I have a buddy named Eric in Indiana who believes there is an education bubble. He sent me an this article last week about how Seton Hall will lower their tuition to match that of Rutgers. This seems to be a theme that comes up more and more often. I am not a huge fan of Rick Perry, but his plan to provide a $10,000 Bachelors degree to qualifying Texans seems to be a stellar idea. If they could get rid of some of the goofy, politically correct curricula and replace it with something the is a little more market driven, our higher education system might start to improve. There is more to this story than just cost. Maybe too many people who would be better served in apprenticeships and community college go to four year colleges to get worthless degrees. Maybe some fields like Psychology would be better served through certification and apprenticeship programs than through traditional college degrees. I was gratified to see that one of my favorite authors, Charles Murray, is going to debate that topic in Chicago on October 12. I plan to start watching this topic a little more closely.
Eric is not what I would call a conspiracy theorist, but almost. I think his problem, if you want to call it a problem, is the same as mine–he knows what he believes and the things he believes are not based on the pop culture zeitgeist. We might be wrong, but it least we know what we believe and why we believe it. We are not EXACTLY on the same page on everything, but we are pretty close on a lot of things. He has a wonderful family, homeschools his kids, lives on a farm, works as an engineer, and does what he believes is right to a fault. He is a thoughtful, happy, but pretty intense guy. Come to think of it, I need to ask him to start doing a guest post for me here if he can ever spare the time. Eric?
Eric
On a personal level, when I started at the university in 1990 the cost was $16,000 per year. This year a freshman at that same university pays $52,000 per year. When compared to the rate of inflation (CPI), that $16,000 in current dollars is slightly more than $23,000. Why has tuition at my alma mater increased more than double the rate of inflation?
There is nothing conspiratorial about the education bubble and I’m not the only one aware of it. I stand with more influential folks like Peter Thiel of PayPal fame,
http://techcrunch.com/2011/04/10/peter-thiel-were-in-a-bubble-and-its-not-the-internet-its-higher-education/
Then there is Mish Shedlock at Global Economic Analysis who has blogged extensively on the subject.
http://globaleconomicanalysis.blogspot.com/2011/04/education-bubble-student-loan-debt.html
http://globaleconomicanalysis.blogspot.com/2010/03/debt-for-diploma-schemes-and-cookie.html
http://globaleconomicanalysis.blogspot.com/2010/03/for-profit-schools-turn-students-into.html
The reason we are in an education bubble is that tuition is highly subsidized by the federal government in the form of Pell and other grants to students. Secondly, tuition is subsidized by low interest long term loans to students. Thirdly, it is subsidized by similar loans to parents. Subsidies affect prices in the market place, and rarely to the downside.
I am very fortunate because my children will not start secondary education for several more years. I am pretty sure the education bubble will have burst by then. If it has not burst by then, I will encourage them to obtain an affordable education in the U.S. at a good state school. Another option is to encourage my children to go abroad for secondary education where they can literally get a fantastic education much less. For instance, Cambridge University in England is only $19,000 per year and Einstein’s alma mater, Swiss Federal Institute of Technology is a mere $750 per semester. The price is much lower … all that remains is academic barrier of entry. My kids would have a better education and resume, international experience with ZERO debt.