Will the Coronavirus pop the Higher Education bubble?

Early in our blog we often talked about a possible seismic change in higher education.  This was heavily driven by the fact that the cost of higher education has been climbing twice as fast as inflation, for decades.  This can not continue forever.  As Instapundit often points out: something that can't go on forever, won't.

In a 2009 post I started with:

"I have blogged in the past about the problem of rising cost of a college education. In a nut shell the cost of college education has climbed twice as fast as inflation for decades. It has gotten to the point that a college education is not an economic benefit for many."

Today Instapundit had a link to an article by Michael Barone titled Colleges and universities threatened by COVID-19.  The article explores some of the ramifications on colleges as students spend more and more time away from their classes.

Near the end of the article Michael Barone shares a line from Heather Mac Donald had written in City Journal:

"Students and their parents may start to ask why they should pay astronomical fees for a campus experience if they can get the same instruction over the web."

I think there is a good chance that this year will be the turning point where more and more families push for cheaper alternatives to getting higher education.

Good article on the Higher Education Bubble

Nathan Harden writes about The End of the University as We Know It.  It is a great article.

He starts off with this prediction:

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In fifty years, if not much sooner, half of the roughly 4,500 colleges and universities now operating in the United States will have ceased to exist. The technology driving this change is already at work, and nothing can stop it. The future looks like this: Access to college-level education will be free for everyone; the residential college campus will become largely obsolete; tens of thousands of professors will lose their jobs; the bachelor’s degree will become increasingly irrelevant; and ten years from now Harvard will enroll ten million students.
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I found this paragraph fascinating:

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One of the biggest barriers to the mainstreaming of online education is the common assumption that students don’t learn as well with computer-based instruction as they do with in-person instruction. There’s nothing like the personal touch of being in a classroom with an actual professor, says the conventional wisdom, and that’s true to some extent. Clearly, online education can’t be superior in all respects to the in-person experience. Nor is there any point pretending that information is the same as knowledge, and that access to information is the same as the teaching function instrumental to turning the former into the latter. But researchers at Carnegie Mellon’s Open Learning Initiative, who’ve been experimenting with computer-based learning for years, have found that when machine-guided learning is combined with traditional classroom instruction, students can learn material in half the time. Researchers at Ithaka S+R studied two groups of students—one group that received all instruction in person, and another group that received a mixture of traditional and computer-based instruction. The two groups did equally well on tests, but those who received the computer instruction were able to learn the same amount of material in 25 percent less time.
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Think about it.  Not only can online education be cheaper, it can be faster!

This was also interesting to learn:

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It’s worth noting that while the four-year residential experience is what many of us picture when we think of “college”, the residential college experience has already become an experience only a minority of the nation’s students enjoy. Adult returning students now make up a large mass of those attending university. Non-traditional students make up 40 percent of all college students.
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I hadn't realized that higher education wasn't delivering much of an education for many students:

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In their research for their book Academically Adrift, Richard Arum and Josipa Roksa found that 45 percent of the students they surveyed said they had no significant gains in knowledge after two years of college. Consider the possibility that, for the average student, traditional in-classroom university education has proven so ineffective that an online setting could scarcely be worse.
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The article is long, but well worth reading.

More on the higher education bubble

Almost five years ago I wrote a post about the exploding cost of higher education.  For decades the cost of going to college has climbed two to three times faster than inflation.  When the cost was relatively low as a fraction of an average yearly salary it made sense to send children to college.  Now that it has become sometimes two to three times how much a parent makes in a year it no longer makes sense for some to go to college. 

Over the years I've written several posts about what Instapundit calls the Higher Education Bubble.  He has even written a book about this problem called appropriately The Higher Education Bubble.

Recently my mother sent a link to the family on University 2.0 — Revolution in Education.  It is a good summary of how online education will help make higher education more affordable.  The post starts with:

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Two major announcements in the last month showed online higher education moving decisively beyond for-profit institutions such as the University of Phoenix, Kaplan, Walden, and DeVry.

