can she afford it?”

It was Jeryl Bier who originally noticed. Good catch. Hey, I was encouraging Obama to do some remedial reading on higher education just the other day. I even suggested he could read the book on a single fundraising trip. Maybe he got the word. . . .

HIGHER EDUCATION BUBBLE UPDATE: Think College Is Expensive Now? Wait Until ObamaCare.

HIGHER EDUCATION BUBBLE UPDATE: Washington Monthly: Obama Should Fire The College Loan Repo Men. “Our current system for collecting student loans makes no distinction between deadbeats who cheat and the much greater numbers of people who just don’t have the money to repay. As predatory debt collection agencies ruin the lives of more and more Americans, we are ignoring an easy and fair solution.”

Just be sure to give the colleges some skin in the game.

CAMPAIGNING AS HE’S GOVERNED: Obama Criticizes Romney For Suggesting College Students Consider Costs, Avoid Debt in Choosing College.

Here’s some Presidential remedial reading. Give it a try, Barack. You can probably finish it on a single fundraising trip.

Meanwhile, Romney seems pretty in-tune with this NPR story. You might want to turn on the radio now and then, Prez. Your bubble’s gotten so tight, even NPR would let in a little Fresh Air.

HIGHER EDUCATION BUBBLE UPDATE: Uncomfortable truths your college won’t tell you, parts one and two.

HIGHER EDUCATION BUBBLE UPDATE: “For more than a decade Emory University intentionally misreported data about its students to groups that rank colleges.”

The higher education bubble is looking more like the subprime bubble all the time.

HIGHER EDUCATION BUBBLE UPDATE: Higher Education Invests in Marketing: “The Wall Street Journal reports that a number of universities, wary of the public perception that the degrees they offer may not be worth the student loan burden, have taken to hiring highly-paid “CMOs” (Chief Marketing Officers) to build their brands and coordinate their admissions offices’ sales pitch. Although many in academia disdain corporate marketing methods, the practice is becoming increasingly common.”

They’d be smarter to lower tuition and increase value, but that would require sacrifice by internal constituencies. I agree with Peter Thiel here: “If you need large marketing budgets, it suggests that something has gone wrong with the substance of the product.”

HIGHER EDUCATION BUBBLE UPDATE, BRITISH EDITION: A-level students must be told the whole truth about the value of a degree: Mis-selling of higher education is one of the least remarked upon scandals of our time.

Least remarked upon? Some of us have been trying! And this sounds familiar:

From the moment that John Major started to abolish student grants, the British government has been in the business of selling (rather than simply providing) higher education. Yes, studying costs, runs the argument, but it is an investment: what students pay is a small fraction of what they will get back.

Then came the proliferation of courses and institutions, from BA (Hons) in Golf Management at the University of the Highlands and Islands to Trade Union Studies at Blackpool College. The definition of a degree has changed massively, but the financial argument used for getting one has not changed at all.

Costs have gone up, value has gone down. Plus this:

Of recent graduates, almost a third are in jobs that don’t require anything more than GCSEs. One in 10 recent graduates is now on the dole. All youth unemployment is tragic, but there is something especially scandalous about young people who have been sold a vision of graduate life, only to find it was a piece of spin to sweeten the bitter pill of student loans. The mis-selling of higher education is one of the least remarked-upon scandals of our time.


HIGHER EDUCATION BUBBLE UPDATE: Mark Perry on “The Academic Conference Racket.” Hey, don’t be too harsh — it’s not like we’re talking the GSA here.

HIGHER EDUCATION BUBBLE UPDATE: Online Education Tsunami Gaining Momentum. Online education won’t replace traditional instruction, but it will certainly compete with it quite successfully in many applications.

HIGHER EDUCATION BUBBLE UPDATE: Virtually Decorated Dorm Rooms.

HIGHER EDUCATION BUBBLE UPDATE: Majoring In Free Content. “The Saylor Foundation has nearly finished creating a full suite of free, online courses in a dozen popular undergraduate majors. And the foundation is now offering a path to college credit for its offerings by partnering with two nontraditional players in higher education – Excelsior College and StraighterLine.”

All is proceeding as I have foreseen.

HIGHER EDUCATION BUBBLE UPDATE: Student Loan Debtors May Not Be Able To Get Mortgages.

HIGHER EDUCATION BUBBLE UPDATE: A Push Grows Abroad for Open Access to Publicly Financed Research.

FOR A LIMITED TIME, my The Higher Education Bubble is $1.99 on Kindle. The Kindle version has links and video, too, which the paper version (naturally) lacks. (Bumped).

HIGHER EDUCATION BUBBLE UPDATE: The Upper-Middle Class Has Itself to Blame for Student Debt. “When it comes to paying for college, upper-middle-class families often get the worst of all possible worlds. They’re not wealthy enough to treat the cost of tuition as an afterthought. They’re not needy enough to qualify for big discounts. But they’re often status conscious enough to pay whatever’s necessary for their kids to attend an elite college.”

I think we’re beginning to see some buyer-resistance, though.

FOR A LIMITED TIME, my The Higher Education Bubble is $1.99 on Kindle. The Kindle version has links and video, too, which the paper version (naturally) lacks. (Bumped).

