This, in a way, a circular set of links, as I read a comment from Instapundit, who linked to Professor Caron, who linked to Professor Perry, who linked to Professor Reynolds' (The Instapundit Opinion Piece in The Washington Examiner. The OpEd starts:
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.I am of the opinion that the cost of higher education is out of line. I agree with Former Labor Secretary Robert Reich that a public college education should be essentially free. (I found the Professor Reich OpEd via Paul M over at the Richard Howe blog.)
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.
Yes, this sounds like the housing bubble, but I'm afraid it's also sounding a lot like a still-inflating higher education bubble. And despite (or because of) the fact that my day job involves higher education, I think it's better for us to face up to what's going on before the bubble bursts messily.
Public universities should be free; in return, graduates would then be required to pay back 10 percent of their first 10 years of full-time income.As Professors Reynolds, Perry and Caron note, we are facing an Education Bubble. A "Bubble" is:
“trade in high volumes at prices that are considerably at variance with intrinsic values”Older readers will remember the "Tulip Bubble" of 1637 or the "South Sea Company Bubble" of 1720. Wikipedia has a more extensive list here.
There are two considerations here. One is that some of those who go to college could be having very lucrative careers in the trades. For sure, my plumber is benefitting from being in his trade. He owns his own company and has put one child through college and has another in college.
The second consideration is that those going through college have large debts, which fall on someone, or are defaulted, leading to the same kind of thing we are seeing with the "Housing Bubble". Here is some data from The College Board for 2006-2007. (Note that this is for "Resident" vs "Commuting".)
|TYPE||TUITION & FEES||BOOKS & SUPPLIES||ROOM & BOARD||TRANSP||OTHER COSTS||TOTAL|
|4 Yr Public||$5,836||$942||$6,960||$880||$1,739||$16,357|
|4 Yr Private||$22,218||$935||$8,149||$722||$1,277||$33,301|
The problem with a higher education bubble is not just the debts unpaid, but that it will result in younger people not enrolling at the same rate. This will result in fewer professors being hired and fewer staff. Depending upon the strength of the bursting bubble it could have a major impact. It could even have a major impact on Lowell.
Regards — Cliff