Bubble in the Higher Education Market, Part Two

 

In my previous post on this subject, I mentioned in passing that Andrew Hacker (whom I knew slightly when I was an undergraduate at Cornell more than forty years ago) and Claudia Dreifus have written a book examining the question. In the interim, The Los Angeles Times has posted a squib from the book. Here is how it begins:

At Pomona College, a top-flight liberal arts school, this year’s sticker price for tuition and fees is a hefty $38,394 (not including room and board). Even after adjusting for inflation, that comes to 2.9 times what Pomona was charging a generation ago, in 1980.

This kind of massive tuition increase is the norm. In New England, Williams College charges $41,434, or an inflation-adjusted 3.2 times what it did 30 years ago. USC‘s current tab of $41,022 is a 3.6 multiple of its 1980 bill.

Tuition at public universities, in a time of ailing state budgets, has risen at an even faster rate. The University of Illinois‘ current $13,658 is six times its 1980 rate after adjusting for inflation. San Jose State’s $6,250 is a whopping 11 times more.

This cannot go on. And when something cannot go on, ordinarily it doesn’t. My bet is that state university charges continue to increase dramatically as the public subsidy is withdrawn and that private education charges level off or even decline.

The piece from which I quote is well worth reading. Hacker and Dreifus document the dramatic increases since 1980 in the money allocated to sports, to administration, and to the salaries of tenured faculty. The book is no doubt worth looking at as well.

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  1. Profile Photo Inactive
    @MichaelTee

    I hate to disagree, but I have to.

    Witness the housing bubble. People paying $500K for a new house for a few years and buying the next for $750K. Housing prices, especially those in CA where building is limited skyrocketed. Realtors, assessors, banks all made money. Then the housing bubble burst.

    Now there are certainly foreclosures in the market. But tell me how much a 1,200 square foot bungalow in Studio City costs again?

    • #1
  2. Profile Photo Member
    @PaulARahe
    Richard Cook: Upon Mr. Obama’s election I predicted to my wife that he would forgive student loan debts. While that looks increasingly unlikely in political terms, don’t you think it conceivable as a way to sell some reforms in education pricing/lending/subsidies? … It couldn’t cost more than Stimulus or Cap-and-Trade or Obamacare, and it would re-bind young voters to his cause. Also, it can be played more cynically, along the lines of amnesty: it will never have to actually be done, but talking about it keeps people on your side and against the mean-spirited opposition. [Mind you, even with a sizable student loan debt myself, I find this idea immoral. Plausible, but immoral.]

    PS: Dr. Rahe: Would a Ricochet reference make my CV look like Hillsdale material? · Sep 12 at 5:59pm

    Edited on Sep 12 at 06:01 pm

    The Ricochet reference would not hurt, but probably would not help much either. My bet is that student loans will get cut back after the election this November. Budgets are going to get cut radically.

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  3. Profile Photo Member
    @PaulARahe
    katievs: As a parent with two daughters in college, and three sons coming down the line, I am seriously wondering whether we do well by them to pay for their college education. Are we being saps? Would it be better for their ultimate well-being to NOT to pay?–to push them out of the nest to sink or swim on their own?–to guide them to finding good work they can do without an education, so that they can earn enough to go themselves if they value it? …

    These are hard questions.

    I feel like I should sign “Perplexed in West Chester” or something. · Sep 12 at 6:26pm

    Edited on Sep 12 at 06:27 pm

    You might consider military service. Then, the GI Bill picks up much of the cost.

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    @PaulARahe

    For what it is worth, I favor the liberal arts — philosophy, history, literature, and political theory. Most of the kids graduating from high school these days know nothing, and a good liberal arts curriculum of the sort found at Hillsdale and the University of Dallas is invaluable. Most of what is taught concerning life skills at the undergraduate level is worthless. There is much to be said for engineering, to be sure, for economics, and for accounting. The rest is usually a joke. When we sent everyone to college, we dumbed down high school. We do not teach remedial reading at Hillsdale, but every state university does. Think about what that means.

    • #4
  5. Profile Photo Member
    @
    Paul A. Rahe:

    This cannot go on. And when something cannot go on, ordinarily it doesn’t. My bet is that state university charges continue to increase dramatically as the public subsidy is withdrawn…

    Oh, that’s gonna be fun.

    No one, absolutely no one, throws an entitlement hissy fit as amusing as college students. They wave their tiny little fists and do that Rachel Corrie rage face.

    I’ll haul a lawn chair and a picnic cooler over to Berkeley for that one.

    • #5
  6. Profile Photo Member
    @

    Upon Mr. Obama’s election I predicted to my wife that he would forgive student loan debts. While that looks increasingly unlikely in political terms, don’t you think it conceivable as a way to sell some reforms in education pricing/lending/subsidies? After all, the schools themselves probably don’t own all that much of the lending directly [especially going forward], so a forgiveness would not harm them overmuch, while it might free more people to believe they could afford the product, and some graduates that it was all worth it. It couldn’t cost more than Stimulus or Cap-and-Trade or Obamacare, and it would re-bind young voters to his cause. Also, it can be played more cynically, along the lines of amnesty: it will never have to actually be done, but talking about it keeps people on your side and against the mean-spirited opposition. [Mind you, even with a sizable student loan debt myself, I find this idea immoral. Plausible, but immoral.]

    PS: Dr. Rahe: Would a Ricochet reference make my CV look like Hillsdale material?

    • #6
  7. Profile Photo Member
    @
    Richard Cook: Upon Mr. Obama’s election I predicted to my wife that he would forgive student loan debts. While that looks increasingly unlikely in political terms, don’t you think it conceivable as a way to sell some reforms in education pricing/lending/subsidies?