HIGHER EDUCATION BUBBLE UPDATE: We Can’t Afford Any More In-State Students!

HIGHER EDUCATION BUBBLE UPDATE: Big Troubles Ahead For Online Learning? I don’t think I buy this critique. The real problem with higher education as it exists today isn’t class-resentment of academics on the part of other Americans, it’s that higher education costs too much and delivers too little, and over the past decades the costs have been going up faster than inflation even as the value delivered has gone down. And that value has gone down even in non-economic terms, as the rigor in even “useless” humanities courses has faded.

HIGHER EDUCATION BUBBLE UPDATE: Does Student Loan Debt Put a Damper on Your Relationship? “About 37 million Americans are weighed down by college debt, according to a recent report from the Federal Reserve Bank of New York. Twenty-seven percent of those students and ex-students also have past-due balances. The loans, whether they are his, hers or collectively his-and-hers, can be toxic for budding romances or new marriages.”


The spiraling rise of component costs in higher education are helping to inflate the higher-education bubble. One of the reasons those costs are out of control is that colleges and universities see no merit in keeping track of some of the larger ones. You cannot exercise fiscal discipline if you have no idea what you’re spending. Higher education has at least two major cost drivers that it hides from rational oversight: diversity and sustainability. . . .

Of course, diversity and sustainability have real costs, even if they aren’t properly counted or disclosed, and such ideas can and should be subject to critical scrutiny. I’ve been doing my part in developing critiques of both movements. The dysfunctions in higher education’s financial model seem likely to make these matters more urgent. The “common good,” as my correspondent phrases it, isn’t achieved by pretending that we can ignore costs and bypass reason. Ostriches may achieve a certain moral clarity but we would do better from a higher vantage point.

When I see a school bragging about its “sustainability” efforts, I take that as an indicator that it’s on an unsustainable financial path. And I wrote at some length about university administrations’ efforts to expand diversity bureaucracies even as they cut teaching faculty.

PROF. WILLIAM HENDERSON: Federal Funding of Higher Education–A Bubble that is Going to Burst.

Student loans are viewed as “assets” by the federal government … until they become uncollectable, in which case the value of the assets eventually has to be adjusted through write-downs, just like mortgages in the mortgage crisis. Extensive use of Income-Based Repayment makes it possible for a student loan to be simultaneously uncollectable but not in default.

Folks, I am an unapologetic New Deal Democrat. But the current “system” of federal higher education financing is near perfect insanity. We set tuition and, no questions asked, the federal government writes us checks in exact proportion to students’ willingness to sign loan papers. For young people who have never worked, it is all like monopoly money.

The only way the math works is if the real earnings go up en masse for virtually all college and professional school graduates. In a rapidly globalizing world in which our students are competing against Chinese and Indian professionals, the assumption of mass rising real incomes is implausible. See, e.g., views of economist Alan Blinder in this NPR article.

Right now we–higher ed and the nation as a whole–are maintaining the illusion of prosperity through debt financing heaped on naive young people. This is immoral in the extreme. Moreover, in the long run, it is economic and political ruination.

Couldn’t have said it better myself.

Related: Three Law Schools Busted for Underreporting Student Debt Load by 63% – 234%.

HIGHER EDUCATION BUBBLE UPDATE: Coursera Tops 1 Million Students. “Coursera, the company that provides support and Web hosting for massive open online courses at top universities, announced Thursday that more than 1 million students have registered for its courses.”

HIGHER EDUCATION BUBBLE UPDATE: The Future of Online University Education. “The current rate of tuition hikes is clearly unsustainable, and I believe that within the next 10 years there will be a big disruption. The traditional 4-year college experience won’t go away, but what if you could also earn credits with an online class taught by an Ivy League professor and graded to equivalent standards of mastery? What if it cost less than community college?”

HIGHER EDUCATION BUBBLE UPDATE: Big Jump in Student Debt for Well-Off Families. “The biggest jump in student borrowing (by economic group) between 2007 and 2010 was from families with incomes of $94,535 to $205,355.” That makes sense. These are people who are too “well-off” for price discrimination financial aid, but not well enough off to bear the full sticker price.

But we’re starting to see more price resistance. Good.

HIGHER EDUCATION BUBBLE UPDATE: Feds Dock Social Security Checks For Unpaid Student Loans: More retirees are falling behind on student debt, and Uncle Sam is coming after their benefits. “From January through August 6, the government reduced the size of roughly 115,000 retirees’ Social Security checks on those grounds. That’s nearly double the pace of the department’s enforcement in 2011; it’s up from around 60,000 cases in all of 2007 and just 6 cases in 2000.”

HIGHER EDUCATION BUBBLE UPDATE: Bernanke Just Assured That The Student Loan Bubble Will Be The Next “Financial Stability Issue.”

HIGHER EDUCATION BUBBLE UPDATE: Student Loan Debt Weighs Down Recovery. “Finally, we have some (arguably) good economic news: Americans’ credit levels have returned to their pre-recession peak of $2.58 trillion. This is usually a good sign for the economy. Higher credit means more consumers are shopping, more banks are lending, and confidence in general is up. But as the Wall Street Journal points out, this news comes with a caveat, and it’s a big one.Sstudent loan debt accounts for nearly one-third of that figure and is now second only to mortgage debt as the leading form of debt held by Americans. This seriously undercuts the otherwise good economic news, as student loan debt provides a considerably smaller boost to the overall economy than other forms.”

