The education bubble is what you get as the competition by universities for students takes on the same other-worldly perspective as the housing market did in the early 2000's.
Remember all the "flip this house" shows? Buy a junk house for $150,000 USD, put $50,000 USD in for improvements, etc., sell it for $275,000 USD - all in two months. Of course, all that went bust a few years ago with the recession - now there are too many cheap houses and there is no market for a "starter" house in the $275,000 USD range.
Universities have been under the same pressure except that instead of selling the house at the end they want to turn out alumni that will A) contribute back to the school financially and B) get a premium for the education the impart.
This problem has a long history.
In the 1970's when I was in a large, state university system the idea was to get a diploma. The school existed to provide that opportunity. The cost was cheap, about $30 a credit in those days. No one forced you to go, no one cared if you went, and there were certainly a lot of jobs and success for those who did not finish.
Lot's of billionaires are high school dropouts from those days, Richard Branson and Bill Gates and Paul Allen of Microsoft among them.
High school ended upon graduation in those days as well. After that you either went to Vietnam, got a job, or went to school. A number of people in my graduating high school class got married. You were an adult and expected to act like onw.
Certainly in the science, mathematics and technology areas you only went into higher education if you were really "into the technology", i.e., had the "passion" or needed the "fix" of tech or knowledge you could not get on your own. If you were into auto body finishing there was no need - you found a job working at your dad's buddies body shop and learned the trade.
After university graduation the idea was to get "hired" by a prestigious company where you would work until you retired. Again, in those days it was an aerospace company, IBM, or something like that. Once there, you were just like the auto body kid out of high school and you learned the trade from your elders on the job.
But since then things have changed dramatically.
Schools have discovered that a "higher education" is just like a "big house" or a "fancy car". They have discovered that the more costly and expensive the better clientele they can attract (and this means parents with money as opposed to a specific kid with a specific talent).
What became important was selling the parents on the idea that the school would make little Johnny or Suzy into a superstar. This meant a potential instant job at a high tech company paying big bucks.
Of course, for such a glorious privilege the parents would have to cough up a bit more dough than the average school might cost... But since the little kiddies lives would be all set the parent ponied up. Or, if the cash wasn't on hand, take out a loan, or get the kid to take out a loan, all to fulfill the parents desire for the kid to succeed.
(How many of you out there are still doing what you were doing ten, twenty or thirty years later than what you were doing at age 22?)
The problem is that the kiddies had no passion for the skills they were learning - the passion was all about the well healed parents wanting the kid to have a "bright future".
If first saw this in the late 1980's with graduates from the local universities.
During interviews I would ask why were they in this field - most thought (or were told) they could make a good living.
How much spare time did they spend on this particular avocation away from school I would ask - none was often the reply.
The point was that the kid could have cared less about the job he was getting - he or she figured that they were entitled to a good job because they had successfully run the educational gauntlet.
I, on the other hand, who owned the high tech company looking to hire someone did not want someone like that as an employee. I would much rather have the passion to learn and to love the technology. The specific skills needed were relatively easy to teach given someone like that. Plus they wanted to learn.
But the schools kept churning out losers with a passion only for entitlement.
Now eventually, the schools realized that they were all teaching (or due to educational mandates from the government had to teach) the same thing. Virgil is Virgil, calculus is calculus, and psychology 101 are all basically the exact same thing no matter where you go to school...
So the schools figured out that branding themselves was the way to go. And branding didn't mean pricing themselves as the bottom of the bin. Nope.
The way to go was to charge more than everybody else and to claim that the results were going to be worth it.
And so, just like the housing market, the cost of education skyrocketed - well ahead of the cost of living over the same period.
And the schools built huge, powerful brands: Standford, Harvard, and so on. All with similarly astronomical price tags. Local state schools, who did not want to be left out of this tuition bonanza followed suit by raising prices as well. In addition, the scoop that pulled in
Instead the notion that college was just an "extension" of high school was created. That way, with more and more high education institutions a steady source of students could be found. The educational standards where also lowered to make sure that those new recruits would be able to "make it".
(Of course "make it" simply means that mom and daddy (government) will keep paying the bills - no one cares if you actually learn anything.)
So today we have college educations costing $50K USD for which little Johnny or Suzy get a "government loan" or mommy and daddy mortgage their house. The expectation is, of course, that little Suzy or Johnny will get a $100K a year job out of the box, pay off the loans, and be on their way.
Except that's not how it works anymore.
The loans, even higher if you continue on into a profession like Architecture or go on to graduate school, become crippling. The idea of pinning all your hopes on your education is like putting all your eggs in one basket. What if the industry changes? What if technology changes and your industry is no longer important? (Like the Rochester Institute of Technology Printing School sending me an email Christmas card...!!!)
You literally spend decades paying these loans off - regardless of whether your a CEO of a high tech money maker or a hamburger flipper at McDonalds.
All the while your earning power is being eaten away by taxes to give grants so that yet more kiddies can go to college for free, get degrees, and take your job away from you because they are younger, more attractive, and have learned all the "latest things".
No, its a racket.
And now the education bubble is about to burst. (Look at the above chart - the "tuition bubble" - the gap between the expected linear increase following housing and cost of living and the nearly exponential increase of tuition shows just how bad it is.)
People cannot afford this nonsense any longer - not in today's economy - not ever.
They cannot afford the cost of decades of loan repayment (sort of like kicking the dead whale along the beach for a lifetime).
Its really like a modern debtors prison when you thing about it.
And meanwhile, "Frankie dropout" is building his body shop business from rented garage down the road to a full time business with twenty employees. If he's clever he has no debt, gets paid in cash as much as he can, and happily fixes the cars for the "well healed" clientele that are sending the kiddies off to higher edumucation.
(For another similar but different perspective see this.)
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