Thingish Things

The College Bubble

Written By: William F. B. O'Reilly - Jan• 20•11

Something major is awry with higher education in the U.S.  And everyone knows it.  Just like they knew something was wrong with other economic bubbles that screwed up the first decade of this century.

Everyone knew the housing market was out of whack three years ago. People with good jobs couldn’t afford modest homes. Something was wrong.

Ten years ago everyone knew the Internet bubble would eventually burst.  When www.I’ is valued higher than General Electric, it’s a problem.

Something has been wrong with property taxes. They have been doubling every 10 years and wages are flat. That’s not going to work. Every homeowner knows it.

But bigger than any of these bubbles, perhaps, for parents of my generation and their children at least, is the ever-haunting college question: How on earth does anyone pay for it today?

Something has to give. And eventually it will.

The cost of a college education is bordering on the impossible for most Americans.

Say you’ve got a four-year-old, and you want him or her to go to a top four-year private school. A simple college calculator will tell you what its cost will be: approximately $545,000. (Put away $1,500 a month starting TODAY and everything will be alright.)

Say you have twin four year olds…

Or a family of five.

You might be better off buying lottery tickets than saving.

Public schools cost less.  But their prices are skyrocketing, too, as more students, unable to afford private universities, chase fewer class seats – and government dollars that traditionally supplemented their cost dry up.

There have been a number of studies on why the cost of college has far outpaced inflation – from 1982 to 2007 college costs increased 439% — but none of them answer the simplest questions.

What is education at its fundament? What does it require?

Last I checked, with the exception of medical school or other highly specialized science programs, it requires a.) books, b.) a student, and  c.)  a mentor/teacher – the old Socrates-Plato thing.

The first two parents are providing.  The student and his books are on us.  So what we essentially have to pay for is tutelage.

If the average ratio of student to faculty – these ratios vary widely from school to school – is  around 15-1, how can this cost so much?  How much can a pipe and a corduroy jacket run these days?

Most universities are tax exempt not-for-profits.  They own their buildings, and they have massive endowments from alumni.  So where are these costs coming from?

An interesting school of thought suggests that easy money is at the root of all this.  Universities have been able to charge whatever they want because government loans and other tuition assistance has heretofore matched whatever they demanded. In other words, colleges have had no incentive to lower costs.  Indeed, just the opposite, they have had every incentive to raise them and they have (no dummies in academia.)

But that’s about to come to a screeching stop.

Federal and state governments are broke and borrowing at an historic pace.  They no longer have easy cash to hand out to bright young students, and their borrowing will eventually drive up interest rates, compounding the problem for parents and students.

Something has to give. And everybody knows it.

Or has life in the U.S. become one giant hamster wheel where we work a lifetime to pay off universities, hospitals, and old-aged homes?

It can’t have.  Can it?

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  1. […] me like they are.  My gut says this is the college industry looking to rationalize today’s ridiculous college costs, and they should be called on it if they are […]

  2. […] the value of degrees themselves and artificially fuel the higher education industry. (I wrote a piece on that a few months […]

  3. […] the monumental rip0ff that has become our nation’s higher education system. It’s been a peeve of mine for awhile – it is estimated that a four-year bachelor’s degree for my five-year-old will cost […]

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