Plenty of smart people seem to think there’s a bubble in higher education. And for good reason: The cost of a college education is skyrocketing and student debt is growing out of control, at the very same time that college graduates are struggling to find jobs. When they do, it’s often in positions that hardly require any of the "critical thinking" they were told a college education would teach them.
So what’s going to happen in the face of all this data? Well, that’s where the "bubble" conceit breaks down. The very idea suggests that the value of an asset might suddenly crash, as people come to their senses and reevaluate how much that asset is actually worth. But people can’t buy and sell their college degrees. The "asset" in this case isn’t going anywhere. This isn’t to say that something bad isn’t going on. Rather, what we’re seeing with education is probably worse than a bubble, simply because it’s not clear that there are market forces in place to correct the rise in tuition costs and the increasing debt levels that are funding it.
The "market" for higher education simply isn’t pure enough. For one, students and parents alike tend not to be very rational about whether a college is worth the cost—we simply have a culture which, for good and bad, tells kids that no matter what, more education is an unalloyed good. That wouldn’t necessarily be a problem—after all, even if students do value an education, they should be able to recognize the prices attached to them. The problem is that the debt they take on isn’t the same as other kinds of debt: You can’t declare bankruptcy and escape from it.
Thus, the colleges and lenders pushing student loans upon kids know that they can pile on crazy dollar amounts and never have that debt erased in bankruptcy court. Put another way, those lenders are fine making bad bets on student loans that’ll never be repaid, because that debt will follow the student for their entire life. That is totally unlike the real debt markets, where lenders adjust their behavior based on default rates. If you make a bad bet on a borrower that can’t repay, you should get burned. That’s the only way that the market can regulate unsustainable debt levels. (If this nasty little dynamic sounds familiar, it should: After all, wasn’t it Fanny Mae and Freddie Mac that lent out far more money than they should have, under the assumption that they’d get bailed out even if things went bad? And we all know what happened as a result: Lots and lots of unsustainable bad debt, which ultimately crushed the economy.)
The real danger of this debt is that it’ll simply place an impossible drag on the broader economy as people continue to pay just for getting educated, instead of going out and buying cars and stuff that stimulates the economy. The banks and colleges holding this debt, in the meantime, have every possibility of folding as default rates rise.
But enough economics! What drives me crazy isn’t more of a practical value. We look at a liberal arts education as the summit of higher learning, as if it confers some greater ability to think clearer and be more creative. It doesn’t. Some students at really good schools are able to play a kind of three-card monte game in which they end up selling that philosophy degree as a qualification for a high-paying job. But most will graduate with no skills other than having read some books they didn’t like. We inherited this ridiculous ideal about higher education from Europe, where college used to be a finishing school for the rich. But today, students actually need practical skills that they can take into the real world, such as computer programming.
The point I’m trying to make is simply that there’s a huge opportunity for a different sort of education experience, one based on the real-world rather than the fantasy life of academia. The trick is convincing the best students that this is far more prestigious than reading Homer for four years. (I can’t effing believe I read Homer for four years!) Our education system will only reform itself when our ideal of what education should be changes as well.
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