The Higher Education Bubble (Part 1)

The Higher Education Bubble (Part 1)(educationnews.org)

38 points by mstockton 13 years ago | 14 comments

bentcorner 13 years ago |

I can't pin my finger on it, but this feels too hand-wavy to me. AFAIK, the housing market crash was caused by bad lending - people with bad credit were able to get loans for homes for far more than they could afford (in the hopes of flipping the home), they defaulted, and the banks are left holding the bag.

Could this happen to higher-education? Could too many graduating students defaulting on their loans cause problems for future students in obtaining loans? I don't know how student lending works (how does a bank know when or when not to issue a loan to a student?), but I'd wager that if they aren't taking into account a student's performance record and potential future earnings, they will soon.

Google break

Huh. It looks like they don't [1]. It would be interesting to learn why they haven't yet, it seems like a good idea. It's certainly reasonable to think that there are more factors to take into account (I'm thinking that of moral/ethical considerations mentioned in the linked paper).

[1] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1941070

the_watcher 13 years ago | |

Federal Loans are basically unlimited to anyone without an adverse credit history (so 18-24 year olds with no credit qualify). That is the definition of bad lending. There is no linkage between likelihood of making the investment back and size of the loan.

mjmahone17 13 years ago | | |

That's not true, unless you're a grad student or an independent, and can take advantage of PLUS loans. As a senior, I can only take out 10 or 11k in subsidized, and 2k in unsubsidized loans. The rest has to come from family, aid or private loans.

Sumaso 13 years ago |

Not all degree's are equal.

I can't imagine any engineer saying that they cannot pay off their student debt because they cannot find a well paying job.

rayiner 13 years ago | |

That's not true. Even during the boom, many people who got engineering degrees at second and third tier schools couldn't find jobs as engineers.

vonmoltke 13 years ago | | |

When I graduated in 2002 from a smaller state university I was the only BSEE out of 12 (I think) who had a job or even prospects. The rest of the engineering department wasn't much better.

I turned down Rose-Hulman because I would have had to make up $12k+ per year in loans and wages to afford it.

Edit: I would like to add that, despite the complaints here about not having enough programmers, the current unemployment rate for fresh BSCS grads is about 7.8%.

twoodfin 13 years ago |

Taking the Harvard endowment's performance in 2008 (a year in which the S&P 500 lost 40% of its value) as a measure of the change in the availability of financial aid is... strange.

rdudekul 13 years ago |

It would be interesting to see how MOOCs (Coursera, Udacity etc.) will change the education landscape. Personally the MOOC courses have been far more useful to me than any university courses I took. If getting a job is the sole criteria, I can see a time where university courses can become irrelevant compared to free online courses.

stevenameyer 13 years ago |

I think the major problem with higher education is two things.

1) Inflation. So many people are now getting degrees that they are starting to mean less and less. But since so many people have a degree its starting to become a necessity for jobs that use to not require them.

2) People see Higher education as something it was not designed for. Training for a job. Historically (unless your going into a professional program such as engineering or medicine) education was designed to help in the quest for knowledge, not as a means to get a good paying job. And we are starting to see this more and more. A BA may give you tons of knowledge in literature, or history, or whatever your major is but more often then not this knowledge is not preparing you for a job, it is acquiring knowledge for the sake of knowing.

lkrubner 13 years ago |

Is there a way to reconcile their graph, which shows the cost of education going up by 1000% on their index, with the statistic, lower on the same page, that says the cost of education has gone up by 439%?

KaeseEs 13 years ago | |

The graph shows a 1000-ish percent increase in tuition since 1978, the 439% number later on the page is the cost (not tuition) increase since 1982. Measuring different things from different starting points.

Someone 13 years ago | |

The index has 1978=100 (or is that 1970? The graphic is very vague on an iPad), the 439% is since 1982. Eying the graph, that 439% is about right (200-ish to 1100-ish is a factor of 5,5-ish, or about 450%)

lurker14 13 years ago | |

1. it's an infographic, not intended as meaningful discourse.

2. It talks about tuition, which is a nonsense metric, since private (and to a lesser extent public) colleges offer steep discounts (aid). A meaningful analysis would report on actual payments.