HIGHER EDUCATION BUBBLE UPDATE: Student debt follows growing number of borrowers into their 50s, 60s.

HIGHER EDUCATION BUBBLE UPDATE: Families Make Big Changes To Pay For College.

“I think I’ve maybe mortgaged my future in ways that I couldn’t have imagined when I went back to school.”

She has no savings, no money put away for retirement and is thinking of taking on a second job to pay off her kids’ loans.

And she even has a little bit to pay off in student loans from her first degree — from 1996.

Despite her family’s growing student loan debt, O’Brien still believes in the value of a college education. She says it was her first degree — in French and international studies — that taught her how to think critically. And she wants the same for her kids.

Hmm. Did it?

A little inexpensive reading material could prevent this.

HIGHER EDUCATION BUBBLE UPDATE: Peter Wood: Too Many College Students? Yes, Unfortunately.

HIGHER EDUCATION BUBBLE UPDATE: The Economist: The college-cost calamity — Many American universities are in financial trouble. “Four-year residential colleges cannot keep on forever raising their fees faster than the public’s capacity to pay them, especially when online degrees are so much cheaper. Universities that fail to prepare for the hurricane ahead are likely to be flattened by it.”

With a nice quote from The Higher Education Bubble.


Since 2009, the UC Board of Regents and President Mark Yudof have responded to state retrenchment by taking the axe to their campuses—cutting hundreds of millions of dollars from UC’s budget, raising tuition 32% and more recently proposing another tuition hike of 81% over the next four years. The response has been rallies, direct actions, and widespread protest among faculty, staff and students.

While many of these actions have called for an end to Operational Excellence, movements for greater democracy in university governance face a variety of obstacles. At UC, knowledge workers are divided among an alphabet soup of bargaining units, each covering campuses across the state: the UAW (grad teachers), CUE (clerical workers), UPTE (technical workers), AFSCME (service and maintenance), the AFT (lecturers and other staff), and then undergrads and tenure-track faculty, who don’t have formal bargaining power. As Smith puts it, “There are coalitions that have been built that are working, it’s just that there’s a lot coming at us. We have to be continually regrouping, moving forward.”

Meanwhile, dissident university staff face threats to their already insecure jobs. “I have spoken to next to no individual staff who welcome the idea of shared services, but nobody will speak out,” says one employee, who has worked in managerial and sub-managerial capacities and wished to be kept anonymous. “People are mostly doing like I am doing, counting the years to retirement and hoping to stick it out.” . . .

The fate of Gender and Women’s Studies at Berkeley rests on the availability of its single full-time staffer. “Visitors come, foreign visitors, global feminist people,” she says. “Part of our mission is to welcome people and have a space for intellectual discussions. Are we going to reach a point where there’s no there there?”


HOW’S THAT HOPEY-CHANGEY STUFF WORKIN’ OUT FOR YA? (CONT’D): Financial Times: Jobless generation puts brakes on US. “Youth unemployment has reached crisis levels around the world, with almost 13 per cent of the global youth labour force out of work this year, according to the International Labour Organisation. But the problem has a unique flavour in the US, where the weak job market has collided with record levels of educational debt – about $25,000 for the average graduate. Together, they pose a threat to the future earning power of young Americans such as Mr Grzywacz – and could have long-lasting effects on US growth.”

Or maybe I should call this a higher education bubble update. Read the whole thing. And reader Harry Forbes writes: “The online edition does not have the scary loan debt growth chart that is in the printed edition. It is attached.”

I’m not surprised.

HIGHER EDUCATION BUBBLE UPDATE: Degree of debt: Students mortgage future for higher education.

HIGHER EDUCATION BUBBLE UPDATE: Going Away to College This Fall? You’re Now the Exception. “For American students, heading off to college has traditionally also meant physically going away to college. But now, at a time when college costs are soaring, and when news of young people being saddled with burdensome student loan debt is unavoidable, today’s students are trying to trim college expenses in every way possible. More than half of students, in fact, will be living at home when the fall semester begins—up significantly from the 43% of students who commuted a couple of years ago. . . . The argument that a so-called ‘higher education bubble’ really does exist —- and may be in the process of popping —- gets a boost especially because it looks like students in wealthier American families, who should be able to pay for pricey colleges, are choosing to stay home in increasingly higher numbers.”

All is proceeding as I have foreseen.

NEVER MIND THE HIGHER EDUCATION BUBBLE: “I suppose all those unemployed journalists from the legacy media can go to work teaching journalism at universities. Oh, wait. . .”

HIGHER EDUCATION BUBBLE UPDATE: Obama’s New Federal Office for Black Students.

HIGHER EDUCATION BUBBLE UPDATE: Student loan debt threatens graduates’ financial future.

JEREMY LOTT: My Higher Education Bubble.

HIGHER EDUCATION BUBBLE UPDATE: Remember, when you send money to higher education administrators, you’re funding people who think a picture of The Joker is a terroristic threat.

