Will Higher Education Be the Next Bubble to Burst?

http://chronicle.com/free/v55/i37/37a05601.htm

by nickb • 17 years ago

60 61 17 years ago

This has been discussed before in many other sources. The cause of the bubble is probably the way tuition and financial aid are used by many colleges. Perhaps the most in-depth analysis was by The Atlantic.

http://www.theatlantic.com/doc/200511/financial-aid-leveragi...

If this hypothesis is correct, then it has interesting implications for how a pop in the education bubble might play out. Since a fair portion of college budgets are propped up by moms and pops taking Mortgage Equity Withdrawals to finance their kid's education (who may or may not actually be deserving to go the college of their choice, but probably not) then we can expect (1) the tuition portion of institutions' income to drop precipitously and (2) that there will be fewer sort-of-rich-kids going to elite schools.

This doesn't seem all bad in my opinion. Maybe academia should return to humbler roots. Do the top schools really need Olympic sized swimming pools, or gyms that would require a $100 a month membership in any big city?

timwiseman5• 17 years ago

I think part of the point of the article in the Chronicle is that the top schools will be fine and do not need cut back. While this only applies to the very top schools, they will still have people willing to pay the tuition and endowments large enough to cover any student they want to admit that cannot cover the tuition themselves.

It is the small and mid grade schools that may need to carefully look at their models.

Personally, I think a bigger question is what will it do to families trying to help their children climb into a higher income bracket if there is a major shake up in the higher education market?

adamc• 17 years ago

I think the real solution is to stop overvaluing university degrees. Most of the folks coming out of universities don't have any particularly valuable job skills. (I'm thinking of majors in business, or liberal-arts fields, or for that matter most people with a BA/BS in the sciences.)

Will that happen? Not unless getting university grads gets hard.

noonespecial• 17 years ago

I think it will pop much differently. There will be enough PhD waiters and Home Depot employees that people will start to question if college was worth it. The recession also seems to be triggering a wave of self employment. That will reduce the need for the all important degree on the resume.

Attendance will just evaporate as people ask "do I need college?" Not in the smug 90's startup way, but in the cold, calculated "great recession" way.

anamax2• 17 years ago

> Do the top schools really need Olympic sized swimming pools, or gyms that would require a $100 a month membership in any big city?

I'd guess that students are less likely to use their college gym than members are to use their gym. If I'm correct, the per-student cost of a college gym may be in the noise.

hs2• 17 years ago

if this continues, 'college dropout' will be replaced by 'high school graduate' -- simply because s/he takes high ed as cost-saving bootstrap strategy

netsp7• 17 years ago

I'm still hoping for some sort of disruption that will change the game.

The line of thinking is along these lines: The core of what elite colleges (or any colleges) is not really valuable. A university course is mostly a syllabus, a textbook, lectures, tutorials, papers & exams. All are based on knowledge that is freely available. You do not need a Professor who spends most of his time on research that doesn't benefit you teaching you.

It wouldn't even be hard to offer the core of what Universities offer at a much lower cost. What is hard to offer is the vast periphery. The clubs & socialisation. The Gyms. The contact with researchers & other talented and/or rich young people. The social norms & leeway associated with Undergraduate life (this might be more important then we think). The prestige. The prospects created by the contacts, the prestige, the social conditioning & whatever else goes in to making a University education other then education.

A potential catalyst could be the growing Internationalisation of Uni education.

potatolicious2• 17 years ago

I just finished my undergrad degree a month ago, and I think I have some insight into this.

By far the most valuable thing I take away from university is not the classes, but rather the experience. As a student you get a lot of leeway to screw up and learn - even interning at large, private corporations. This has helped me in my life (and my career) more immensely than anything else I've ever learned at school (most of which I doubt I will apply in a job, ever).

Secondly, the networking opportunities that you have at a university is ridiculously useful. Short of going to war together I doubt there are many forces that bind people together as tightly as the college experience. I have made many friends, many of whom are incredibly talented and will no doubt go far in life - it's a network that you can't replicate, say, studying online.

Thirdly is the name - prestigious schools, whether justifiably or not, do for some reason make you more employable in a lot of places. I know many a hacker from "lesser" colleges who can't find a job in this economy, while I had multiple offers before my final semester even started.

tjmc• 17 years ago

Depends on what you're studying. Subjects like medicine, dentistry and chemistry need extensive lab facilities and highly skilled, often personal tuition. That's going to cost a lot no matter where it's done.