Some of the U.S.'s most prestigious, established universities are making aggressive inroads into the field of online education. The recent announcements were preceded about a decade ago when University of California Berkeley, Yale, and MIT began to offer free internet access to videos of their courses to the public. Video footage of classes received some acknowledgment for providing excellent knowledge from top universities for free, even though they offered no grade or certification of completion. However, in the last month a new company, Coursera, was launched. Coursera will be partnering with some top universities -- Princeton, University of Pennsylvania, Stanford (the home of the two professors at the helm of the startup), and the University of Michigan (the only non-Private University in this group) -- to provide free online courses.

Then, just last week, Harvard joined MIT in announcing their new joint e-learning platform, edX. Both online learning platforms go far beyond the simplicity of video lectures, and incorporate a variety of interactive learning tools. The entrance of such storied institutions has the potential to radically reshape the landscape of higher education worldwide.

With these universities typically admitting only about one applicant in fifteen -- and with those lucky few staring down a four-year bill of $200,000 or more -- such moves by the two universities raise a number of questions. Since the online courses will be free, what's their strategy?
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Online education will be part of the process, maybe the main influence, which makes higher education more affordable and pops the higher education bubble.

Interview with Glenn Reynolds on the Higher Education Bubble

I frequently checkout Instapundit, by Glenn Reynolds.  One of the topics he writes about is the high cost of higher education.  The cost of going to college has risen twice as fast as inflation for decades.

Glenn just released a book on this topic: The Higher Education Bubble. 

I enjoyed this interview of Glenn on the topic:



This was posted at PJ Media.

Cool Bill Whittle video on Glenn Reynolds' book "The Higher Education Bubble"

I enjoyed this video by Bill Whittle:




I have been meanding to buy Glenn Reynolds' book The Higher Education Bubble.  This is giving me more motivation.

Glenn Reynolds: The Ever Inflating Higher Education Bubble

Glenn Reynolds talks about The Ever Inflating Higher Education Bubble. 

SNL gives us the cause of the Higher Education Bubble

Now you know why higher education costs so much:



Hat tip: Instapundit

Looks like we'll be part of the new trend

Even before the birth of our first daughter Janine and I have been planning on our children attending college.  We both earned Bachelors and wanted our children to have the addtional education that comes from college.

Just this last year we started rethinking this.  Our oldest is in her senior year of high school.  She is taking a couple classes at a local junior college. It tunrs out one of the local community colleges has a great project in Interior Design, which is what she is currently exited about.  We've been under going a mental shift because now her tenative plan is to earn her Associates and then leave to earn her Bachelors at a tradtional four year college.

The Washington Post reports that Two-year colleges draw more affluent students. The article starts with:

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Julie Hong grew up in the sort of leafy Montgomery County suburb where college is assumed. Her parents had saved for the expense since she was a baby. When the time came, they said she could go wherever she wished. She chose a community college.


Comparatively affluent students are picking community colleges over four-year schools in growing numbers, a sign of changing attitudes toward an institution long identified with poorer people.

A recent national survey by Sallie Mae, the student loan giant, has found that 22 percent of students from households earning $100,000 or more attended community colleges in the 2010-11 academic year, up from 12 percent in the previous year. It was the highest rate reported in four years of surveys.


In the lengthening economic downturn, even relatively prosperous families have grown reluctant to borrow for college. Schools are finding that fewer students are willing to pay the full published price of attendance, which tops $55,000 at several private universities. More students are living at home.
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Read that third paragraph again.  In just one year the number of students from higher income homes almost doubled from 12% to 22%.  In one year.

The article goes on to say that many families with good incomes are deciding not to spend through the nose for the four year college experience. 

This is just another sign that the education bubble will burst.
Hat tip: Instapundit

The education bubble

The Class The Loans Fell On reports that the University of Pennsylvania’s Wharton School MBA graduating class is graduating with over $100 million in debt.

Can you say education bubble?

The article starts with:

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Dubbed “The Class The Dollars Fell On” by Fortune magazine, the 1949 graduates of the Harvard Business School were undoubtedly the most celebrated group of MBAs in history. Though the 700 or so members of the class graduated with modest expectations, more than a third would become CEOs and well over half would end up as multi-millionaires.


