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How the College Bubble Will Pop (wsj.com)
86 points by muzz 1376 days ago | hide | past | web | 105 comments | favorite



The author seems to have particular ax to grind against tenured faculty. This seems, at least in my personal experience, to be a bit of red herring.

I've spent time around a couple of research universities (the kind where the degrees do pay for themselves), and I've known a lot people who pursued PhDs, post-docs and faculty positions. Most of these people are extremely bright and incredibly hard-working, and many of them were paid less than than third of what a typical programmer makes. Why did they put up with it? Because they loved their subject, and they convinced themselves they had a shot at tenure.

But tenure is incredibly hard to obtain at an elite university. You've got to sacrifice your 20s and much of your 30s in a haze of work, and the odds are still very slim that you'll win the tenure lottery. And if you do win it, well, you've just spent the last 15 years proving you're a workaholic who can't stop. And if you do manage to slack off? I know at least one professor who was told, "Absolutely, you're a professor for life, no question. But your salary is paid for by the research you bring in. If you can't bring in the grants, we can't afford to pay you. At least not much."

So for every piece of tenured deadwood, there are probably at least 4 crazed workaholics (and in my personal experience, far more). And beyond that, there's 50 or 100 grad students, postdocs and young faculty all working for ridiculously low wages in hopes of getting tenure.

So let's do a little thought experiment: What happens if we do what this writer from the American Enterprise Institute wants, and get rid of tenure? Well, to make an analogy, how would the behavior of startup founders change if they no longer had a tiny chance of a big payout someday?

I do not know why US education keeps getting more expensive. But tenure, ironically, seems to be one of the things holding down salaries at elite universities, in the same way that big chunks of equity hold down startup wages. Unless somebody can provide actual numbers demonstrating that tenure is a problem, I'm inclined to look elsewhere.


I do not know why US education keeps getting more expensive

There are two major hypotheses, along with variants. One hypothesis, advanced mostly by Bill Bowen, holds that colleges are eating the student loan subsidies and engaging in amenities arms races (the growth in the number of administrators fits into this hypothesis). The other is related to Baumol's cost disease, which happens when some goods experience major productivity improvements (think of most physical goods) while others don't (think of education or medicine).

See here: http://marginalrevolution.com/marginalrevolution/2012/11/mea... for one good discussion. See here: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/02/t... for another. See Why Does College Cost So Much? for an elaboration on the Baumol hypothesis.

I buy the Bowen hypothesis.

Tenure is not a major part of the cost story, but in any system that's not working so hot almost every part starts to come under scrutiny. I tend to favor limiting or removing tenure because of the way it distorts the academic labor market, but that's a pretty long discussion.


People throw around offensive-sounding numbers of millions of dollars for college amenities, but often they work out to pocket change per student (quite a few people will circulate through a large state university over the lifetime of a building) or are paid for by private donors.

The Bowen hypothesis makes people feel better about themselves - it says the root of all our problems is that kids today are spoiled. However, one must consider that state subsidization of public higher education has been slashed in half since 1975; students and their families pay a higher proportion of the cost than they once did.

http://www.nasfaa.org/advocacy/perspectives/articles/Myths_a...


People throw around offensive-sounding numbers of millions of dollars for college amenities, but often they work out to pocket change per student

This is not true, generally. The cost of running a modern university (property, plant, energy) is quite material. These costs are an order of magnitude above "pocket change".


Physical plant costs are material, yes. However, the issue is specifically the incremental physical plant costs of having nice things like brand new athletic centers.

My university has a new $51m gym. $51,000,000 / 12,000 students / 30 years = $142/student/year. Roughly the price of a single science textbook, and that's assuming it only lasts 30 years.

Not pocket change on a student's personal expenses budget, but compared to the $65k sticker cost of attendance, it's a drop in the ocean. If administration had refrained from spoiling its students with nice things, cost of attendance would not be markedly less.


In 2013-14, Stanford is a $4.8 billion enterprise

Expenditures for FY 2013-14

59% salaries & benefits

31% operating expenses

4% SLAC National Accelerator Laboratory

6% financial aid

_________

=~$1.5 B on opex. Which is basically garnderers, housekeepers, lawn-mowers, and janitors. That, plus security, heat electric, etc. golf courses, gyms, etc.


