June 18, 2013
The economic realignment of education will . . . most likely take place in the next five to ten years.
According to Frank Ryan, the higher education bubble has burst. If this is true, families with children now in college are buying at the top, just like the unlucky homeowners who bought at the peak of the last housing bubble about five years ago.
Evidence for this pending “collapse of the education systems” includes soaring tuition costs, record student loan debt, escalating loan delinquency rates, declining college enrollment, and Moody’s negative financial outlook for the higher education sector. There will be winners and losers in the coming years, with “marginally profitable schools, or schools with high debt loads which depend upon taxpayer support”, finding it difficult to survive.
Ryan’s outlook for the next ten years:
First, to stem declining enrollment, tuition will decrease. Schools will struggle to maintain enrollment and in order to cover their fixed cost will be forced to reduce tuitions to encourage students and enrollment.
Second, faculty tenure and burgeoning cost of academic instruction will come under question and will be changed. While existing tenured faculty will probably not be affected, the probability of getting tenure for other professors will be significantly more difficult, except at well-funded academic institutions. Pay will likely decline as well.
Third, entire educational institutions will begin to file bankruptcy. There has already been a major bankruptcy of a university in Atlanta, Georgia. Other institutions that are not well-funded will meet the same fate.
Fourth, it is very obvious that academia will be forced to justify its cost relative to the value garnered from the education. This will be one of the first times in history that the value of education relative to the cost will come under scrutiny.
June 6, 2012
If we are experiencing a higher education bubble, characterized by skyrocketing costs for degrees of questionable value that are increasingly only affordable by assuming growing amounts of debt, what comes after the bubble bursts? Glenn Reynolds writes about how portfolios could replace some degrees as the credential of choice for employment.
Another opportunity exists in alternative methods of certifying knowledge. A college diploma serves as a basic signifier of its holder’s basic competence, but with costs running well into the six figures, it’s an awfully expensive credential.
MIT/Harvard will start certifying online students, and that may be just the beginning. The Cato Institute’s Andrew Coulson suggests that people should accumulate knowledge in life, then build a portfolio that will directly demonstrate their knowledge to future employers. He calls it savoir faire: (Literally: “know how to do.”)
One sign of a higher education bubble is that too many unprepared high school graduates are enrolling in college. So instead of enrolling in a four-year degree program that will leave him paying back loans for twenty years or more, it might make more sense for a student to focus on the key skills needed for his career of choice. He could then create a portfolio of credentials or “badges” that demonstrates his capabilities for a job in technology, customer service, healthcare, human resources, or any number of fields. This makes more sense than the broken system we have now, where an urban studies major struggles to pay back student loans while working as an administrative assistant.
It’s hard to predict exactly how such a significant evolution would take place, but it might be useful to remember the days when it was rare that want ads for administrative staff included “college degree preferred” in their requirements. That change probably happened over twenty years or more, but the move to a new credentialing system could take less time.
Writing is one skill that could benefit from such a change. I can see how high school graduates could become better writers by taking a few targeted courses instead of spending most of four or five years
studying partying on a typical college campus. Employers should welcome this new type of credentialing since they now have a difficult time finding qualified employees to hire among recent college graduates.
ADDED: A new report by the Georgetown University Center on Education and the Workforce says that certificates are the fastest-growing postsecondary credential awarded and have demonstrated increasing clout … in the labor market.
May 25, 2012
In writing about the higher education bubble, Jerry Bowyer had this observation.
Furthermore, there has been a severe contraction in the quality of higher education in America. Did we really think we could open the floodgates and not affect the quality of graduates? Can you turn college into the new high school, and not get high school-like results? Grade inflation will only keep the problem concealed for so long before the general public becomes aware that outside of a few highly challenging programs and majors, the quality of American higher education is plummeting. Graduates are mastering fewer facts, can’t think critically about the facts they have mastered, and can’t express whatever ideas they have mastered in clear, cogent, grammatically correct sentences. Employers already know this.
Professor Mark Perry thinks most college professors would agree with Bowyer. As others have, Perry compares the housing bubble to the higher education bubble.
Similarity between ‘good renters’ and ‘good high school graduates’
It seems clear now that because of dual political obsessions, we have “oversold” both homeownership and college education to the American people, by artificially lowering the costs through government intervention and subsidies. As economic theory tells us, if you subsidize something you get more of it, and that’s what happened with both homeownerhip and college education – but we got too much of it, and that has led to twin bubbles. Just like government policies turned “good renters into bad homeowners,” it’s now apparent that government policies have turned “good high school graduates, many of whom should have pursued tw0-year degrees or other forms of career training, into unemployable college graduates with excessive levels of student loan debt that can’t be discharged.” Perhaps economics textbooks in the future can illustrate the concept of “government failure” with these two examples of government-induced, unsustainable bubbles?
Just as too many unqualified home buyers took on mortgages in the run-up to the housing bubble, maybe too many unprepared high school graduates are enrolling in college.
Related: Typical undergrad ‘could not write a paper or solve an algebra problem’
May 21, 2012
MARK CUBAN ON THE HIGHER EDUCATION BUBBLE:
This comparison between higher education and the newspaper business seems apt.
The Higher Education Industry is very analogous to the Newspaper industry. By the time they realize they need to change the costs to support their legacy infrastructure and costs will keep them from getting there.
Its far too easy to borrow money for college. Did you know that there is more outstanding debt for student loans than there is for Auto Loans or Credit Card loans ? Thats right. The 37mm holders of student loans have more debt than the 175mm or so credit card owners in this country and more than the all of the debt on cars in this country. While the average student loan debt is about 23k. The median is close to $12,500. And growing. Past 1 TRILLION DOLLARS.
We freak out about the Trillions of dollars in debt our country faces. What about the TRILLION DOLLARs plus in debt college kids are facing ?
The point of the numbers is that getting a student loan is easy. Too easy.
You know who knows that the money is easy better than anyone ? The schools that are taking that student loan money in tuition. Which is exactly why they have no problems raising costs for tuition each and every year.
Purpose of college
As far as the purpose of college, I am a huge believer that you go to college to learn how to learn. However, if that gaol is subverted because traditional universities, public and private, charge so much to make that happen, I believe that system will collapse and there will be better alternatives created.
Reading this on Cuban’s blog, I was amused by his writing errors. I’m sure he writes quickly and eschews basic spell checking. Somehow, it’s entertaining to see “its” and “thats” with missing apostrophes in a billionaire business magnate’s writing. The lesson might be that perfect grammar and correct spelling are not always essential for good communication. There are probably a few other self-made billionaires who can’t be bothered to know when to use “it’s” instead of “its” *.
* Actually, I think the more common mistake is to add an unnecessary apostrophe.