Higher Ed Bubble to Burst? May 26, 2009
Posted by tobykeeping in Challenges.trackback
I just finished reading a commentary piece at The Chronicle of Higher Education by Joseph Marr Cronin and Howard E. Horton who jointly question if in fact higher education could be the next bubble to burst.
They relayed some statistics which are of no surprise to those in higher education circles, including;
- tuition has crested $50,000/year at many private schools
- average tuition and fees have risen by 440% in the past 25 years
- the middle class is restricted by a private student loan market that has dried up
- declines in housing valuations makes it hard for home-equity loans to pay for college
- endowment losses no longer allow for deep tuition discounting
- many states could see eligible students decline by 10%; Vermont is expected to lose 20% by 2020
- non-traditional competition has risen steeply
- and others
The suggestion is that higher education institutions need to look for ways to become more efficient and other sources of tuition.
While much of the commentary was dire, a few bright spots emerged. Specifically, the government has raised support to returning veterans to obtain education. They also suggest that an additional 400,000 students each year could be enrolled in US schools from abroad if visa applications were expedited. While this may be true, it’s important to note that the UK has recently become a more prominent draw for international students and the US has increased competition.
Like any institution, company or individual seeking to become better, higher education is now presented with a challenge to become more efficient and effective. “Doing more with less” is now part of the higher ed vernacular and the economic and demographic challenges facing it are profound.
What are your thoughts? Could higher ed be the next bubble to ‘burst’? What are unique examples you’ve heard of that schools have either found alternative sources of tuition and/or become more efficient/effective?
Thanks for posting this article. There have been many bubbles over the past 20 years, but the higher ed bubble is one of the more obvious and one that is only beginning to deflate.
Going back decades now, we’ve seen tuition projections that demand rising income in order to be within the realm of possibility. That has not happened. Incomes have been stagnant for (at least) the bottom 75% of Americans. That has left debt as the “best” option — either student loans or the home equity of their parents. The latter is essentially gone and the former is becoming less and less appealing in a new era of debt aversion. Combine that with endowments that have taken massive hits over the past two years and an employment structure that makes it extremely difficult to reign in costs and there is a recipe for massive disaster.
PS – please turn off the snap pop-ups in wordpress.
A lot of attention is (rightly) focused on private institutions’ tuition and fees. One thing that deserves more public discussion in my opinion is the disproportionately high student debt borne by those attending for-profit institutions. That’s a quasi-separate bubble that has an additional set of current consequences for personal finance among lower- and middle-income families. See:
http://www.finaid.org/educators/20090511excessivedebt.pdf
and
http://is.gd/F5jZ