And who will then tell you that higher education is important because it fosters “critical thinking.” Something like this might be grounds for further inquiry, but it’s hardly a terroristic threat. But university administrators tend to try to interpret any criticism as a threat, so as to have an excuse to bring the boot down on critics. Oh, well, at least it wasn’t a Firefly poster or anything.

IN THE WASHINGTON TIMES Jeremy Lott reviews The Higher Education Bubble. I wasn’t expecting the Mad Max reference.

HIGHER EDUCATION BUBBLE UPDATE: Profiling The Online Student. “The average student pursuing a postsecondary credential completely online is a white, 33-year-old woman with a full-time job and a household income around $65,000 per year, according to a new survey sponsored by two companies involved in online consulting.”

HIGHER EDUCATION BUBBLE UPDATE: What Does the “Twilight of the Elites” Mean to Elite Higher Ed?

HIGHER EDUCATION BUBBLE UPDATE: Texas State University System Has $10,000 Degree Plan. “The Texas State University System is the state’s third major university system to announce the development of a bachelor’s degree that only costs $10,000 — a response to Gov. Rick Perry’s 2011 call for more affordable higher education offerings.”

HIGHER EDUCATION BUBBLE UPDATE: An Academic Auto-da-fe? This seems correct, and indicates that there’s an intellectual, as well as a financial bubble in place:

Sociologists tend to be political and cultural liberals, leftists, and progressives. That itself is not a problem, in my view. (I am not a conservative.) A critical progressive outlook is part of sociology’s character and contribution to the world, making it an interesting and often useful discipline, especially when it comes to understanding poverty and inequality, determining whether social policies are effective, and establishing why education systems succeed and fail. But the ideological and political proclivities of some sociologists can create real problems.

Many sociologists view higher education as the perfect gig, a way to be paid to engage in “consciousness raising” through teaching, research, and publishing—at the expense of taxpayers, donors, and tuition-paying parents, many of whom thoughtfully believe that what those sociologists are pushing is wrong.

It is also easy for some sociologists to lose perspective on the minority status of their own views, to take for granted much that is still worth arguing about, and to fall into a kind of groupthink. The culture in such circles can be parochial and mean. I have seen colleagues ignore, stereotype, and belittle people and perspectives they do not like, rather than respectfully provide good arguments against those they do not agree with and for their own views.

The intellectual bubble, too, is heading for a bust.

HIGHER EDUCATION BUBBLE UPDATE: You Don’t Owe That: An Obama proposal would make it easier not to repay student loans.

HIGHER EDUCATION BUBBLE UPDATE: Political Prejudice At Yale. “As people know, many leading universities, such as MIT and Yale, have made many courses available on line for free. This is a great service. But this does not merely spread knowledge, it also opens a window to the educational bias that is going on in elite college classrooms.”

ALL THOSE “CAMPUS SUSTAINABILITY CENTERS,” WHEN IT’S THE CAMPUS ITSELF THAT’S UNSUSTAINABLE: Higher Education Bubble Update: 33% of Colleges Are on ‘Unsustainable Financial Path.’

Related: The Ever-Expanding Campus Bureaucracy. “The modern administrative university is a business machine without a soul.”

Sounds familiar.

Also, from Peter Wood: “What is inflating the bubble still further is federal policy on grants, loans, and loan-forgiveness. But even as the bubble inflates, there is a growing collection of sharp objects—the jackknife of online education, the hatpin of tax increases, the razor of state budget cuts, and the dart of public disenchantment—that threaten the whole thing.”

More here. “An affluent family that suddenly has to tighten its belt is very likely to take another look at its commitment to Ov’r Priced College and their daughter’s exploration of Post-Colonial Identity Studies. . . . A college degree is metaphorically an ‘investment.’ It is much more plainly a consumer expense. Confusing consumption with investment is often what gets us into financial bubbles.”

HIGHER EDUCATION BUBBLE UPDATE: Mortgaging your way to a college education – the burden of student debt and the impact on the starter home market. “Over two-thirds of past due debt is hitting with those 39 and younger. A good amount is hitting the under 30 crowd. Remember those co-signed loans? There is little doubt why the housing recovery has been so tepid nationwide. In California, home prices are still out of sync in many locations but just think about a more realistic nationwide scenario. A young graduate comes out with $50,000 in student debt and the starter homes they are looking at cost $150,000. This is very typical. How easily can they shoulder that new debt amount? Are they even willing to take this new loan on? Virtually every other debt segment has pulled back since the recession hit outside of student debt. Home ownership rates for younger Americans have fallen dramatically in the last decade and this burden of ‘other’ debt is becoming a big issue. It is also impacting baby boomers as kids boomerang back home. Another trillion dollar debt market with major issues. You don’t need a Ph.D. to know this is a big problem.”

HIGHER EDUCATION BUBBLE UPDATE: Online Courses Free For The Taking. “A dozen major research universities, including Georgia Tech, Princeton, Duke, Johns Hopkins and the University of Virginia, announced plans last week to offer 100 free online courses that will enable millions worldwide to take the same classes as students at elite U.S. campuses.”

This is happening even faster than I expected.


Some have raised the question how a PhD student on unemployment could afford what appears to be at least $10K – $20K of guns and explosives. When I was in school, the only way I could have done that would have been: student loans.

In some cases, it’s possible (not legal, but possible) even to get the loans and drop out, and keep the money.

