Friday, January 23, 2009

Higher Education the Next Bubble?

Professor Donald Downs reports:
The idea of "bubble" has been on everyone's mind since the escalating housing and economic crisis first erupted in July 2007. Throughout these turbulent times, one institution appeared to be coasting along above the fray: Higher Education. Higher ed has been growing for decades, becoming a staple in the national political economy. The supply and demand situation has been remarkably favorable to it: believing that higher education is a necessary, if not sufficient, ticket to personal success and social progress, the public has tolerated increasingly higher costs and tuition---forces that citizens have rebelled against in other consumer domains.

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.

Something had to give. The fate of the housing market comes to mind.
An article worth your time.