I have been fortunate in life. I was able to go to college when my parents could not afford it with a full scholarship. When my two children were ready to go to college I was fortunate to be able to afford to send them without going into debt or taking out any loans. My children and grandchildren – at the current rate of college expense inflation – will not be that fortunate.
But as Glenn Reynolds remarks - "something that can’t go on forever, won’t." Colleges and universities are pricing themselves out of the reach of middle America. Even today, college graduates are finding no jobs available to them while facing the need to pay off hundreds of thousands of dollars in debt.
The fault on the part of the students – and their indulgent parents - is failing to graduate in four years with a degree that employers can use. Who needs another cinema and photography major earning less than $25,000 per year with $130,000 in debt? In fact, who needs another lawyer?
Reynolds:
Back at the beginning of the summer, I had a column in this space in which I predicted that higher education is in a bubble, one soon to burst with considerable consequences for students, faculty, employers, and society at large.
My reasoning was simple enough: Something that can’t go on forever, won’t. And the past decades’ history of tuition growing much faster than the rate of inflation, with students and parents making up the difference via easy credit, is something that can’t go on forever. Thus my prediction that it won’t.
But then what? Assume that I’m right, and that higher education - both undergraduate and graduate, and including professional education like the law schools in which I teach - is heading for a major correction. What will that mean? What should people do?
Well, advice number one - good for pretty much all bubbles, in fact - is this: Don’t go into debt. In bubbles, people borrow heavily because they expect the value of what they’re borrowing against to increase.
In a booming market, it makes sense to buy a house you can’t quite afford, because it will increase in value enough to make the debt seem trivial, or at least manageable - so long as the market continues to boom.
But there’s a catch. Once the boom is over, of course, all that debt is still there, but the return thereon is much diminished. And since the boom is based on expectations, things can go south with amazing speed, once those expectations start to shift.
Right now, people are still borrowing heavily to pay the steadily increasing tuitions levied by higher education. But that borrowing is based on the expectation that students will earn enough to pay off their loans with a portion of the extra income their educations generate. Once people doubt that, the bubble will burst.
So my advice to students faced with choosing colleges (and graduate schools, and law schools) this coming year is simple: Don’t go to colleges or schools that will require you to borrow a lot of money to attend. There’s a good chance you’ll find yourself deep in debt to no purpose. And maybe you should rethink college entirely.
Many people with college educations are already jumping the tracks to become skilled manual laborers: plumbers, electricians, and the like. And the Bureau of Labor Statistics predicts that seven of the ten fastest-growing jobs in the next decade will be based on on-the-job training rather than higher education. (And they’ll be hands-on jobs hard to outsource to foreigners). If this is right, a bursting of the bubble is growing likelier.
What about higher education folks? What should they (er, we?) do? Well, once again, what can’t go on forever, won’t.
For the past several decades, colleges and universities have built endowments, played moneyball-style faculty hiring games, and constructed grand new buildings, while jacking up tuitions to pay for things (and, in the case of state schools, to make up for gradually diminishing public support).
That has been made possible by an ocean of money borrowed by students -- often with the encouragement and assistance of the universities. Business plans that are based on this continuing are likely to fare poorly.
Just as I advised students not to go into debt, my advice to universities is similar: Don’t go on spending binges now that you expect to pay for with tuition revenues later. Those may not be there as expected.
Post-bubble, students are likely to be far more concerned about getting actual value for their educational dollars. Faced with straitened circumstances, colleges and universities will have to look at cutting costs.
Online education, and programs focused more on things that can help students earn more than on what faculty want to teach, will help to deliver more value for the dollar. In some areas, we may even see a move to apprenticeship models, or other approaches that provide more genuine skills upon graduation.
Meanwhile, for the states, and big donors, who fund those portions of higher education that the students don’t, a post-bubble world will bring some changes, too. Many states have been cutting aid to higher education, content to let higher tuition pick up the slack.
Some may choose to change that (if they can afford it) but regardless I expect more direct oversight of state institutions from those who fund them. Universities’ priorities will be brought closer to states’ priorities
Read more at the Washington Examiner
1 comment:
I understand that many people at two year colleges are people with four year degrees without a job because they have no marketable skill.
Our high schools need to stop telling our children that four years at a liberal arts college is the only sure fire way to success and imply that vocational schools are for the lesser among us.
I'm not going to call a four year liberal arts major when my car breaks down, or I need my house rewired, or my plumbing is shot. At that point I need to find someone who actually knows how to do something.
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