Something to keep an eye on, as the MSM is probably not going to play up this angle.

Good question. I haven’t heard that he was wealthy, but on the other hand, he may not have had many other things to spend his money on.

HIGHER EDUCATION BUBBLE UPDATE: The Amazon Career Choice Program. “The Amazon Career Choice Program will pre-pay 95% of tuition and associated fees at accredited schools for courses that lead to technical and vocational certifications or associate’s degrees in eligible in-demand fields, such as Engineering, Information Technology, Mechanical and Electrical Trades, Healthcare, Construction, Transportation, and Accounting. Specific examples include aircraft mechanics, computer-aided design, machine tool technology, medical laboratory science, dental hygiene, and nursing. This program focuses on technical and vocation training programs and does not apply to Bachelors or Master’s degree coursework.”

Plus, from the Jeff Bezos announcement: “Unlike traditional tuition reimbursement programs, we exclusively fund education only in areas that are well-paying and in high demand according to sources like the U.S. Bureau of Labor Statistics, and we fund those areas regardless of whether those skills are relevant to a career at Amazon.”

Now where could he have gotten an idea like that?

HIGHER EDUCATION BUBBLE UPDATE: Unemployment and Student Debt Sour America On College.

HIGHER EDUCATION BUBBLE UPDATE: Can Bankruptcy Solve Student Loan Woes?

HIGHER EDUCATION BUBBLE UPDATE: Obama Administration Backs Bankruptcy Option for Some Student Debt. Actually, as Brian Lehrer noticed when I was on his show last week talking about my book, Obama and I are pretty much on the same page about a lot of this higher education bubble stuff.

HIGHER EDUCATION BUBBLE UPDATE: Elite College ($50,000 a Year) or Good State School ($20,000)?

HIGHER EDUCATION BUBBLE UPDATE: Student loan defaults mimic subprime woes, study shows.

Some of us have been saying this for a while.

HIGHER EDUCATION BUBBLE UPDATE: Student Loan Debt Sours Public Opinion On College Degrees’ Worth, Consumers Prioritize Retirement Savings Instead: Survey.

Gosh, who could have seen that coming?

HIGHER EDUCATION BUBBLE UPDATE: How to defuse the student-loan crisis in three easy steps. For some values of the word “easy,” anyway.

HIGHER EDUCATION BUBBLE UPDATE: Aging Student Debtors. “The New York Fed, which has become a chronicler of student loans in America through quarterly reports, recently released historical charts showing the growth in borrowers, balances and delinquencies over the past seven years. They show a steady upward march toward more borrowers, more loans and more debt. . . . In some cases, retirees are finding their Social Security checks docked to repay delinquent federal loans, and parents are paying for their children’s education while still grappling with their own student loans.”

Not surprising.

WALTER RUSSELL MEAD: Middle-Aged People Drowning In Student Loan Debt.

Sadly, government’s fingerprints are all over this mess. In a well-intentioned effort to make higher education more widely accessible, the government offered large student loans without asking many questions. Two things happened.

First, colleges kept raising tuition. College tuition has been rising faster than inflation for quite some time, in part because schools added layers of administrative bureaucracy and offered gold-plated student services. As long as students could rely on government loans to help pay their way, colleges have chosen to compete on amenities rather than on value.

Second, students got out of the habit of thinking about a college education as an economic decision. Students were encouraged by parents, teachers, college guidebooks and guidance counselors to find the school of their dreams rather than a school that they could afford. Unfortunately, if you borrow money, you have to pay it back. Many graduates are now learning this lesson years too late.

Banks and Wall Street, as usual, got into this act too. And with all that student debt on their hands, they lobbied to make sure it couldn’t be discharged in bankruptcy. Now we have $1 trillion of student debt, and a lot of it can’t be repaired. Lives are being damaged, and young people who should be thinking about starting families and careers are instead being saddled with new burdens.

This is terrible social policy. It is deeply destructive.


HIGHER EDUCATION BUBBLE UPDATE: Louisville Outspends Financial Aid Budget by 136% to Land 1L Class; School to Eat $2.4m; Admissions Dean Resigns.

All is proceeding as Brian Tamanaha has foreseen.

JOHN LEO: Janitors With College Degrees and the Higher-Education Bubble. “Employers, because they realize that many college graduates aren’t really educated, now routinely quiz job seekers on what they majored in and what courses they took, a practice virtually unknown a generation ago. Good luck if you majored in gender studies, communications, art history, pop culture, or (really) the history of dancing in Montana in the 1850s.”

All is proceeding as I have foreseen.

HIGHER EDUCATION BUBBLE UPDATE: The Rise of “Stackable Certificates” in place of college degrees. Note, however, that colleges aren’t out of the loop here. But there are still issues:

That’s not to say that manufacturers and colleges always see eye-to-eye. In fact, many companies feel higher education has failed to create a pipeline of skilled workers. An estimated 600,000 manufacturing jobs are currently unfilled.

“We’re dealing with an industry that has lost a lot of faith in working with education,” said Jacey Wilkins, a spokeswoman for the Manufacturing Institute, which is affiliated with the National Association of Manufacturers. In particular, Wilkins said manufacturers have been frustrated with the dismantling of vocational education.

