Glenn Reynolds: Higher education’s bubble is about to burst
It’s a story of an industry that may sound familiar.
The buyers think what they’re buying will appreciate in value, making them rich in the future. The product grows more and more elaborate, and more and more expensive, but the expense is offset by cheap credit provided by sellers eager to encourage buyers to buy.
Buyers see that everyone else is taking on mounds of debt, and so are more comfortable when they do so themselves; besides, for a generation, the value of what they’re buying has gone up steadily. What could go wrong? Everything continues smoothly until, at some point, it doesn’t.
Yes, this sounds like the housing bubble, but I’m afraid it’s also sounding a lot like a still-inflating higher education bubble. And despite (or because of) the fact that my day job involves higher education, I think it’s better for us to face up to what’s going on before the bubble bursts messily.
College has gotten a lot more expensive. A recent Money magazine report notes: “After adjusting for financial aid, the amount families pay for college has skyrocketed 439 percent since 1982. … Normal supply and demand can’t begin to explain cost increases of this magnitude.”
Consumers would balk, except for two things.
First — as with the housing bubble — cheap and readily available credit has let people borrow to finance education. They’re willing to do so because of (1) consumer ignorance, as students (and, often, their parents) don’t fully grasp just how harsh the impact of student loan payments will be after graduation; and (2) a belief that, whatever the cost, a college education is a necessary ticket to future prosperity.
Bubbles burst when there are no longer enough excessively optimistic and ignorant folks to fuel them. And there are signs that this is beginning to happen already.
A New York Times profile last week described Courtney Munna, a 26-year-old graduate of New York University with nearly $100,000 in student loan debt — debt that her degree in Religious and Women’s Studies did not equip her to repay. Payments on the debt are about $700 per month, equivalent to a respectable house payment, and a major bite on her monthly income of $2,300 as a photographer’s assistant earning an hourly wage.
And, unlike a bad mortgage on an underwater house, Munna can’t simply walk away from her student loans, which cannot be expunged in a bankruptcy. She’s stuck in a financial trap.
Some might say that she deserves it — who borrows $100,000 to finance a degree in women’s and religious studies that won’t make you any money? She should have wised up, and others should learn from her mistake, instead of learning too late, as she did: “I don’t want to spend the rest of my life slaving away to pay for an education I got for four years and would happily give back.”
But bubbles burst when people catch on, and there’s some evidence that people are beginning to catch on. Student loan demand, according to a recent report in the Washington Post, is going soft, and students are expressing a willingness to go to a cheaper school rather than run up debt. Things haven’t collapsed yet, but they’re looking shakier — kind of like the housing market looked in 2007.
So what happens if the bubble collapses? Will it be a tragedy, with millions of Americans losing their path to higher-paying jobs?
Maybe not. College is often described as a path to prosperity, but is it? A college education can help people make more money in three different ways.
First, it may actually make them more economically productive by teaching them skills valued in the workplace: Computer programming, nursing or engineering, say. (Religious and women’s studies, not so much.)
Second, it may provide a credential that employers want, not because it represents actual skills, but because it’s a weeding tool that doesn’t produce civil-rights suits as, say, IQ tests might. A four-year college degree, even if its holder acquired no actual skills, at least indicates some ability to show up on time and perform as instructed.
And, third, a college degree — at least an elite one — may hook its holder up with a useful social network that can provide jobs and opportunities in the future. (This is more true if it’s a degree from Yale than if it’s one from Eastern Kentucky, but it’s true everywhere to some degree).
While an individual might rationally pursue all three of these, only the first one — actual added skills — produces a net benefit for society. The other two are just distributional — about who gets the goodies, not about making more of them.
Yet today’s college education system seems to be in the business of selling parts two and three to a much greater degree than part one, along with selling the even-harder-to-quantify “college experience,” which as often as not boils down to four (or more) years of partying.
Post-bubble, perhaps students — and employers, not to mention parents and lenders — will focus instead on education that fosters economic value. And that is likely to press colleges to focus more on providing useful majors. (That doesn’t necessarily rule out traditional liberal-arts majors, so long as they are rigorous and require a real general education, rather than trendy and easy subjects, but the key word here is “rigorous.”)
My question is whether traditional academic institutions will be able to keep up with the times, or whether — as Anya Kamenetz suggests in her new book, “DIY U” — the real pioneering will be in online education and the work of “edupunks” who are more interested in finding new ways of teaching and learning than in protecting existing interests.
