Is Education the Next Bubble?

Interesting article:


Is education the next bubble? - The Week


Higher learning is just an overpriced, speculative investment that typically rewards graduates with dismal career prospects, says billionaire Peter Thiel
posted on April 19, 2011, at 1:03 PM

PayPal founder Peter Thiel warns young Americans that shelling out for an overpriced college education is an ill-advised, speculative investment.

Billionaire libertarian businessman Peter Thiel, the founder and former CEO of PayPal, is perhaps best known as the venture capitalist who gave Facebook the angel investment it needed to really get started. But, increasingly, he's getting attention for his controversial views on higher learning. Last year, he launched the Thiel fellowship, which gives grants as large as $100,000 to 20 tech entrepreneurs who drop out of college by age 20 to pursue their own ideas. Then, in a National Review interview earlier this year, Thiel said that higher education is a "bubble in the classic sense," because education is "overpriced," something people have "an intense belief in," and an investment that's unlikely, in the majority of cases, to have a positive return. He made the point again last week at TechCrunch. Given the "financial disaster" of student loan debt surpassing credit card debt, does Thiel have a point?

No, education isn't about returns on an investment: The concept of the education bubble is based on horrifying, false logic, says Freddie deBoer at L'Hote. "To see an education, college or otherwise, as merely a way to increase the amount of money you make is a terrible corruption and fundamentally unsustainable." Increasing earning potential was never meant to be the sole purpose of education, and if it's reduced to that, we're all in trouble.
"Yet another casualty"

Well, college is overpriced: College has gotten too expensive, with state governments cutting aid to public universities, says E.D. Kain in Forbes. But let's not abandon institutions of higher learning. If needed, we should raise taxes to make public universities more affordable. "Yes, education costs money. But that money should not fall squarely on the heads of middle class kids who are forced to take out tens of thousands in debt just to attend school."
"A college education should not result in crushing debt"

And grad school is a particularly poor investment: College is still a good decision for most young Americans, but I can't say the same about grad school, says Conor Friedersdorf at The Atlantic. Grad school has become a socially acceptable way to drink beer, read, and go into massive debt in your 20s. "Upper-middle-class Americans tend to overvalue the non-financial benefits of grad school." Thiel's wrong about a lot. But at least he's "challenging the cultural assumptions that cause a lot of people to make bad life decisions."
"Is there an education bubble?"

 

In a word, yes.

 

Ditto.

Abner

 

I just saw this article today....it's somewhat related to the topic of discussion and is a good read...

Why College is Not For Everyone - Page 1 - Katie Kieffer - Townhall Conservative

 

It's a matter of perspective as always.

If you are a person who is average in most respects you can expect your education to change your perspective on life if you're paying attention to the skills you're learning and the knowledge you're receiving as you are being educated. You should not expect a direct education to income correlation. You should expect that you're not going to be a total buffoon though.

If you are a person who has one or two exceptional qualities you can expect if you're smart to make some connections that will make the education more advantageous. However, there are many, many people who have done nothing with their lives to the point of getting educated who believe that there's going to be some nirvana of job satisfaction attained by getting educated.

To them I say, garbage in, garbage out. In these cases of course it's a waste, simply because the intention going in is not what it should be. Not completely their fault, there's always sheep in society that follow the bleating of people who push the college = jobs agenda. Sad thing there is all of those people are fully aware that's not the case and should know better than to publicize it that way.

I do believe that the for profits are going to bust sooner rather than later, so if you're a student in that category, finish quickly.

 

This article by Thiel is not new and we have had a number of threads about it. I agree with him, and have been saying for over a year that we are in a bubble. What will happen when it pops, nobody can really say. I'm sure the worst of the online schools will suffer, at the very least, and it may be worse.

Will it destroy online education? I don't think so, but it will receive a significant setback when this happens.

 

Why is it that those who say "education is not for everyone" have advanced degrees themselves?

 

Yes, and this is true whether or not the bubble pops.

 

Exclusive, good-old-boys club, maybe?

