Posts tagged ‘Education Bubble’

Higher Ed Bubble, Demographics and Roe Effect

The Roe Effect, combined with way-too-high college tuition and fees for a lousy education, the resulting student debt, and underemployment of recent college grads is going to lead to many more colleges closing in the coming years.

A waning number of high school graduates from the Midwest is sparking a college hunt for freshman applicants, with the decline being felt as far away as Harvard and Emory universities.

The drop is the leading edge of a demographic change that is likely to ease competition for slots at selective schools and is already prompting concern among Midwestern colleges.

“You can’t create 18-year-olds in a lab,” said Brian Prescott, director of policy research at the Western Interstate Commission for Higher Education in Boulder, Colorado. “Enrollment managers are facing an awful lot of pressure that they can’t do much about.”

Denison University, in Granville, and the College of Wooster, both project about a 13 percent drop from within the state. Ohio residents make up about a quarter of Denison’s student body and about a third at Wooster. Denison and Ohio Wesleyan University have boosted travel outside the state to attract prospective students, especially in California and the Southwest.

Dwindling Midwest High School Grads Spur College Hunt

From April 2013: Colleges Struggling to Stay Afloat

Too many high school students are told they must go to college when many of them would be much better off getting trained in a 1 to 3 year program learning a trade or earning a certificate in a practical skill, like welding. See
– mikeroweWORKS Foundation
– Don’t Go to College Next Year
– Don’t Send Your Kids to College
– Edububble
– Phi Beta Cons

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Posted 2014/02/26, 7:17 am  ·  Category: Demographics, Economics, More Education than Judgement, More Money Than Judgement, Tips ·  Comments Off on Higher Ed Bubble, Demographics and Roe Effect

Education Bubble?

In a nutshell, blue collar workers are subsidizing the college education of future higher income workers.
. . .
It has been found at many institutions all across the country that colleges have used government dollars not to increase options and improve facilities, but to increase headcount among staff. All of this extra overhead adds to the fixed cost of college. The cost is not just in salary, but guaranteed pension benefits that accrue to the staff members no matter what.
. . .
There are two ways out of the problem, and we ought to do both.

First, build more colleges. This increases the supply and tempers demand, dropping prices. At the same time, remove the stigma of going to a community college. Going to a two year school will also relieve demand pressure on four year colleges, allowing prices to stagnate.

The second solution sounds cold hearted. But in order to make college more affordable for everyone, government ought to get out of the higher education subsidy business altogether. Blue collar workers will thank them for removing this hidden tax burden. Colleges will run leaner, and the federal budget deficit will drop.

“Is There An Education Bubble?” by Jeff Carter, Points and Figures, January 15, 2011

HT, Instapundit

New Business School
Creative Commons License photo credit: yosoynuts

We find that there is indeed a building bubble in US higher education, which we see is clearly represented by three separate periods in which the growth of tuition decoupled from the growth of US median income.

These periods of tuition inflation largely coincide with periods of recession or slow job growth in the United States, from 1990 to 1993, 2000 to 2004 and from 2007 to the present. That these distinct phases of tuition inflation have occurred during recessionary periods, while tuition costs have steadily paced household income in healthier economic conditions, suggests that US higher learning institutions have been the beneficiaries of a remarkable amount of insulation from economic circumstances during these periods.

“Visualizing the U.S. Higher Education Bubble,” by Ironman, Seeking Alpha, September 8, 2010

Regardless of the root cause, the cost increases are not sustainable. Students and parents can make other choices, such as attending a two-year college, attending a trade school, purchasing a business franchise, investing in a new business, or (in my opinion the worst option) not going to college at all. As many recent graduates have found out, a college education does not guarantee a job.

“The College Education Bubble,” by Investor Junkie, March 30, 2010

Random but important points: 1. Getting a college edjumication does not (NOT) raise your lifetime earnings by $1 million. When you control for inflation, opportunity costs of going to school, advanced degrees, and the kitchen sink, you’re looking at about $280,000 more over a lifetime. 2. Where you go to college is far less important to future earnings than that you go to college. According to Princeton economist Alan Krueger, the returns to attending an elite university (defined as one that will put you in the poor house) are far from clear. In fact, where you apply to college is a better indicator of future earnings than where you actually go….

“Is The Education Bubble About to Burst?” by Nick Gillespie, Hit and Run, June 8, 2010

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Posted 2011/01/15, 10:47 am  ·  Category: Caught Our Eye ·  Comments Off on Education Bubble?