So the institute decided to take matters into its own hands, and came up with standards for the education of manufacturing employees. The group created its manufacturing skills certification system in 2009. The “stackable” credentials include four tiers of competency for applicants and veteran employees to demonstrate, ranging from basic aptitude – like showing that they can get to work on time and work in teams – to proving that they have high-tech skills in specialized manufacturing fields, like machinery or medical technology.

The certifications are stackable because they build on each other, with each level presumably having value but also leading to a next step, which can in turn lead to promotions on the job.

Read the whole thing. And note that the “higher education” involvement is led by “most notably the University of Phoenix and a growing number of community colleges.”

HIGHER EDUCATION BUBBLE UPDATE: More big universities going online with Coursera. “A dozen more universities have signed partnerships with Coursera, a company that provides hosting services for massively open online courses (MOOCs), the company announced today. Coursera’s new partners include the University of Virginia, whose highly publicized administrative ballyhoo last month made it the epicenter of the debate over how traditional universities should adapt to the rise of online education in general and MOOCs in particular. In addition to U.Va., Coursera will also be serving as a platform for open online courses from the California Institute of Technology, Duke University, École Polytechnique Fédérale de Lausanne (in Switzerland), Georgia Institute of Technology, Johns Hopkins University, Rice University, and the Universities of California at San Francisco, Edinburgh (U.K.), Illinois, Toronto and Washington.”

HIGHER EDUCATION BUBBLE UPDATE: CSU again considers executive pay hikes. “Trustees with California State University will consider Tuesday giving three university presidents pay raises from added money provided by campus foundations, increases that would push the trio’s earnings to above $300,000 each. The pay hikes would be the first under a policy approved earlier this year that shifts salary increases for new university presidents compared to their predecessors, at least until 2014, from state coffers to campus foundations. For new presidencies, like with these three, any total salary increase is capped at 10 percent compared to those previously serving in the post. At the same meeting, trustees also will discuss possible tuition increases and job cuts and other budget reductions that may result if the governor’s tax initiative is not successful on the November ballot. If the measure does fail, the 23-campus system would have $250 million less.”

HIGHER EDUCATION BUBBLE UPDATE: Education Dept. Proposes New Rules on Student Loans. “The U.S. Education Department today proposed new rules governing federal student loans, which would, among other things, ease the process by which disabled borrowers could have their loans discharged, establish a new income-contingent repayment plan for direct student loans, and expand the government’s income-based repayment program.” They need to make schools more responsible for students’ failure to repay.

EVERYBODY WANTS TO GET INTO THE ACT: Stacy McCain on the Higher Education Bubble.

HIGHER EDUCATION BUBBLE UPDATE: Report Documents Shifts in How Students Pay for College. “Students are shoulder an increased share of their own college tuition payments (with their parents picking up less of the tab), and more families are considering price when deciding where to send their children to college, according to an annual study by the lender Sallie Mae to be released today. The study, ‘How America Pays for College,’ found that the proportion of families that said they had stopped considering certain colleges had risen to 70 percent, up from 56 just three years ago. And the proportion of college expenses that students themselves paid for rose to 30 percent, the highest level in four years.”

All is proceeding as I have foreseen.

HOW’S THAT HOPEY-CHANGEY STUFF WORKIN’ OUT FOR YA? (CONT’D): The twin lost decades in housing and stocks – baby boomers selling homes to a less affluent young American population. The impact of baby boomers on the housing market. “You have a wealthier generation that has seen their wealth decline trying to sell to a less affluent and smaller generation. Instead of household formation or even renting, over 2 million young Americans moved back home. Is it any wonder why we have now faced a lost decade in housing?”

And, of course, recent (and even not-so-recent) grads with heavy student loan debt can’t afford to pay top dollar for a house, if they can afford a house at all. Thanks, Higher Education Bubble!

HIGHER EDUCATION BUBBLE, legal realism edition:

With significantly smaller classes starting this fall at Twin Cities law schools, it looks like the regional market for legal education is finally in correction mode.

Seems overdue, given the dismal news from the legal employment market so far this summer.

The darkest point of the Great Recession is well behind us, but 2011 law school graduates are living in a Great Depression of their own. They had a little better than 50-50 shot at a full-time legal job, based upon employment data released recently by the American Bar Association.

A year ago, the market for 2010 grads was characterized as the worst since 1996, and now it’s “arguably the worst” entry-level market in more than 30 years. The market is particularly bleak for those seeking jobs at firms of more than 100 lawyers.

Here are the grim facts, nine months after 2011 graduation: Out of 134 graduates at the University of St. Thomas School of Law, just five found their way into full-time jobs at firms of 101 lawyers or more. Hamline University School of Law placed three out of 205 in that category. Even the University of Minnesota Law School, way up the food chain with a top 20 national ranking, placed just 32 out of 261 grads at big firms.

Yeah, it’s tough all over, and while some of it’s related to the economic contraction, some of it’s structural, as I predicted a few years back. Law schools, and prospective law students, need to adjust.

SO THIS WEEK’S SUZE ORMAN SHOW WAS ALL ABOUT STUDENT LOANS: THE MOST DANGEROUS DEBT! It’s like she’s been reading up on the higher education bubble or something.

