I'm catching up on my blog reading and Michael Feldstein had an interesting post a few days back, asking the question of whether there is a bubble in the higher education market. He points to a number of statistics indicating the declining rate of return for a college student investing in his or her education. As he concludes, "unlike your home, your education is a fundamentally illiquid asset. You can’t sell off your diploma, even at a loss, to pay back your bank loans. These students will be screwed six ways from Sunday, which is even more ways than they’re getting screwed now." In other words, students could end up essentially upside down in a college education that will never be worth the cost. Feldstein's alternative is to explore the idea of a DIY education.
So here are some thoughts I had on that.
1. Unlike the housing bubble, where house values were raised by speculation, college really does cost that much. I mean no one is making a living flipping BAs. Maybe college shouldn't cost that much, maybe it should be funded differently to reduce the cost to students, but that seems different from a bubble, or at least it's a different kind of bubble. That said, I agree that this whole business is encouraged by the availability of these loans, so that is something shared with housing.
2. Maybe a purely economic ROI calculation shouldn't be the rationale for going to college. If you're going to college solely to make money designing, producing, marketing, and/or servicing widgets, then maybe socially we should expect WidgetCo to train you. They're the ones making money off your labor anyhow. Of course that's a radical shift in our culture, but so is a DIY education.
3. So let's say half of our current college students decided to stop going to college… I wonder what that would do to the unemployment rate? It would also shift the burden for health insurance, which they are currently getting from their parents. When these couple million new job seekers enter the market, what will happen to pay rates? All I'm suggesting here is that there could be other externalities that would arise from moving so many people out of higher education.
So if you look at UB's costs, it's about $8000/yr for tuition, fees, and books.Yes, there are other expenses for college like food, clothing, transportation, shelter: but I'm guessing you were going to need those things anyway. That's $32K for a four-year degree. Even if it went up every year (as it seems to these days), it would still be under $40K. Just as a point of comparison, the average cost of a new car in 2010 is $28K. Why are we happy to pay that much for a new car, which will be worth less than $5K as a trade-in in five years, and upset by the cost of college? Typically 16 million new cars are sold each year in the US. In 2008 that number crashed to 13.2M, resulting in a multi-billion dollar bailout of the auto industry as we all remember.
This conversation is far from over, but I'm already so tired of it. Yes, great, let's find a way to make college more affordable without reducing its quality. And yes, let's explore the DIY route, which can work for some people. I can think of at least 10-20 students I've had over the last 15 years that could probably succeed doing that.
But don't tell me that a college education is less valuable than your gas-guzzling SUV. And if you have to come to college to get the job you want, then complain to the corporations. Colleges don't require you to get a degree in order to get some entry-level corporate job. The probably isn't that college isn't worth the money. The problem is that people are forced to pay for a college education that they don't actually want.