Professor Elam

Thursday August 18, 2011

Professor Sam Rock (psychology) and I did a paper entitled Peak College for the recent Southwest Teaching and Learning Conference held here. We suggested that Higher Education like sub prime mortgages were supported by lots of easy loans perpetuating an industry (colleges) that encouraged more lending and accordingly was free to raise costs. Indeed tuition inflation has outpaced any other inflation. 

Now our friends at The Socionomist have a similar study suggesting Higher Ed is a bubble.

Historically a financial bubble is a mania supported by the belief there will no end to the value of the object being chased. Examples include the Tulipmania of 16736, stocks in 1929, the dot.com stocks of 1999-2000, sub prime housing of 2007-08, and silver in 1980. As we suggested what really makes the Higher Ed bubble interesting is that there is literally no collateral. No matter what one says, at least a sub prime mortgage usually involved some shack and the real estate under it, somewhere. But in the case of a college degree, the collateral, the degree, is completely intangible. So, no collateral to seize. The collateral instead becomes the grad's future wages which can be seized. 

Now even Susan Combs, The Texas Comptroller is jumping on the Higher Ed Bubble Bandwagon.

She has chosen to quote a Univ of Tennessee professor rather than ourselves but the case gets more and more clear. At some point the cost of the education is simply not supported by the future benefits. 

Already there are blogs about the dubious value of yes law school education. Private for profits have a 43% default rate on their student loans. This week I sat next to a Professor from Trinity at a forum. She said two semesters at Trinity cost about $35,000 for a graduate degree. How high is up, is the Beanstalk of Higher Ed topped out?