Saturday, January 24, 2009

More on Higher Education - Will It Be the Next Bubble to Pop?

This article at Minding the Campus is worth reading. It talks about the cost of higher education and its potential for being the next bubble, a la the housing market. The cost of a college degree has been rising at roughly three times the rate of inflation for some time. People have been willing to pay it, often going deep into debt (see post below), because they see it as the price of entry into the competition for the best paid jobs. Never mind that the degree earned may have little if any relevance to the career they actually end up with. I remember when I went to Large State U that the Chancellor addressed the incoming class and one thing he said has stuck in my mind ever since. He said that only about 5% of all liberal arts majors actually end up working in their field of study. I'm certainly not in that 5%, and that's probably a good thing because chances are it would be a poorly paid job teaching other people the same stuff.
After all, didn't ambitious citizens have to pay their dues to higher ed in order to have a meaningful chance at success? With seemingly no viable alternative or exit strategy, consumers have stretched their pocketbooks to the breaking point and taken out loans to purchase a chance at the American Dream. (Today over 35% of students rely on student loans, and the number is growing.) Not surprisingly, the last twenty years have seen tuition costs rise at over three times the rate of inflation. The overall costs for many private schools add up to $50,000 per year, while public universities cost up to $20,000
for state residents, and over $30,000 for those who hail from out of state. Meanwhile, wages for most Americans have been left in the dust.
Another point made in the article is of particular interest to me because part of my job involves arranging financing for both public and private higher education institutions.
Last September, Timothy Burke, a professor of history at Swarthmore, wrote an influential essay at Inside Higher Ed in which he asserted that "the party's over" for higher ed's tuition and building binge. Burke focused on five main reasons for a contraction in higher education: 1) declines in tuition growth; 2) underperformance by endowments; 3) pullbacks by donors (indeed, on November 26 the Wall Street Journal published a lead story on how the economic crisis has caused a downturn in charity giving nation-wide); 4) lower funding from public and private sources; and 5) the fact that revenues from IPOs, investment property rights, and technology benefit only a few institutions. A respondent to Burke's piece added three other factors: 1) fewer students are attending college as the nation's demographics change; 2) "growing public awareness of the declining economic returns of a college degree" is causing a backlash; and 3) such on-line schools as the University of Phoenix provide education at a fraction of what residential institutions charge. (Will the Internet affect higher ed the same way it has affected newspapers?)
It's all very though provoking. Read the whole thing.
Update: I remembered reading a column by James Taranto in the Wall Street Journal along these same lines a while back and thought I blogged it already. Seems I didn't, so here it is. "College is an expensive way of taking an IQ test."
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1 comment:

max33 said...

I recently retired from a large university. The administrative costs went through the roof... all sorts of parasitic offices, e.g.,"Assistant Sports Information Director" and "Assistant Vice-President for University Mission". No one questions the money handed over to these folks who neither teach nor learn, but consider themselves "essential". Parents never bother to ask about or perhaps even question the need for more administrators than faculty -- which was the case in my university. What a con game!