As author Laurence Shames would write in The Big Time, one of two books that documented the group’s unprecedented success, “the class would become emblematic of the mysterious potency of the MBA degree back when it was still exotic, a rare golden ticket to action.”


Fast forward to this year’s incoming class at the University of Pennsylvania’s Wharton School. The 845 students who start their first classes on Sept. 7 are among their generation’s best and brightest. Unlike the men of 1949—there were no women–the Wharton group is as diverse as any in history: A record 45 percent are women and 36 percent hail from outside the U.S. To come to the Philadelphia campus, they left some of the most prestigious organizations in the world where they already were on the fast track to success. Some 36 students founded or co-founded businesses.


But there’s one other very big difference between this year’s incoming Wharton class and the most renowned: debt and lots of it. Largely funded by the GI Bill, few members of Harvard’s class graduated with any debt. If the Class of 1949 had been the most wildly successful of all the MBA classes ever, it can be said with certainty that Wharton’s Class of 2013 will be the most heavily in hock.
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Interview with Glenn Reynolds on the Higher Education Bubble

A Bubble in Higher Education starts with:

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There was a time in our nation’s history when college was reserved for a privileged and well-heeled few. And today many worry that those days may be returning, given the spiraling cost of tuition.

According to the National Center for Public Policy and Higher Education, average U.S. college tuition and fees rose by an astonishing 439 percent between 1982 and 2007 — more than four times as much as the inflation rate for that period (106 percent), and about three times the increase in median family income (147 percent).
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Bruce Wright then goes on to interview Glenn Reynolds aka Instapundit.

One hour video on College Conspiracy

This is long, but makes some great points:



Instapundit calls this problem of rising costs of college education the Higher Education Bubble. 

I was surprised to learn textbooks are now $200, each.

Hat tip: Consent Of The Governed.

Is this a good summary of what college is for many? Drifting without purpose

We've written often about the problem of the cost of higher education climbing twice as fast as inflation, for decades.  Instapundit started calling this the Education Bubble.

California teen entrepreneur asks: College? Who needs it? is one solution to this problem:

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He calls it the UnCollege movement.


Nineteen-year-old Dale Stephens is urging his peers to rethink the need for college, arguing that they can get more out of pursuing real-world skills than completing homework assignments and studying for exams.


"I want to change the notion that a college degree is the only path to professional success," said Stephens, who grew up in Winters and now lives in San Francisco, where he is building the UnCollege movement and developing a Web-based company.
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Later the article has the phrase: Drifting without pupose.

I wonder how many college students that applies to?

Hat tip: Judy Aron

Column on Higher Education Bubble

We have long blogged about how the cost of college and university education can not continue to climb twice as fast as inflation.  Instapundit calls this the Higher Education bubble. 

The decision to go on for higher education is not considered isolated from the rest of life.  It is a decision based on trade offs.  If it cost a dollar more people could justify the value of four more years.  If it cost a million dollars far fewer people would be willing to make the sacrifice.

Bubbles tend to burst over some event.  Often one that shows the emperor has no cloths or draws back the curtain to reveal a man pushing dials and buttons.

In What is a college education really worth? Naomi Schaefer Riley wonders:

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Did Peter Thiel pop the bubble? That was the question on the minds of parents, taxpayers and higher education leaders late last month when the co-founder of PayPalannounced that he was offering $100,000 to young people who would stay out of college for two years and work instead on scientific and technological innovations. Thiel, who has called college “the default activity,” told USA Today that “the pernicious side effect of the education bubble is assuming education [guarantees] absolute good, even with steep student fees.”
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Good column.  Some good thoughts.

Hat tip: Spunky Homeschool

Good post for your teenagers to read

Janine and I value education.  This is one of the reasons we homeschool.  We expect our children to go to college.  But with the Higher Education Bubble it is possible that some of our children may decide not to go to college.

The Coming Disruption: Teen Knowledge Work is a good post about the options for doing well in life while skipping the expense of going to college.