On a broader level you also need to consider the value of networking opportunities. Is the course content of a Harvard MBA really that much better than elsewhere? Of course not. It's the contacts you make while you're there.

tigerthink• 17 years ago

>You do not need a Professor who spends most of his time on research that doesn't benefit you teaching you.

I don't know if my math professor does research or not. But the guy is a fucking brilliant lecturer.

On the other hand, I'm at a community college :o)

asciilifeform• 17 years ago

> I'm still hoping for some sort of disruption that will change the game.

The chance of success is basically zero, but you could lobby for the overturn of the Griggs v. Duke Power Co. decision, the famous lawsuit which resulted in U.S. employers being officially prohibited from using IQ tests in hiring:

http://supreme.justia.com/us/401/424/case.html

This is what gave colleges their monopoly as gatekeepers of the intellectual labor market.

drawkbox2• 17 years ago

That or healthcare.

timothychung• 17 years ago

It is disappointing that these service based industries come to a point when making money is becoming so important especially when they are commodities. I hope that some institutions will reduce their price for a greater purpose especially for poor people.

pj• 17 years ago

I agree that they are over priced, but they aren't commodities. Commodity products are indistinguishable, but there are definitely different qualities of healthcare and higher education.

joe_the_user3• 17 years ago

Education and healthcare were once clearly seen as something to be provide by society as a value to society.

Having more educated citizens benefits an entire society, not just those citizen.

Having healthier citizens works similarly.

Certainly both education and healthcare been private for a long time BUT often effectively on a non-profit basis.

joe_the_user3• 17 years ago

That, AND healthcare

mildweed• 17 years ago

Anything that requires taking out a loan. Homes? Check. Vehicles of all types? Check. Elective surgery and higher education? Probably.

Every kind of loan aside from payday loans...

Alex39172• 17 years ago

A product sold for 1/3 of cost is overvalued?

Shamiq• 17 years ago

This seems entirely possible in a hypothetical case.

Energy source A costs $1 per unit and is sold at $1 per unit.

Energy source B costs $6 per unit and is sold at $2 per unit.

So long as A exists, B will be overpriced, even with that subsidy.

anamax2• 17 years ago

Cost has nothing to do with value.

Products that cost more than they are valued tend not to be produced (or rather, there are no buyers), but that doesn't imply that everything is worth more than it costs.

Alex39172• 17 years ago

"Cost has nothing to do with value."

Unless you value cost. The value of a degree comes from the story we tell ourselves, and paying $160,000 is part of that story. Most people wouldn't want to go to college if it was free; just look what people were saying when Seth announced his alternative MBA, or look at library participation among 20-somethings for that matter.

blhack2• 17 years ago

Perhaps the problem is that they're spending too much on the education.

BLASPHEMY! You may be thinking, education is PARAMOUNT to any civilization! We musn't cut spending on education!

Does anyone here live in the Phoenix, AZ area? If so, take a tour of ASU's recent campus renovations. The new dorms look like luxury-condos. The buildings around campus match. ASU has gotten into the habit of buying up the most expensive property available, and developing high-end real-estate on top of it.

Do we really need that?

What we need are desks, blackboards, and good professors. I could not care any less what the building I'm studying inside of looks like. Are campus aesthetics really that important, or even relevant at all, to higher education?

No. The answer is that no, they are not.

It seems cliche' for a geek to get bent out of shape about it, but lets also look at the sports teams. How much money is spent on this educationally fruitless endeavour? What is the return on it? How does it effect education?

Suggesting that post-secondary education should cost what it currently does is insane.

Private institutions can do whatever they please, in my opinion, but the state schools need to get back to their roots. That is: intellectual pursuits, not physical ones.

thwarted• 17 years ago

BLASPHEMY! You may be thinking, education is PARAMOUNT to any civilization! We musn't cut spending on education!

Yeah, and it's unfortunate that "education" often has a capital E and is viewed as being something that only formalized schools, Big Education, can provide.

Spending money on things like internet access, libraries, encouraging greater literacy and reading, and not banning "educational toys" just because they may be perceived of as dangerous (I'm thinking of things like chemistry sets here, which were a lot more fun and educational back in the day) could end up going a long way to increasing the minimum education level without actually requiring people to throw money at schools to have to attend them.

billswift• 17 years ago

"BLASPHEMY! You may be thinking, education is PARAMOUNT to any civilization! We musn't cut spending on education!"

Don't confuse education with learning.

jerf• 17 years ago

"BLASPHEMY! You may be thinking, education is PARAMOUNT to any civilization! We musn't cut spending on education!"

This logic is running rampant right now and is a major player not in the economic collapse, but our inability to convince our governments to deal with economic collapse. When the answer to "Are we spending enough on education?" is simply hard-coded to "No", you get very stupid budget behaviors.

