It’s a story of an industry that may sound familiar.
The buyers think what they’re buying will appreciate in value, making them rich in the future. The product grows more and more elaborate, and more and more expensive, but the expense is offset by cheap credit provided by sellers eager to encourage buyers to buy.
Buyers see that everyone else is taking on mounds of debt, and so are more comfortable when they do so themselves; besides, for a generation, the value of what they’re buying has gone up steadily. What could go wrong? Everything continues smoothly until, at some point, it doesn’t…
[B]ubbles burst when people catch on, and there’s some evidence that people are beginning to catch on. Student loan demand, according to a recent report in the Washington Post, is going soft, and students are expressing a willingness to go to a cheaper school rather than run up debt. Things haven’t collapsed yet, but they’re looking shakier — kind of like the housing market looked in 2007.
What makes it worse is that all the proceeds from these loans are being dispersed unequally. Private lenders, university presidents and football coaches get theirs, faculty still get contingent contracts furloughs.
What stops me from panicking though is the absence of two forces that made the real estate bubble so bad: Home equity loans and flippers. And as Reynolds points out elsewhere, you can still trade down for a cheaper college education, which is one key reason my school has been booming lately.
This argument, however, gets no sympathy from me at all:
My question is whether traditional academic institutions will be able to keep up with the times, or whether — as Anya Kamenetz suggests in her new book, “DIY U”* — the real pioneering will be in online education and the work of “edupunks” who are more interested in finding new ways of teaching and learning than in protecting existing interests.
I’m betting on the latter. Industries seldom reform themselves, and real competition usually comes from the outside.
Apples and oranges, Glenn. Apples and oranges. Actually, it’s more like apples and rotten oranges. A college education and an online degree are not substitutes for one another. The online degree is an inferior good. Not only that, it’s an inferior good that’s actually more expensive! If I remember this program well enough, it’s on average four times as expensive as a public college.
Furthermore, I bet if the price of private college ever went down, they wouldn’t be private anymore because the investment wouldn’t be profitable enough for their shareholders. Fund a lot more capacity at America’s community colleges, like Washington Monthly has been suggesting lately, and the online college degree industry would disappear overnight.
If there really is an education bubble, it’s the online, for-profit colleges that are going to burst first.
* If someone sends me a review copy of DIY U I promise I’ll read it and write about it in this space, but I still refuse to enrich the author and publisher of book with a title that stupid.