6 ms·

Will Higher Education Be the Next Bubble to Burst?

60 points by nickb 17y ago

baguasquirrel 17y 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-leveraging 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?
- timwiseman 17y 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 17y 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.
    - potatolicious 17y ago
      There needs to be a real separation between vocational schools and comprehensive universities. I get the feeling that as a society we have a thing against vocational training - even though some of the most celebrated jobs really belong there instead of at a traditional college (e.g. engineering, accounting, etc). The problem here is that people are going to university expecting this to lead nicely into a job - it does not, particularly for the liberal arts where the path is even more vague. People expect the fact that they have a degree to mean something to employers, when it in fact does not. This whole thing would be a lot simpler if we didn't have such a grudge against vocational schools - who by and large do not seem to have trouble placing their graduates into jobs.
      - netsp 17y ago
        I don't think we do really. Just against the name and against the professions that use vocational schools intensively. The medicine path is very similar to the electrician path. Medical school is vocational school. We have nothing against those.
      - timwiseman 17y ago
        I think you have a very good point. Personally, I got a traditional degree and am working on my Master's, but there are people in my family that learned things like welding instead and they are doing quite well for themselves. Similarly, a fully certified mechanic is in an excellent position. Some people need traditional degrees, but we as a society do need to value significant trades more highly.
    - joe_the_user 17y ago
      Actually, I think that just the opposite should happen. The goal of higher should not be crude "job skills". The value of higher education includes a wide view of the world and broad participation in intellectual life. This goal should be furthered by private foundations and government. More things should be "priceless".
- noonespecial 17y 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.
- anamax 17y 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.
  - hs 17y 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
- netsp 17y 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.
  - potatolicious 17y 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.
    - netsp 17y ago
      I suspect that the strongest thing holding all those aspects together is convention. I think the institution is very entrenched in the US. maybe the place for innovation is outside. In Israel (where I am from), a lot of people do go to war together. So they're sorted for friends. Actually, most don't physically fight, but they still make friends. There is an additional (recent) institution of backpacking/travelling that tackles some of this friends/experiences/growth/leeway territory. University entrance tends to be 20-25 yr olds. So, the whole dynamic is very different. A lot of no frills courses are offered. Cost effectiveness is a big factor ,though naturally the level of Government intervention messes with this and doesn't allow private colleges to compete with research Unis on equal footing. Another place change might come from are the places in the world now entering the growing middle income per capita range (not sure what that is exactly. But I think around 2-$10k pa) where people care about education, can afford some of it, but can't afford $100k or even 10k. They also are first generation entrants & don't have too formulated an idea of what schools should be. Basically, what I am saying is that if you took Universities away and then let something else grow in their place, it probably wouldn't be universities.
drawkbox 17y ago
That or healthcare.
- timothychung 17y 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 17y 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.
    - jnovek 17y ago
      Pragmatically, I would describe health care and education as commodities with some providers who sell a "premium" service. How much education happens at top tier, how much health care happens at the Mayo Clinic?
    - yummyfajitas 17y ago
      Most of the evidence suggests that healthcare is a commodity product. http://www.overcomingbias.com/2009/02/what-is-medical-quality.html http://www.overcomingbias.com/2009/02/what-is-medical-qualit...
  - joe_the_user 17y 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_user 17y ago
Alex3917 17y ago
A product sold for 1/3 of cost is overvalued?
- Shamiq 17y 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.
- anamax 17y 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.
  - Alex3917 17y 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.
    - blhack 17y ago
      I don't know that library participation is so much relevant in the days of instant-access to the ammount of information that is available to us on the internet.
- blhack 17y 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.
deleted 17y ago
[deleted]
dxjones 17y 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 17y 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 17y 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 17y 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 17y ago
Yet another reason to make higher education universal and free. Just like where I live, Sweden.
- gaius 17y ago
  You pay no taxes in Sweden?
  - jjs 17y ago
    I pay no taxes in Sweden.
    - dublinclontarf 17y ago
      So you don't spend any money whatsoever, therefore avoiding VAT on the purchase of everyday items....like food?
      - deleted 17y ago
        [deleted]
      - jjs 17y ago
        No, I live in California.
        gaius 17y ago
        What point are you trying to make?
        jjs 17y ago
        None whatsoever! :)
- tokenadult 17y 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?