I’m betting on the latter. Industries seldom reform themselves, and real competition usually comes from the outside. Keep your eyes open — and, if you’re planning on applying to college, watch out for those student loans.
June 22nd, 2010 4:17 am
Excellent writing. Thank you
June 22nd, 2010 10:59 am
I personally wouldn’t mind a government takeover of education, especially musical education. I grew up in Russia’s musical educational system, so I’ve experienced what I’m talking about first-hand. It was better quality than anywhere you can find in the States, it was free, and it was nationally systematized and standardized (producing an equally high level across the nation). The only trick is, they could (and did) kick out anyone that didn’t make the cut– and I’m not sure if America (culturally) could reproduce that mentality. It also required an extremely high level of performance in elementary and middle schools– which would also be hard for American culture to swallow, since a child shouldn’t really have to try hard until they are old enough to decide what they want.
The American Dream is largely to blame for the scores of children that have been given no direction (and hence have no instilled discipline) and end spending most of their college years figuring out what they want to do. Having been taught that having fun is the goal of life (life, liberty, and the pursuit of HAPPINESS), often the sheer discipline necessary to be productive in any sphere discourages them from really trying for anything worthwhile.
June 22nd, 2010 3:28 pm
I really feel the gist of this article personally as I racked up student loans and credit card debt from my time in grad school. A master’s degree in music only really pays enough if you happen to get a great full-time teaching position in a school or community college. You might be able to score a part-time adjunct job, or if particularly talented, get into the performing biz, but neither of those pay enough to even allow one to pay rent, let alone pay down student loans. For me, my master’s was worth it because of 1. my brilliant voice teacher, Mrs. Reinebach 2. learning how to research 3. getting the tools and experience to teach a number of things in music (i.e. piano lessons with Dr. Sage, undergrad MIDI, theory classes, conducting, music history, vocal technique) I think an alternative that will need to be considered is apprenticeships, real world experience in a kind of unpaid or paid assistant internship where long term one on one training occurs. That’s where the cream rises to the top because it’s based on applied knowledge, not just theoretical knowledge. It’s the applied knowledge that has been the most beneficial to me in my career. Unfortunately, our university system seems to have turned into a massive, complicated, expensive series of hoops through which one must jump. Thankfully, God provided me with many wonderful teachers (like you Shack!) and equipped me to pass that information along to my students. With student loans coming out of deferment again this summer, it does make me grateful that I graduated 6 years ago and not today. One really doesn’t need to have a degree to do what I do in teaching piano and voice, but one does need the skill sets from good teachers. To be debt free and well-educated even without a degree is so alluring. I wouldn’t blame anyone for pursuing a career without college. That is, at least until post-secondary education becomes affordable again.
June 24th, 2010 6:08 am
Kathrine, I have to chuckle a little because I don’t believe our problem is that the Government doesn’t control the schools. Post office and education are the two most socialized industries that I can think of off the top of my head. I believe you were closer when you were talking about culture. The only motivation to succeed in america is materialism. Your needs will be covered as long as you have kids and don’t get married. This is generational stagnation. If parents refuse to be an active synergist with the education of their children then their kids brains will be the same quality and texture as government welfare cheese.
June 24th, 2010 3:27 pm
The Russian system suffers from the same problems educationally as it did economically under the communists. Economically, it did produce some good things (AK47s work OK…), but it could not sustain itself. That’s because at the end of the day, no one knows enough to do true central planning (the central point of F.A.Hayek in “The Road To Serfdom”)… which is why market driven economies eventually buried the Soviet economy.
Similarly, no one knows enough to do “command” education. No one knows enough to decide who will be educated to do what at the age of 6. Or even 12. No one CAN know enough to make that decision. So, while the Russian system WILL succeed in educating those it has correctly identified (like you!), it will mis-identify too many, and fail to provide an education that would have been possible in the USA.
I come back to this: in Russia, I would probably not have been allowed to finish a college music major, because I didn’t play trumpet well enough.
The problems with American education aren’t just the system of education, but are the way we’ve tried to use the schools to do social engineering, deflecting attention from where it belongs.
You are correct that America’s “educational problems” are really values problems. The fix is not an educational commissar, however.
BTW… in my opinion, the real problems with the American school system began with with John Dewey…. a big fan of socialism and central planning.