 

Those with advanced degrees tend to have significant training in methods of critical analysis. It is easy to state blindly that education is always worth the investment. Those who have received a solid education can see that such blanket assertions do not always hold up.

From a fiscal standpoint, some individuals would benefit better from vocational education. Many of these jobs pay well and do not require a long time in school or tens of thousands of dollars in tuition.

I mean, let's be honest--not everyone is going to be a manager, director, or VP. If you are not so inclined and you have an aptitude toward skilled labor, you are better off with a vocational education than with a BS and MBA in most cases, especially if it requires 40k of debt to get them. If you are entrepreneurial, you can always learn the material on your own, or you can go back to school at a later date after your business takes off.

That being said, I do believe that a college education is very helpful for producing responsible citizens. Unfortunately, I see a trend away from the liberal arts toward job preparation in undergraduate degrees, partially due to the cost. When job preparation becomes the focus, then you are better off completing the most cost-effective program.

For those who aren't really sure what they want to do, our community college systems provide an excellent, affordable way to test the waters of higher education without amassing large amounts of debt.

 

As more schools with physical campus offer doctoral degrees (which is the main source of cash from internet schools), fewer will be attracted to expensive degree programs from online-only schools. Cheap programs from online schools will survive, but online schools that charge high tuition for the same degrees that folks can get for same high tuition at B & M schools (yes, B & M schools are also expensive) won't appeal much to many. Schools like APUS can snatch alot of students from those other expensive online schools if the can somehow offer the same set of doctoral degrees at a substantially reduced tuition. They can take it further, by creating doctoral programs that target folks who dropped out from schools like NCU with transferable doctoral credits (there are many of them in this forum). Overall, I think when the government no longer can borrow money from China to fund student loans, the "chickens will come home to roost" (the whole thing will come down crumbling, and B & M schools will also be impacted, not just internet schools). I guess the question becomes "when?"

 

I totally agree with your analysis. I think this discussion emanates from folks getting into too much debt that can't be repaid due to taking out loans to study useless courses/degrees. I've always wondered why majority of DL doctorates that cost $50k, $60k, or $70k are in business and management. Those are the type of worthless degrees that I am talking about...... Folks know they can't get managerial jobs but they go ahead and rack up $60k or $70k in student loans to study management from an internet school anyway.

 

the amount of debt folks are racking up in the name of getting an education is unbelievable, and that is debt they cannot discard.............

 

There's a quote I like: "The market can stay irrational longer than you can stay solvent."

Look at housing. Still completely nuts.

Another (paraphrased) quote, which is perhaps quite instructive: "It's very difficult to explain a situation to someone when it's in their greater interest to misunderstand it."

Sure, it's a bubble.

On the other hand, our entire financial and economic system is built on slight of hand and unsustainable consumption... and yet we're still here, somehow limping along. Aside from a few outliers, I don't think anyone wants a full-on reckoning. There's a lot of math in economics, but I would argue that it's ultimately a branch of psychology... and that our collective attitudes, cultural norms, and desires play a tremendous role in how things shake out. My point, I think, is that "business as usual" has a tremendous amount of momentum, and that it's extremely difficult to predict when (or even if, for practical purposes) the bubble will pop.

It's been a while since I paid a great deal of attention to geo-political-economics, but a simplified view might be that we're playing a giant game of economic chicken with China. China can't afford to lose its growth rate, and we can't afford for anyone to call our bluff and establish an alternate reserve currency. We should probably thank our lucky stars for the Euro-zone's troubles...

And then there's energy. Hoo boy, what a mess.

In the long view, we're screwed. I hedge my bets ("risk management"), and part of that is buying-in to the education-industrial complex. My primary concern is quality of life... intellectually, at least. (I wish I could rationalize away my emotional reaction to the extreme mis-management I see. The stupidity, on such a grand scale, is very disturbing; and the ultimate results of these endemically poor policy decisions, when the chickens do finally come home to roost, will be ruinous for a great portion of humanity.)

Tom

 

Because the media generally does not quote those without education as subject matter experts on education.