The stories were pretty bad: A guy with $160,000 in loans that his parents cosigned, but he never finished college and the parents are bankrupt. And a girl who Suze talked out of going to Vet school at a cost of over $240,000 in student loans. But mostly, the change from a few years ago — when financial-advice shows usually called student loans “good debt” because they were an “investment” in your future — to today is really noticeable and suggests to me that popular consciousness is likely to shift pretty fast.

HIGHER EDUCATION BUBBLE UPDATE: The Crazy Growth of Student Loans.

HIGHER EDUCATION BUBBLE UPDATE: NALP: Starting Salary for Law Grads Plunges 35% in Two Years. Legal education seems to be a leading indicator.

HIGHER EDUCATION BUBBLE UPDATE: Can You Afford Law School? Law Dean Says Think Twice.

GEORGE LEEF: Burst The Higher Education Bubble.

During the bubble, colleges could get away with offering lots of courses that met a standard that former Indiana University English professor Murray Sperber characterizes as “the faculty/student nonaggression pact.” That is, the professor didn’t demand much of the students and gave high grades; in return, the students didn’t expect much from the professor, who wanted time for academic research projects.

The students were happy: Who complains about courses with high grades but little work? The professors were happy, and the administrators were happy because students getting good grades typically don’t gripe or, more important, drop out.

But courses in which students just go through the motions without learning anything are a waste of time and money.

The good news is that in the new higher-education world, courses like that will be jettisoned. Like dieters giving up doughnuts in favor of more nutritious, low-calorie foods, college consumers will look for affordable courses that lead to demonstrable educational gains.

One hopes.

UPDATE: A reader emails: “Sorry to burst anyone’s hopes, but I was (cautiously, indirectly) told by my department chair a few weeks ago to dumb down my courses so that the department doesn’t lose ‘market share.’ I’m ignoring the whole discussion. Please, no names if you wish to quote this.”

HIGHER EDUCATION BUBBLE UPDATE: Controversy about pay hikes at Western Washington University.

In a single collective bargaining agreement, Western Washington University has undermined state efforts to control costs, spotlighted the tuition bubble, and spurred interest in a new delivery model. Western’s mischief has not gone unnoticed.

Pointing to high unemployment and “the worst economic times in 80 years,” Gov. Chris Gregoire wrote WWU president Bruce Shepard to express “grave concerns” about the school’s decision to increase faculty pay by more than 14 percent over the next three years. Department chairs and faculty receiving promotions get additional boosts.

The agreement is not subject to review by the state budget office or Legislature.

Gregoire writes that she and the Legislature did not intend for higher student tuition to lead to “significant salary increases for faculty” and is “perplexed” at how the school thinks it can afford them. Responding on “Bruce’s Blog,” Shepherd praises his colleagues’ “heroic” efforts in weathering the economic realities. He celebrates the contract, saying it represents the “courage and leadership these difficult times demand.” But he doesn’t address the affordability question. Efforts to cast the contract as a duel between tuition and faculty salaries, he dismisses as “pernicious … rhetorical hyperbole.”

Uh huh.


As I’ve predicted in the past, we’ll see more use of accreditation in the defense of the status quo and as a means (ultimately, I think, unsuccessful) of limiting disruptive innovations.

HIGHER EDUCATION BUBBLE UPDATE: Low-Paid Grads Not Spending Money Or Building Careers.

Underemployment isn’t debilitating only for individuals whose career and income opportunities are stunted. It threatens the economic expansion as college-educated young adults have traditionally fueled consumer spending on clothes, technology, entertainment and cars.

“If you have a stumbling entry into the labor market, you risk getting stuck in jobs for which you’re overqualified and poorly paid for the rest of your life,” said Katherine Newman, a sociologist and dean of the school of arts and sciences at Johns Hopkins University in Baltimore who has studied the long- term effects of underemployment. “There’s a scarring effect, with employers you want marking you as undesirable. The economic toll is enormous.”

The underemployed include those of all ages who are working part-time but want full-time positions. There were 8.2 million people working part-time for economic reasons in June, according to the U.S. Bureau of Labor Statistics. That number had doubled to 9.1 million in the last quarter of 2009 from 4.5 million in the same period of 2007.

It’s not pretty.

HIGHER EDUCATION BUBBLE UPDATE: College Educated Waiters Up 81%; college-educated janitors up 87%.

Not exactly shocking.

DAILY CALLER: I talk about the Higher Education Bubble on Matt Lewis’s podcast.

And hey, it’s not too late to buy the book!


Twice as many teachers. Twice as much money. But does anybody believe that a high school graduate today is (as a college student might actually say) “twice as much smart?”

We know they’re not.

We test students all the time, tests like the National Assessment Of Educational Progress (NAEP). And since 1970, these results in math and reading have essentially been flat.

For example, the average 17-year-old’s NAEP score in reading back in 1971 was 285. In 2008 it was 286.

That’s what we got for doubling our education spending.

When you compare the U.S. to countries in the Organization for Economic Cooperation and Development, the results are even worse. Education reform activist Bill Costello points out that our annual “per-pupil spending in 2006 was 41 percent higher than the OECD average of $7,283, and yet American students still placed in the bottom quarter in math and in the bottom third in science among OECD countries.”