June 24th, 2010 11:32 pm
HarmonicMiner,
I have to agree that it is impossible to precisely identify a child’s natural capabilities and inclinations for their future career at a very young age. However, children have to go through rigorous tests before entering even the first grade of a specialized school of music. Those tests are designed to separate out the musically gifted from the rest. I personally would support that kind of young-age over-identification, as opposed to pretending that all children have the same amount of talent. While you are right that the Russian system puts the “specially abled” children at a disadvantage, at least it gives a real education to those that actually do have talent. I suppose, broadly speaking, the Russian system cares more about producing the best product possible, in terms of the capabilities of its graduates, whereas America is more concerned about caring for each individual, more for the sake of their personal well-being than for their educational rigor.
BTW, sometimes I really wish I could have heard you play the trumpet.
June 25th, 2010 8:01 am
Hmmm… when you filter out all but the most naturally gifted before you start teaching them, you can’t claim brilliance in your teaching as the reason for the great outcome, can you? I know of many grad schools that take in only the most elite incoming students… and then take credit for the great outcome, as if it is the responsibility of the brilliant teaching at the grad school. It sounds like you want to use that theory for 1st grade.
There is a middle ground. And there is enormous value to the society for children with many levels of “natural talent” to participate in significant musical instruction, provided that we aren’t trying to teach monotones to sing. Honestly, my observation is that too many American music majors suffer for lack of work ethic much more than for lack of talent. They didn’t work at it very hard in middle and high school, and don’t work very hard at it now, in college.
You’re correct that too many American students have a sense of entitlement. That is, as long as they just “serve their time”, someone should smile on them and give them awards, and rewards, and provide a job for them when they are graduated. They “everybody is equal and everybody should win” background assumptions are simply false, of course. Everybody can’t “win” at everything, though most people can find something that they can do well enough for them to succeed at it, at some level.
I seem to recall you saying that you almost weren’t allowed to enter music conservatory in Russia. As you presented it, it was a near thing, because you were “too old” to begin. That means that our world almost didn’t get to have the experience of a musical Katherine. We would probably never have met.
I wouldn’t have known what I’d missed out on, of course.
In America, if your parents wanted you to have lessons, you’d have had them, even if you hadn’t started till age 12, or something. You might not have been quite so precocious. But I’ll bet you’d have done very, very well, if you worked at it, and I’ll bet that the outcome by, say, age 30, might not have been so very different than it is going to be in your actual life, if you were sufficiently motivated to work at it.
Of course, that’s the problem: American schools have stopped demanding excellence, as a whole, and have stopped having high standards that must be met before you can go on. We deliberately pass students who aren’t ready for the next grade’s work, for social/political reasons. It’s an open question whether American society will survive this disastrous attitude for 50 more years of it.
It’s almost like students think, “I was born in America! Of course I deserve the best stuff in life!” We know biblically, of course, what happens when a “chosen people” starts thinking they were chosen to receive benefits and do what they want, instead of chosen to be obedient.
I am not blind to the great failures of American education. I just wouldn’t want to substitute the Russian system. Russia is dying faster than we are.
June 28th, 2010 9:00 am
This is what I do for a living (and I’m surprisingly good at it). With a small school size, it’s the only way to keep class numbers up, and thus justify my job.
Having said that, I find this to be an interesting conversation. There is no doubt that Russia has produced some of the most amazing musical and athletic talents that the world has ever seen. Once they go on tour, however, they defect from Russia and move to the United States (at least that’s what happened before the Communist government collapsed). What doesn’t get mentioned is the extreme poverty of so many of the Russian people, even today. A niece spent time there (not sure exactly where) 5 years ago and came back appalled. The testing that is used in Russia creates a level of elitism for the very talented but leaves most others in the dust. They might as well have kept the Czar. Americans, on the other hand, have exchanged ‘equality of opportunity’ for ‘equality of outcome’ and nearly pulled all down to the lowest common denominator. It is the attitude of the teachers themselves, who ignore the politicians and just get on with the business of teaching, that keep us from totally sinking into the abyss.
July 9th, 2010 12:03 pm
Online education is also as good as conventional education but interpersonal interaction might be limited.,’*
September 12th, 2010 10:19 pm
i’m not a great fan of online education coz for me there must be some interaction between teacher and students.’~