Hat tip: Miazagora via Facebook.

Another good article on the Higher Education Bubble

Chris Dunn opens his article Education bubble is close to popping in our faces with:

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Fair warning: This article will piss off a lot of you. That was the opening sentence to TechCrunch’s recent article, “Peter Thiel: We’re in a Bubble and It’s Not the Internet. It’s Higher Education.” Earlier this month Peter Thiel, the co-founder of PayPal, told TechCrunch that the housing bubble was replaced by the education bubble. Thiel was in the minority of people who predicted both the dot-com and housing bubbles. Now he and others are warning that most college degrees are not worth the cost.


According to Thiel, a bubble, in this sense, exists when “something is overvalued and intensely believed.” He makes another claim: “To question education is really dangerous ... It’s like telling the world there’s no Santa Claus.” Thiel’s definition is a good one because it accurately describes the frenzy surrounding the dot-com, housing and education bubbles.
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Just like the housing bubble, the issue isn't should people buy a house or go to college, but should they waste a ton of money doing so?

Janine and I encourage our children to go to college.  But we also encourage them to be wise in where they go and not incur huge debts.  We don't plan to give them a lot of money so they can attend a high priced school.  If they want to go to Harvard or Stanford, they'll need to work out the financing.

With the current hard economic times I agree with Chris Dunn, the Higher Education Bubble will burst soon.  At some point the number of students applying to go to college will drop to a point which affects many schools.  Once that happens, many colleges will start to scramble trying to chase the shrinking applicants.  The classic law of supply and demand will result in lower prices.  Colleges that cannot survive on lower tuitions may not survive at all.

Hat tip: Instapundit.

Big problem in higher education: Too many administrators

One of the complaints against public schools is so much of the money goes to administrators, staff and even janitors, while a small fraction reaches the teachers.  I remember reading awhile back that government schools have something like one person out side of the classroom for every two teachers.  By way of comparison many private schools are much leaner and have one person in the office for every ten to fifteen teachers.

But it looks like higher education is worse.  Hard to imagine!

Malcolm Harris has an article about Bad Education.  He starts by comparing the current higher education bubble with the recent housing bubble:

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The Project On Student Debt estimates that the average college senior in 2009 graduated with $24,000 in outstanding loans. Last August, student loans surpassed credit cards as the nation’s single largest source of debt, edging ever closer to $1 trillion. Yet for all the moralizing about American consumer debt by both parties, no one dares call higher education a bad investment. The nearly axiomatic good of a university degree in American society has allowed a higher education bubble to expand to the point of bursting.


Since 1978, the price of tuition at US colleges has increased over 900 percent, 650 points above inflation. To put that number in perspective, housing prices, the bubble that nearly burst the US economy, then the global one, increased only fifty points above the Consumer Price Index during those years. But while college applicants’ faith in the value of higher education has only increased, employers’ has declined. According to Richard Rothstein at The Economic Policy Institute, wages for college-educated workers outside of the inflated finance industry have stagnated or diminished.
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then here is the killer:

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If current trends continue, the Department of Education estimates that by 2014 there will be more administrators than instructors at American four-year nonprofit colleges.
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Wow!


Hat tip: Newsalert

When will the education bubble burst?

I have have blogged in the past about the problem of rising cost of a college education. Instapundit calls this an Education Bubble.

Now main stream media is picking up on this problem. Forbes has an article about Universities On The Brink:

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Higher education in America, historically the envy of the world, is rapidly growing out of reach. For the past quarter-century, the cost of higher education has grown 440%, according to the National Center for Public Policy and Education, nearly four times the rate of inflation and double the rate of health care cost increases. The cost increases have occurred at both public and private colleges.

Like many situations too good to be true--like the dot-com boom, the Enron bubble, the housing boom or the health care cost explosion--the ever-increasing cost of university education is not sustainable.

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Good article to read.

