Since I wrote this post yesterday afternoon, it seems as if I’ve been inundated with interesting links about the supposed higher education bubble. [I'd give everyone credit for directing me to these great essays, but I've forgotten where I found everything now.] As I wrote in the comments to that post, I think the conventional take on this is completely wrong. A real (as opposed to online) college is an excellent investment even if it is too darned expensive. It’s the colleges themselves, not the students, that seem to me to be the ones floating on a bubble.
Let me see if I can explain myself better now. I’ll start with this quote from the anti-college critic Peter Thiel:
But if college is neither a luxury good nor an investment, what is it? For Thiel, the commodity college most closely resembles is the humble insurance policy. Americans have become terrified, he says, of what will happen to their children if they don’t send them to college. The recession, widening income inequality, growing job insecurity, the uncertain future of the welfare state, the increasing costs of health care—all have deepened the anxieties that made college such an attractive option for a rising middle class in the first place. “I think that’s the way probably a lot of parents think about it. It’s a way for their kids to be safe, to be protected from the chaos. You’re paying for college because it’s an insurance policy against falling out of the middle class.” The larger question this raises, he says, is, “Why are we spending ten times as much for insurance as we were 30 years ago? And does that tell us something has gone really badly wrong with our country?”
On one level, I like that analogy. College is an insurance policy against falling out of the middle class. The problem with that analogy, though, is that if you fail to buy insurance on your home, you could still be OK since it might not be burglarized. If you don’t go to college, the chances of falling out of the middle class are greatly enhanced. Indeed, it’s almost guaranteed.
To suggest that there’s a bubble on the demand side is also short-sighted. Once the economy recovers, jobs will come back and people will need college degrees to get those jobs. According to Steve Lopez in today’s LA Times:
[T]he Public Policy Institute of California has projected a recovering economy, not too far down the road, that will create more jobs for college graduates than California can supply.
Yes, it might take longer to pay back the loans that make higher education possible, but you’re better off taking on that debt than not. Demand for college is inelastic because it’s still worth it, even at today’s ridiculously high prices.
My fear is that it’s the schools themselves who’ve started a speculative bubble, and the bubble they’re creating is in the “market” for students. With state money decreasing or with increasingly more students unable to borrow enough to go to a private university which costs $50,000/year, they’re bidding up the cost of attracting new students because growing the campus is less painful (but not cheaper) than making painful cuts to administrative salaries and sports. As Tim Burke explains:
When students (and staff and faculty) envision something that they believe a college or university should do, that quickly becomes an assumption that this mission or function should be enacted through one or more paid staff positions. If the best-resourced selective institutions are the equivalent of an expensive house in a highly desirable zip code, then this kind of staffing is the luxury feature that most of the customers expect. Even if the higher ed bubble pops in some fashion, I don’t think a place like Swarthmore could ride out the changed environment by cutting back to nothing but extravagantly offered instruction.
At my school, displaced Californians are the Great White Whale of college expansion. We’ve built three new posh dorms to hold them and other out-of-the-region students, while our older housing is mostly empty. Even with the dorms near full, money from the general fund has to go to pay the bonds back that built the dorm in the first place. This kind of growth isn’t sustainable, especially if every other college that we compete against for students is trying to do the same kind of thing. If “keep digging” is Plan A, what’s Plan B? I’m afraid it’s “recalibration.”
Come to think of it, all of this talk about a higher education bubble, isn’t going to help increase everybody’s enrollment either. If you don’t mind then, I think I’ll forego my plans for “The real higher education bubble: Take three.”