Will Higher Education Be the Next Bubble to Burst?
Is it possible that higher education might be the next bubble to burst? Some early warnings suggest that it could be.
With tuitions, fees, and room and board at dozens of colleges now reaching $50,000 a year, the ability to sustain private higher education for all but the very well-heeled is questionable. According to the National Center for Public Policy and Higher Education, over the past 25 years, average college tuition and fees have risen by 440 percent - more than four times the rate of inflation and almost twice the rate of medical care. Patrick M. Callan, the center's president, has warned that low-income students will find college unaffordable.
Meanwhile, the middle class, which has paid for higher education in the past mainly by taking out loans, may now be precluded from doing so as the private student-loan market has all but dried up. In addition, endowment cushions that allowed colleges to engage in steep tuition discounting are gone. Declines in housing valuations are making it difficult for families to rely on home-equity loans for college financing. Even when the equity is there, parents are reluctant to further leverage themselves into a future where job security is uncertain.
Consumers who have questioned whether it is worth spending $1,000 a square foot for a home are now asking whether it is worth spending $1,000 a week to send their kids to college. There is a growing sense among the public that higher education might be overpriced and under-delivering.
While this highlights the problems facing private colleges, I think the general point is still applicable and a very scary prospect given that Texas is falling to match it's support of public higher education (making even state supported school appear more like private institutions as far as their funding is concerned). See the chart below which included in UT-Austin's promotional materials for it's $3 billion Campaign for Texas fundraising drive.
Growing up, higher education was a given of something that I was expected to pursue; it was never a decision that was calculated based upon a cost-benefit analysis. Maybe that's because it was simply assumed that the benefit most certainly was going to outweigh the cost. Is that the core point being made here- that we are no longer assuming that higher education is a "value" but simply a "value added" subject to a risk/benefit analysis?