You're understating unintentionally.

Let's take "pocket change" to be around $100, an absurdly high amount for pocket change.

An order of magnitude above that would be $100 * 10 = $1000.


Pocket change in this context would be 1-3% of a cost base.[1] >5% is not pocket change, it is a material expense. The expenses in question may be in the 30-40% range ( >10x a "pocket change" amount of 1-2%). Hope this is clearer.

[1] ie, a "non-material" expense.


Obviously this isn't granular enough to draw any conclusions from, but my alma mater (University of Virginia) has an annual opex of about $2b. This covers about 12,000 undergrads and 8,000 grad/professional students.


The reason why prices are high won't matter once the customer stops purchasing. I think there are enough metrics to suggest a peak in US higher education growth, probably around 2010. ( www.nytimes.com/2013/12/26/education/getting-out-of-discount-game-small-colleges-lower-the-price.html & http://www.bloomberg.com/news/2013-09-30/student-loan-defaul... for a few recent examples.)

The debate needs to encompass the entirety of the US higher education system rather than making generalizations based on specific pieces of it. State universities, private schools, not for profits, for profits, schools with massive endowments, and so on, each have their own piece of the story.

Secondly, given that the issue in question involve debt, some portion of the analysis here is future prediction -- both for the students borrowing and for schools which are borrowers. Borrowing a ton of money today seems rational if the future brings great inflation, and lunacy if deflation or stagnation.


The major explanation I've heard is neither of those (though its a more general version of the Bowen explanation), but simple market-specific demand-pull inflation: higher education has increasingly become perceived as essential, so more people want to buy it and those who would have been willing to buy it anyway are less price sensitive, so the market-clearing price goes up.

(This is different than "eating up subsidies", since, while the subsidies are a contributor, they aren't generally viewed as the only, or even the most important, driver of increased demand.)


There's actually a much simpler hypothesis, which is that price competition from cheap state universities has disappeared due to state-level budget cuts.


I once read about Baumol's cost disease and couldn't remember the name - thank you so much!


The salary quote point which is that a good portion of a professor's salary is paid of the grants they bring in. In addition, they are also often the ones supporting grad students and postdocs. Although this isn't true in all cases, from what I can tell, the professors I've interacted with actually bring in more money to the university than they are being paid. I'm not actually sure where tuition is going exactly.


The university might typically take 40% of the grant money, for "administrative costs"


I do not know why US education keeps getting more expensive.

What's killing the middle class in the US is the Satanic Trinity: housing, healthcare, and tuition. Healthcare is an obvious need, usually bought in crisis. With housing and tuition, it's the need for people to increasingly pull themselves closer to successful people and make connections as the middle class breaks apart and mostly falls into the ocean.

Tuition (and dark tuition, such as legacy-family donations, admissions counselors, elite high schools and grade schools and pre-schools, and test prep) is skyrocketing because of middle-class panic-- and non-dischargeable, federally-enabled debt fuels it. Nothing more.


I think current situation is amalgamation of two distinct problems:

1. Extremely easy access to loans for higher education. This, along with systematic misinformation makes for tons of philosophy/liberal arts majors that do not know what to do with themselves and their massive debt at the end of education.

2. Lack of student motivation. I went to college in order to obtain skills and knowledge. On the other hand, many people have other priorities as evidenced by amount of fraternities/sorrorities as well general alcohol consumption in college (Can anyone find number of liters of alcohol purchased in area near universities vs average? I remember seeing quite stark figure few years ago).

So, #1 was brought by college for everyone mantra. Problem with that is illustrated in #2, college should be only for people that want to and are willing to learn. IMHO, until those two issues are reconciled this particular higher education problem will not go away.


I think the whole liberal arts majors issue is a red herring. The problem students aren't the ones studying liberal arts, indeed they aren't even usually attending liberal arts institutions. I'd bet more on a literature major from Harvard winning out over a CS major from University of Phoenix.

The issue is lots of third-rate universities proliferating for people who just don't belong in college. That's the bubble—not particular majors.

In fact, many of these terrible universities offer far more vocational/non-liberal-arts majors than the elite universities. You won't find communications majors at Yale. Indeed, the abundance of liberal arts majors is probably an indicator of a quality institution.


I'd bet more on a literature major from Harvard winning out over a CS major from University of Phoenix.