The problem isn’t a shortage of money, it’s a shortage of value.


HIGHER EDUCATION BUBBLE UPDATE: The Online Revolution Comes to Public Education. “If online education can really be made to work in secondary school, the shift away from big box high schools and centralized school districts is likely to pick up steam. In practical terms, it will mean that smaller schools can offer a more diverse curriculum (Mandarin classes in small town schools, art and music classes without the expense in every school of full time faculty and so on). America has the chance to build school systems that slash bureaucratic overhead and red tape while giving teachers more autonomy and parents and students more choice. Online instruction is a big part of making that happen; congratulations to all the students, parents, teachers and administrators brave enough to give this a try.”


HIGHER EDUCATION BUBBLE UPDATE: U.S. pushes for more scientists, but the jobs aren’t there.

Michelle Amaral wanted to be a brain scientist to help cure diseases. She planned a traditional academic science career: PhD, university professorship and, eventually, her own lab.

But three years after earning a doctorate in neuroscience, she gave up trying to find a permanent job in her field. Dropping her dream, she took an administrative position at her university, experiencing firsthand an economic reality that, at first look, is counterintuitive: There are too many laboratory scientists for too few jobs.

That reality runs counter to messages sent by President Obama and the National Science Foundation and other influential groups, who in recent years have called for U.S. universities to churn out more scientists.

As noted here earlier, we don’t need more scientists, we need better ones. “I was talking with someone the other day who advanced the proposition that there are probably only 50 really first-rate scientific minds produced in the United States every year. And then came the question: Does the current system of training and funding scientists encourage those 50 to stay in the game, or to find something else to do?”

HIGHER EDUCATION BUBBLE UPDATE: Scott Walker Prepares To Reform Higher Education. Walter Russell Mead comments:

Change has to come. After World War Two the United States built its modern university system by extending a model that was originally intended to groom the sons of a social elite to succeed their fathers as government and business leaders to manage the preparation of tens of millions of people for the business of life.

The template doesn’t work in many cases, and the result increasingly is that training and job preparation takes too long and costs too much. The problem isn’t that America has “too much” education. The problem is that a 21st century society needs to be able to teach more skills to more people at a much lower cost and in much less time than our 20th century institutions can manage. It’s really that simple. The most urgent business of a state university system at this point must be to reform and improve the kind of education (in many cases, training) that can enable the state’s citizens of any and every age to acquire skills and prepare themselves to flourish in a rapidly changing economy.


HIGHER EDUCATION BUBBLE UPDATE: “No Loans” Policies Falling By The Wayside.

“No loans” policies were the hit of 2007 and 2008, as many of the nation’s most elite (and wealthy) colleges and universities announced that borrowing would be eliminated from the aid packages of students with family incomes below certain levels.

But this particular movement in higher education took off just before the economic downturn hit in the fall of 2008, sharply reducing these institutions’ endowments and forcing many of them into budget-cutting mode. Now, a few years later, institutions are taking steps that reflect very different financial outlooks than those before the downturn. In May, Wesleyan University ended its policy of need-blind admissions, a policy seen by many as (when combined with meeting admitted applicants’ full need) the gold standard of private college admissions. This policy is supposed to mean that applicants can rest assured of their ability to attend if admitted — and that lack of resources shouldn’t stand in the way.

This week, Cornell University announced modifications of its “no loans” program for those eligible for aid. Instead of assuring a “no loans” package to everyone with family income of up to $75,000, Cornell will make that pledge only to those with family incomes of up to $60,000. (The changes will take effect with those enrolling in the fall of 2013, and will have no impact on those already enrolled or who will enroll this fall.) Those in the $60,000-$74,999 family income category will be assured of aid packages that don’t have more than $2,500 a year in loans. For those in the family income category of $75,000 to $119,000, Cornell is increasing the loan share of aid packages from $3,000 to $5,000 a year, while those with family incomes of $120,000 and higher will still be assured of loan maximums of $7,500 a year (unchanged from the policy to date).

The issue of pulling back from some of the pledges made in previous years — generally with much fanfare — is a sensitive one for universities, especially those like Cornell and Wesleyan that would be the envy financially of 99 percent of research universities and liberal arts colleges, respectively, but that happen to compete with the 1 percent with greater resources.

If it’s a loan, it’s not “financial aid.” It’s more like exploitation.

Plus, from the comments: “Colleges can’t afford their own tuition anymore.”

HIGHER EDUCATION BUBBLE UPDATE: Tough Choices Ahead For Some High-Ranked Law Schools.

HIGHER EDUCATION BUBBLE UPDATE: Western Washington Criticized for Faculty Raises. “Governor Chris Gregoire, a Democrat, and some higher education leaders in Washington State are criticizing Western Washington University officials for agreeing to a faculty contract that grants raises of 5.25 percent this year and 4.25 percent each of the following two years, plus an increase of 15 percent in stipends for department chairs. . . . ‘Your agreement seems to ignore the shared sacrifice that other state employees in general government and institutions of higher education have made during the Great Recession,’ Gregoire wrote in a letter to Bruce Shepard, the university’s president. She added that Western’s raises ‘will hurt current and future efforts to protect and increase funding for public higher education.'”

You’ll see more of this sort of thing, as people fight over slices of a shrinking pie.