In point of fact, there must be a point where we are spending enough on education, enough on police, enough on health care, enough on welfare, enough on anything. There must even come a point where we are spending enough on educating the disadvantaged, enough on health care for the elderly, enough on programs for poor children. Because the alternative is, frankly, absurd... yet that is where we've gotten to, politically.

drawkbox2• 17 years ago

Actually I live in Chandler, went to ASU as a graduate. I like what ASU is doing to urbanize Tempe and even Phoenix downtown. It is growing too big probably but it does drive lots of technology. The engineering 'brickyard' at ASU right there in a highly trafficked part of town is a good message to send to people. The ASU Research Park for instance has many high-tech companies there and it is also a park for people to come to and play. This is similar to what Intel does around their locations in Chandler, AZ.

Anyways, as long as it doesn't harm the educational experience then it may actually help the area as a whole. I feel I got what I needed out of my education but that is really up to the student in the end.

Also, on the sports teams, most of the time this funds a large part of the school so in the end it is a necessary evil. Much like how defense brings the most innovative technologies, even this here internet.

I agree that schools need to focus on quality education experiences and get better professors. I think that the internet and universities that open up to that can share the best professors with the world.

We will see an enormous change in this regard in our lifetime, the University as we know it will be much different. It has taken some time, but the internet and cost reducing measures to information and education are shaking harder at the pillars of these college institutions.

hs2• 17 years ago

if this continues, 'college dropout' will be replaced by 'high school graduate' -- simply because s/he takes high ed as cost-saving bootstrap strategy

dxjones• 17 years ago

In order to keep "the education bubble" growing, the article speaks highly of reducing teaching costs by 40% (by relying less on actual PhD professors who know what they are talking about) and instead giving "students ... a choice of learning styles and ways to get help online from ... fellow students". Oh, and paying university presidents huge incentives for using such "cost cutting" measures.

Yeah, right. Take their $50K+ in annual tuition, then plug students into an e-learning social network where they "TEACH THEMSELVES" through "INNOVATIVE LEARNING STYLES".

If these moves are genuinely embraced, it will indeed create a bubble that will grow until these poor disillusioned students realize they are just sheep following other sheep wandering around, going nowhere, ... when they should instead have been following a shepherd who knew where he/she was going.

Why would we want to create a bubble anyway? By definition, it is only a bubble if it will eventually burst.

nopinsight• 17 years ago

The cost for higher education that steadily climbs faster than the inflation rate will need to stop when it equals to its time-discounted marginal benefits. (Given its many alternatives--both for learning and socializing--the marginal benefits of higher education do not seem to increase nearly as fast.)

If the cost goes higher than that, the bubble will indeed burst--sooner or later.

heycarsten• 17 years ago

I can't help but think the real bubble is in our own inflated sense of ourselves. Everyone thinks their child is capable of becoming the next great whatever, but the reality is that there are only so many people with original and useful ideas out there.

Higher education is dangled as the carrot that is the means to achieving greatness. Everyone speculates that the future will yield awesomeness, but when it takes too long to reach our unrealistic expectations we overreact in the opposite fashion. We have this never-ending cycle of overinflated possibility followed by reality and an overreaction of conservation.

Is it perhaps a flaw in our culture? Selling an idea is more important than the idea itself. Getting "traction" or "backing" is more important than delivering something real and of actual value.

lvecsey• 17 years ago

I'm always surprised when people suggest "community college", as opposed to an elite university, for the masses to flock to. I don't mind if people take on vocational tasks like welding, and as Mike Rowe of dirty jobs explained at his TED talk society definitely has a problem with imbuing meaning towards regular tasks. But all too often I hear that snide remark, which translates to: "Not everyone can excel towards, or afford, an elite education with all the debt and opportunity it offers. But get yourself to a community college and do something basic, to get your portion of the pie. Otherwise you are nothing."

parbo• 17 years ago

Yet another reason to make higher education universal and free. Just like where I live, Sweden.

gaius2• 17 years ago

You pay no taxes in Sweden?

jjs3• 17 years ago

I pay no taxes in Sweden.

tokenadult4• 17 years ago

Just how universal is higher education in Sweden? Can all people who desire to attend the best university in Sweden enroll if they wish, or are there entrance requirements for that university?

Emore3• 17 years ago

Anyone can attend any university (with the exception of a couple of private ones, mainly within marketing and design). This includes medicine, law and business. The only requirements are high school grades and/or a public "university entrance"-exam.

Will Higher Education Be the Next Bubble to Burst?

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