But that's not because of the great value of Harvard's teaching; it's because of what the two of them did in high school that got one into Harvard and the other into UP. It's not as though the two of started out equivalent at time of graduation but the benefit of $160,000 worth of Marxist post-whatever hogwash training turned the Harvard kid into a real-world champion. After being the kind of person who could fight his way into Harvard to begin with, then spending four years socially integrating with the children of the rich, smart, and powerful, then getting to walk away with a Harvard diploma and his contacts list, he could have majored in Sustainable Shoe Repair and he'd be no less prepared for success than with most non-STEM majors.

But for the kids who aren't qualified for entry into an elite university, what they major in (at least for a terminal degree) will matter more.

Indeed, the abundance of liberal arts majors is probably an indicator of a quality institution.

Well, yes, it's an indication that the more prestigious the institution, the less what they learn in class matters.


I do think the liberal arts teach you something. Critical reasoning matters. So even if the actual content of what you learned is irrelevant, the way you learned it is helpful by teaching you to be a good thinker.

For example, a lot of philosophers make great programmers. Not because they specifically learned important things in philosophy, but because they know how to think logically.


I'm with you regarding the importance of careful reasoning. I'll just say that I'm skeptical of the usefulness in the development of that faculty of classes where the quality of your "reasoning" is considered commensurate with your apparent support of the teacher's political agenda. Compared to classes where the quality of your reasoning is judged by whether the things you design actually work or your opinions are confirmed or refuted by voltmeter, critical thinking as a synonym for compliance with authority is not my idea of the kind of critical reasoning that matters.

I'm more impressed by the critical thinking in the physics department than the philosophy department, but departments like philosophy and law are way ahead of the pure activist studies departments, because they tend to genuinely reason about issues from multiple perspectives, not just proselytize the approved one.


> I'm more impressed by the critical thinking in the physics department than the philosophy department, but departments like philosophy and law are way ahead of the pure activist studies departments, because they tend to genuinely reason about issues from multiple perspectives, not just proselytize the approved one.

Eh? I'm not sure what your college experience is based on, but I don't even know what you mean by "activist studies" departments. Most humanities classes don't even touch contemporary politics, and I couldn't even guess the political leanings of (for example) my literature professor.

I'd probably agree with your criticism when it comes to, say, gender studies. But the majority of liberal arts classes don't involve the "teacher's political agenda." In my experience, it's extremely possible to do well while completely disagreeing with the professor as long as your argument is well-reasoned and articulate.


The key difference, though, is that arts & humanities classes force students to cultivate written and [hopefully] verbal communications skills in addition to critical thinking... not to mention reading. I think you vastly overestimate the amount of sway personal politics has over students, or how much faculty discuss/care about politics in the context of their teaching.


University is now considered "the next step" after high school, rather than one of the available options. So many people go to university with a superficial idea of what they want to do or become.

But how can you blame them when it's become a requirement for pretty much any job, and not going is a social stigma.


I don't think the problem is philosophy majors; they aren't a significant percentage of students:

http://nces.ed.gov/programs/digest/d11/tables/dt11_286.asp

Their pay 10 years out is also supposedly in the top 10% (I recall the logic courses help them do well on the LSAT...):

http://www.forbes.com/2009/08/02/college-degree-pay-careers-...


I used philosophy major as an example. Perchance somewhat hastily. What I really meant to say, that there is a certain number of majors that are considered easy and give degrees that confer no substantial benefit in modern workforce. Those majors become default goto majors for people who do not know what to do and people who simply want to do as little as possible.


Point them out and give us a percentage. On top of that it would be nice to see the number of students relying on loans in your category of majors--I suspect (from personal experience) that more well-to-do people would major in Latin or Art History.


I do not have exact study major by major, however here is a summary of a study based on a sample of few recent grads: http://www.accountingprincipals.com/Documents/downloads/api-...

Slide 13 is of particular interest, almost a third of all graduates wish they could:

a. Pursue more scholarship opportunities. While there is obvious parallel to reduction of their net debt, I also take this point as motivation to study harder (Quite a few of scholarships are merit based).

b. Pursue a different major. It is no secret that some majors have jobs out there that have high starting salaries.

c. Getting a job while in college. This is another work harder point.

http://blogs.wsj.com/atwork/2013/04/29/and-the-highest-paid-...

