Two Handed Warriors

Where Higher Education Went Wrong: Popping the College Bubble

A forum on the failures and future of the American university

At an annual growth rate of 7.45 percent, tuition has vastly outstripped both the consumer price index and health care inflation (see chart below). The growth in home prices during the housing bubble looks like a mere bump in the road by comparison.

by Glenn Harlan Reynolds • Reason.com

http://www.collegeview.com/

http://www.collegeview.com/

The economist Herbert Stein once said that something that can’t go on forever, won’t. That observation, sometimes called Stein’s Law, could well turn out to be the theme for the current decade. But nowhere is it truer than in higher education. American higher education is first in the world, but it can’t go on forever on its current path.

Colleges are raising tuition and fees every year, at a rate of increase that far outpaces any reasonable expectation. One might think this is the kind of thing that couldn’t continue forever, but that’s precisely what has been happening over the past several decades. Prices have gone up, and buyers have poured in anyway, buoyed by a flood of seemingly cheap government money in the form of student loans.

As with any bubble, there are doomsayers who are mostly ignored and cheerleaders who say that this time it’s different. But—as with any bubble—reality is starting to intrude.

Though people have been talking about a bubble in higher education for a while, one major indicator that the swelling is approaching its limit was found in last year’s Occupy protests. While the protesters represented a diverse array of grievances, one common thread was that many had run up huge student loan debts for degrees that weren’t capable of generating sufficient income to make the payments.

At an annual growth rate of 7.45 percent, tuition has vastly outstripped both the consumer price index and health care inflation (see chart below). The growth in home prices during the housing bubble looks like a mere bump in the road by comparison.

Continue Reading

Join the conversation!

This site uses Akismet to reduce spam. Learn how your comment data is processed.