(Hat tip: Instapundit, naturally)

Another reason to love homeschooling: Avoiding the culture of poverty

One of the greatest barriers to education is the culture of poverty. Much of the debate in education policy comes down to how to educate children who don’t come to school ready to learn and whose parents don’t value education. Inordinate amount of resources are misdirected in a vain attempt to entice disinterested students.

In a recent conversation with a public school teacher, Janine got a glimpse of just how wide the educational divide can be and how frustrating it is for teachers who fight this battle.

In a nearby school, children in a particular family were always late for school. Someone in the school asked a few questions and found out that the family did not have a refrigerator. As a result, the parents’ rush to get breakfast for themselves before going to work made the children late for school.

Once the lack of a refrigerator was known, the school took up a collection and purchased a modest refrigerator for the family. This solved the problem. For the next few weeks the children were on time. Then one week the children didn’t show up at all. Finally the children returned to school, but from that time on were habitually tardy again.

Again someone in the school did a little investigation and found out what had happened. (You might want to be sitting down for this.) The parents had sold the refrigerator and used the money to take the children to Disneyland. As one teacher succinctly put it, “This is the culture of poverty.” If the parents value entertainment more than the health and education of the children, what could the school do that would make any difference. And more than that, these unmotivated students are draining away resources that could have been used to educate children whose families actually value education. And thus we see the awful dilemma facing the public school system.

In the end, it won’t matter if the child can color in the right bubble on a standardize test if he values his entertainment about all else. As foster parents, we see that pattern often. Parents who blow chance after chance, lose job after job, ruin relationship after relationship because they never learned to discipline themselves. Unfortunately, that is not something even the best school can teach. It takes a parent to model it, day after day, especially in early childhood.

We’re glad that we are able to teach our children to have some self discipline, to delay gratification, and to have reasonable priorities.

Clarification on the expenses of college

Last week I summarized a talk by Glenn Reynolds on the High Education Bubble. Someone sent me an email asking about this line in my summary:

"At about minute 44 he references Bob Samuels of UCLS as reporting on research that the direct teaching costs for public school is about $1456 per student per year at a public school, and a little over $2500 per student per year at private schools."

The question was raised that maybe I had made a typo. Maybe I had meant "$14,560 per student per year at a public school and a little over $25,000 per student per year at a private school."

No, I captured exactly what Glenn was saying.

The point Glenn was making is that for the classroom education experience, seating in the chair, listening to the teacher, and all of that core basic education, the cost per student is around $1500 to $2500 per year. Factored into this are the costs for the building, the salaries to the teachers who really teach, and so on.

This is part of what the bubble is all about. There are many areas where higher education organizations choose to spend money that have little benefit to most students. For example universities have super expensive sports programs that provide little benefit to most students, and these programs lose tons of money. So factored into the tuition is a large chunk of money that goes to the sports programs. Each student is subsidizing the sports programs with highly inflated tuition. Another area is many universities take a large fraction of tuition and "invest" it into research, which may be good for the university, but again does little for most students.

This is an important part of the higher education bubble. The real cost of the true benefit to the student is the $2500 a year for the education they receive. Most of the rest of the tuition they are charged is of questionable benefit. Glenn suggests that more and more students and parents will step back and re-examine the value of over inflated tuition. At some point we'll hit a tipping point. Then the bubble will pop and we'll have some kind of readjustment.

Higher education across the pond

Recently, Henry has blogged about the education bubble here in the USA. I agree that there is a problem, but I like our problem a whole lot more than the one facing the UK.

A quarter of university hopefuls remain unplaced

More than a quarter of UK university applicants are still without a place on a degree course, according to the latest figures.

The university admissions service, Ucas, says up to 187,000 candidates are chasing a falling number of unfilled places.

This means 46,358 more people than last year were in the same position.

With record results and a cap on university places, competition is said to be very tough this year.

Ucas chief executive Mary Curnock Cook warned that this year was likely to be the most difficult year for admissions for a decade. A record 675,465 students have applied to university this year.

Our problem is that we have too many under-qualified students attending college. In the UK, they don't have spots for all the qualified applicants. It will be interesting (and a bit frightening for those of us with children approaching college age) to see how each system corrects itself.