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
4 comments:
One thing worth noting is that while the "sticker cost" of private college tuition has skyrocketed, there is more to the story.
Isn't that always the case?
For small, private, liberal arts schools in New England (the most expensive way you can do it), the full cost of a year of school might be somewhere near $50k. Families from Bronxville, New Canaan, and Weston are paying that tab. If tuition went up even further, say another 20%, many of those families could still do it.
For a lot of other students, the $50k figure doesn't represent the real out-of-pocket cost.
Ironically, the schools with the most hoity-toity names and reputations are the likelist to offer both "need-blind admissions" (your ability to pay is not a factor in whether you get in) and generous aid packages.
At a lot of the very top schools these days, a combined family income under $200k means that you can walk away clean -- GRANTS, not loans -- if you can make it in.
Your points about the rise in costs and the questions about the value are great ones...I too am a believer in reducing ed. costs..before the state schools do it, how about those private schools with MASSIVE endowments? Why should they even charge anything? Maybe b/c if people pay a lot for something, they'll think it's more valuable? Dunno..
I'd love to see the comparison of the CPI and college TEXTBOOK prices! I signed up for a course this semester and books set me back almost $150!!
I am with Paul on the cost of books. When I was growing up a hardback book would sell for $5.95 or maybe a bit more. I checked out my textbook for this term on Amazon and it was $103. That would be a C-Note plus some change. For a paperback.
Textbooks often need to be updated frequently. Last term I took "State and Local Government" and the textbook, less than ten years old, was showing its age.
What makes this more egregious is that we have new technologies that should cut costs. For example printing on demand. And then there is the Kindle. However, somewhere I saw where the US Department of Justice sued some school running a test with the textbook on a Kindle because it wasn't fully handicap compliant.
Regards — Cliff
Today's NYT Business section has an story about an unintended consequence of high tuition:
http://www.nytimes.com/2010/09/04/your-money/04money.html?_r=1&scp=2&sq=ron%20lieber&st=Search
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