60 points by nickb 17y 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-leveraging 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?

timwiseman 17y 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 17y 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.
  - potatolicious 17y ago
    There needs to be a real separation between vocational schools and comprehensive universities. I get the feeling that as a society we have a thing against vocational training - even though some of the most celebrated jobs really belong there instead of at a traditional college (e.g. engineering, accounting, etc). The problem here is that people are going to university expecting this to lead nicely into a job - it does not, particularly for the liberal arts where the path is even more vague. People expect the fact that they have a degree to mean something to employers, when it in fact does not. This whole thing would be a lot simpler if we didn't have such a grudge against vocational schools - who by and large do not seem to have trouble placing their graduates into jobs.
    - netsp 17y ago
      I don't think we do really. Just against the name and against the professions that use vocational schools intensively. The medicine path is very similar to the electrician path. Medical school is vocational school. We have nothing against those.
    - timwiseman 17y ago
      I think you have a very good point. Personally, I got a traditional degree and am working on my Master's, but there are people in my family that learned things like welding instead and they are doing quite well for themselves. Similarly, a fully certified mechanic is in an excellent position. Some people need traditional degrees, but we as a society do need to value significant trades more highly.
  - joe_the_user 17y ago
    Actually, I think that just the opposite should happen. The goal of higher should not be crude "job skills". The value of higher education includes a wide view of the world and broad participation in intellectual life. This goal should be furthered by private foundations and government. More things should be "priceless".
noonespecial 17y 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.
anamax 17y 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.
- hs 17y 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
netsp 17y 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.
- potatolicious 17y 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.
  - netsp 17y ago
    I suspect that the strongest thing holding all those aspects together is convention. I think the institution is very entrenched in the US. maybe the place for innovation is outside. In Israel (where I am from), a lot of people do go to war together. So they're sorted for friends. Actually, most don't physically fight, but they still make friends. There is an additional (recent) institution of backpacking/travelling that tackles some of this friends/experiences/growth/leeway territory. University entrance tends to be 20-25 yr olds. So, the whole dynamic is very different. A lot of no frills courses are offered. Cost effectiveness is a big factor ,though naturally the level of Government intervention messes with this and doesn't allow private colleges to compete with research Unis on equal footing. Another place change might come from are the places in the world now entering the growing middle income per capita range (not sure what that is exactly. But I think around 2-$10k pa) where people care about education, can afford some of it, but can't afford $100k or even 10k. They also are first generation entrants & don't have too formulated an idea of what schools should be. Basically, what I am saying is that if you took Universities away and then let something else grow in their place, it probably wouldn't be universities.

drawkbox 17y ago

That or healthcare.

timothychung 17y 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 17y 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.
  - jnovek 17y ago
    Pragmatically, I would describe health care and education as commodities with some providers who sell a "premium" service. How much education happens at top tier, how much health care happens at the Mayo Clinic?
  - yummyfajitas 17y ago
    Most of the evidence suggests that healthcare is a commodity product. http://www.overcomingbias.com/2009/02/what-is-medical-quality.html http://www.overcomingbias.com/2009/02/what-is-medical-qualit...
- joe_the_user 17y 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_user 17y ago

Alex3917 17y ago

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

Shamiq 17y 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.
anamax 17y 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.
- Alex3917 17y 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.
  - blhack 17y ago
    I don't know that library participation is so much relevant in the days of instant-access to the ammount of information that is available to us on the internet.
blhack 17y 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.

deleted 17y ago

[deleted]

dxjones 17y 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 17y 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 17y 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 17y 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 17y ago

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

gaius 17y ago
You pay no taxes in Sweden?
- jjs 17y ago
  I pay no taxes in Sweden.
  - dublinclontarf 17y ago
    So you don't spend any money whatsoever, therefore avoiding VAT on the purchase of everyday items....like food?
    - deleted 17y ago
      [deleted]
    - jjs 17y ago
      No, I live in California.
      - gaius 17y ago
        What point are you trying to make?
        jjs 17y ago
        None whatsoever! :)
tokenadult 17y 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?