Back to School?

“New Houses were built in every direction; an illusory prosperity  shone over the land, and so dazzled the eyes of the whole nation, that none could see the dark cloud on the horizon announcing the storm that was too rapidly approaching.”

—Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds

It wasn’t that long ago that I was having lunch with the father of a friend at Mory’s, the venerable dining club at Yale, and he said to me: “Do you realize, Roger, that tuition at Yale next year will be $10,000? Ten-thousand dollars.” We paused for a moment over the Golden Buck to savor this enormous sum.

Ten-thousand dollars per annum was indeed a tidy sum. It is still is.  But if you hope to join the Whiffenpoofs next year, it’s going to cost someone at least $52,900.

Exactly who is going to be presented with that tab depends on a number of factors, some of which I’ll mention in a moment. But first let’s step back and ask this embarrassing question: Is it worth it?

Is four years at Yale (or Harvard, Princeton, or any other “competitive”  college) worth $53,000 x 4 plus annual tuition increases for a grand total (assuming you are entering right now) of roughly a quarter of a million dollars?

This is a question that, to the consternation of academic administrators, more and more parents — not to mention responsible teenagers — are asking themselves.

I took my epigraph from Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds, a remorseless anatomy of financial “bubbles” from the Mississippi Scheme and South Sea Bubble to Tulipomania in 17th-century Holland and beyond. “At last,  . . . the more prudent began to see that this folly could not last forever. . .  . It was seen that somebody must lose fearfully in the end.”

Glenn Reynolds, a lawyer and genius loci of the Instapundit blog, has for many months been been cataloguing signs of the higher education bubble. Writing recently in the Washington Examiner, Reynolds explained the process:

“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.”

Have we reached that point in  higher education? Over at Instapundit, Reynolds recently linked to an illuminating article at “TaxProf Blog” which includes this illuminating chart comparing the rise in housing prices with college tuition since 1978.

Paul Caron, the TaxProf himself, observes that “the housing bubble resulted from about a 4-time increase in home prices between 1978 and 2006, and college tuition has now increased by more than twice that amount since 1978 —  it's gone up by more than a factor of ten times.” Bottom line? “The college tuition bubble makes the housing price bubble seem pretty lame by comparison.”