    Didn’t Congress tuck the Federal takeover of the student loan industry into Obamacare? Or was it the financial reform bill?

    My understanding is that it will bar any more private-sector entities from making student loans.

    • #7
  8. Profile Photo Inactive
    @katievs

    As a parent with two daughters in college, and three sons coming down the line, I am seriously wondering whether we do well by them to pay for their college education. Are we being saps? Would it be better for their ultimate well-being to NOT to pay?–to push them out of the nest to sink or swim on their own?–to guide them to finding good work they can do without an education, so that they can earn enough to go themselves if they value it? …

    These are hard questions.

    I feel like I should sign “Perplexed in West Chester” or something.

    • #8
  9. Profile Photo Member
    @
    katievs:

    I feel like I should sign “Perplexed in West Chester” or something. · Sep 12 at 6:26pm

    Edited on Sep 12 at 06:27 pm

    As a Human Resources guy, I can make a few suggestions:

    • Make sure you – and your child – have a definite life-goal in mind. I’ve met very few successful people who did not have a firm goal and a plan to achieve it. College without a goal is likely to be a waste.
    • Choose a course of study that leads to a definite marketable skill. Liberal Arts won’t do it. Doesn’t have to be in the professions – where tuitions eat you alive. We need people who know how to raise animals, improve crops…
    • Choose a skill-set that isn’t going to be outsourced.
    • If you and your child choose a profession – medicine, law, etc. – then a prestigious school matters. Otherwise, not.
    • Please don’t choose law.
    • Be honest with yourselves: if your kid isn’t super-motivated for college, go with some sort of alternative education – plumbing, electrician, auto mechanic, construction management. These be quite rewarding and, with prudent investment, your kid can do very well over the years.
    • #9
  10. Profile Photo Member
    @

    Oh, and katievs:

    If you can possibly swing it, get your kids into Hillsdale.

    Or, failing that, Grove City.

    Every time I had a young person come to me for an interview with a diploma from Hillsdale or Grove City, I hired them on the spot. Without the interview.

    • #10
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    @
    Humza Ahmad

    Kenneth, two questions. First, is the strength of Grove City and Hillsdale well-known in the HR field, enough so that your recommendation would be shared by others? Second, what has been your experience with graduates of those colleges once hired? I’m assuming you’ve had very good experiences and thus hire their grads on the spot, but I’d like to hear more specifics on what makes graduates of those two institutions especially hire-worthy., · Sep 13 at 12:15am

    My preference for those schools is personal, based on politics and what I know of the types of families who send their kids to Hillsdale or Grove City.

    But the maturity, poise and sound education of grads from those two schools would impress any good judge of horse-flesh.

    My axiom for hiring for the types of jobs I mostly filled – management trainees – is “Select for skills, hire for character”. With Hillsdale or Grove City grads, both parts of that were givens.

    Put it another way: I always thought, “If mom, dad and the education system didn’t do their jobs, I’m not here to do remediation.”

    I’ve had very few bad hires, period.

    • #11
  12. Profile Photo Member
    @

    Again I feel compelled to note that that there is no clear evidence here that the market is broken just because prices have risen. Colleges have raised prices to capture more of the value associated with the degree they impart. No question, students have a worse deal, but with exceptions at the margins (like any functioning market) the debt is still worth it over a lifetime. Williams grads do very well thank you very much and the pricing now captures more of that value. At some point when the colleges go too far — and I absolutely agree we are approaching that tipping point — the market will respond.

    In the private K-12 school market there has been comparable inflation. The cost for kindergarten at a top grade independent schools in a big city is roughly double the cost of my undergraduate Ivy League education. But interestingly, over the past five years, for-profit schools have entered this market charging tuition that is half the price and drawing off a not insignificant portion of the parent/student population.

    The higher education market has and will continue to respond. There are far more important issues to worry about.

    • #12
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    @MelFoil

    If the student knows the State or region where they want to start their career, there are often private colleges that may not be well known nationally, but have an excellent reputation in the State where they’ll be looking for work. For example, in Minnesota, Carleton, Macalester, Gustavus Adolphus, St. Olaf, Hamline….

    • #13
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    @katievs

    Thank you, Prof. Rahe and Kenneth. I’m a liberal arts devotee too. Our oldest is a senior at University of Dallas, majoring in history and economics. We are great admirers of the military academies. Hillsdale is on our short list for our 16 year old son.

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  15. Profile Photo Inactive
    @HumzaAhmad
    Kenneth: Oh, and katievs:

    If you can possibly swing it, get your kids into Hillsdale.

    Or, failing that, Grove City.

    Every time I had a young person come to me for an interview with a diploma from Hillsdale or Grove City, I hired them on the spot. Without the interview. · Sep 12 at 6:51pm

    Edited on Sep 12 at 07:03 pm

    Kenneth, two questions. First, is the strength of Grove City and Hillsdale well-known in the HR field, enough so that your recommendation would be shared by others? Second, what has been your experience with graduates of those colleges once hired? I’m assuming you’ve had very good experiences and thus hire their grads on the spot, but I’d like to hear more specifics on what makes graduates of those two institutions especially hire-worthy.,

    • #15
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    @PaulDeRocco

    I think private college tuition has risen largely to absorb the increasing subsidies that are available for it. If you want to see tuition slashed, end the government subsidies. (Yeah, I know, fat chance.) For a year or two, very few people would be able to go to college, but colleges would figure out pretty quickly what aspects of education are chaff and cut it out. Perhaps they’d manage to shame the full professors into actually teaching again.

    • #16
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