The Education Bubble

Are institutions like this overvalued?

We dispelled a number of myths in the past decade.  Technology companies were supposed to usher in a new economy – until we learned users don’t correlate with revenue.  Iraq was supposed to house weapons of mass destruction and terrorists – until our military found nothing there once we wiped out an entire government.  Homes were supposed to be safe assets and obtainable for everyone – until the sub-prime mortgage crisis hit.  The next lie we are about to come to terms with is both scary and personal for many of us.  We have been told by society that a college education is both critical and essential for a secure and successful future.  But if current trends continue, we will soon find that this is a lie and that a college education structured in its present format will harm and inhibit students far more than it will benefit them.  We will discuss the reasons below.

Value is determined by scarcity.  And with each passing year, a college degree becomes more and more prevalent.  In the past, it was fairly simple to obtain a solid job with a college diploma since degree holders were in the minority of the population.  But if you apply for a competitive job in this era, you can bet that nearly anyone else applying for that position also has one, making it more difficult for you to distinguish yourself on paper.  We recognize athletes like LeBron and Kobe because they possess skills that few people have.  We rarely recognize individual high school basketball players because there are so many of them and few truly standout based on distinguished talent.  In the same way, we used to value a college degree because it was prestigious and distinguished.  Now it’s nothing more than a necessary step into a professional position.

The cost of obtaining a diploma has grown from expensive to ridiculous.  When I entered WSU in 2006, the annual cost of tuition alone was approximately $5,500.  I just learned at work today in the Office of Admissions that the annual cost of tuition alone in 2011 is projected to be approximately $9,500; a 11% increase from this years’ total of $8,600!  To compound upon this atrocity, the University is following through on additional budget cuts and departmental trimming/eliminations.  At a time when almost no one is getting a pay raise, and prices of commodities like gas continue to increase, can families continue to justify sacrificing their standard of living for a devaluating asset?  Loans are a common response to this question – unfortunately, it’s a major part of the problem.

Student Loans are not designed to benefit the student as much as they are designed to benefit the lender.  The issuance of student loans is currently a one trillion dollar industry.  Currently 25% of student loans default, due to a good portion of students that unable to find a job which allows them to live comfortably and pay off their loans simultaneously.  At the peak of the sub-prime crisis which led us to our current Great Recession, loan default rates were also 25%.  Unfortunately, unlike the sub-prime mortgage crisis, a bailout isn’t likely to save us – since the government and Sallie Mae (owned by the government) are the primary issuers of student loans.

Universities don’t make people successful, people make themselves successful.  If schools like Yale and Harvard can really teach students how to be intelligent and powerful, why don’t they franchise or create affiliates which use the same curriculum and teaching methods so that more students may attend these prestigious institutions?  One reason is due to the first argument listed above.  But the second is probably because they know that the students permitted entry into their schools were going to have the capacity to succeed either way – regardless if they received their education at Yale or not.  If you have access to the best and the brightest, isn’t it reasonable to assume that you’ll have the most successful graduates?  Is it the university which really fosters success, or is it the students who come in who simply continue their trajectory of success?

I have loved my undergraduate experience and greatly value the lessons I’ve obtained during my time here at WSU.  But I worry greatly for current and future students who will face a higher cost, for decreased services, at a time when a college diploma alone is showing an increasing inability to carry out the American Dream.  Higher Education is still a critical component of society and universities are not going anywhere anytime soon; but there are clear issues we will need to address in the near future if we are to maintain the prestige of the college degree.