Here you can see jobs that pay well. I think it is safe to say, that significant portion of people who want to switch majors did not choose one of the well paying majors. AFAIK every single one of those top paying majors requires you to study hard.


I disagree with both of these points.

As I see it, the main problem with college is that we as a society have put all of our eggs into a basket which is not owned by we the people (the public). If you would like to see a future in which all Americans go to college, then the cost should be spread across everyone. If you don't, then, I think we have different views of what the future could be. We should go back to free tuition, at least for state colleges, because an education requires so much more material than it did a century ago that stopping at K-12 was shortsighted/irresponsible, and now other countries are eating our lunch. An analogy is the private prison system: when we began outsourcing incarceration we created an incentive for prison industry lobbyists to interfere with the criminal justice system. Show me a private school that costs less than a public one.

Student motivation is a red herring. I've met just as many slackers who didn't go to college. In fact I would go as far as to say that pure book learning without introspection is not conducive to the human spirit. The best things I learned in college were how to redefine myself, and how to explore alternate ways of seeing the world. In essence my conscious and subconscious minds both grew as needed. Sometimes I wish that the US didn't have such a puritanical stance on recreation because we are in danger of creating a dystopian, authoritarian future. I wish with all our wealth and potential we could live more like europeans and invest in culture and the human experience. College isn't a trade school, I mean, who goes there to study besides freshmen?


You missed the point. "Free" education for everyone is the largest contributing factor in the inflation of the cost of degrees. Free education is a nice thought, but you didn't propose any way to pay for it.

The only way your proposed system could work would be if the government required all degrees to cost no more than X$ or severely restricted the number of people it paid for. More realistically, we can stop subsidizing students past 5 or perhaps 10K$ per year.


I see what you're saying. Reading it now, it hit me that government programs have to ask for budget increases, but colleges can just raise the price and be guaranteed the money because students can always get more loans.

So this was actually the intention behind transitioning colleges from free to paid. It created the student loan bubble because there was no check on how much college could cost. To fix it, we could just do the reverse and make state colleges free with their budgets set by the government, substantially lower than they are now.


With students that get bad grades being kicked out from the 'free' track. This might actually be workable.


I don't really understand the need for discussion here.

Free education is done from the K-12 level. Its' done in many European countries as well.

Is there any reason that the US government is special, and won't be able to handle a free university education without going bankrupt?


You don't send everyone to college.


It also occurs to me that in the US, k-12 is paid for by local governments via property taxes.


Entry into higher education is more competitive in most European countries...


With this argument, why even bother with the façade of classes and grades? Why not just have college be a four year cruise? It would be just as isolating, just as incubating, probably more fun. Students would get to see the world as they cruised around the globe. Those who wanted to learn, write, or discourse could absolutely do it, and those that just want to party wouldn't have to have grades or 9am classes to bother them. I've have been thinking of this for a while now. This idea reminds me of the grade schools that have stopped having classes and tests; the kids just study or do what they want, and come out just as prepared (according to the tests) as those from a public school.


exactly.. why don't more people say this? so much of the 'worth' of your college degree is essentially a function of how valuable it is in the current workplace. If you major in 'business' or 'communications' then you are majoring in 'fucking around'. There aren't too many jobs that I know of are looking for this.

If you go to college to get a degree that is useless, then you will work at Walmart. I mean, seriously, is that really fucking news?

What's news is how colleges still manage to increase their tuition costs some 5 times the inflation rate year over year just to crank out vast quantities of mindless degrees that are of no use in this economy.

Bill Gates thinks it's a supply-and-demand issue, but it sounds like unmitigated greed to me.


> If you major in 'business' or 'communications' then you are majoring in 'fucking around'. There aren't too many jobs that I know of are looking for this.

Not true, and this is a large issue of the STEM mindset. People majoring in communications or business can work just as hard as someone who is a STEM major (note: I say work just as hard, not that one is more or less difficult). It is what you, as the individual, choose to take from the experience.


>If you major in 'business' or 'communications' then you are majoring in 'fucking around'.

Most of the sales team that I work with must have majored in 'fucking around' then. Somehow they manage to work just as hard as us dev guys and pull their weight anyway.


You've got the correlations mixed up. Just because lots of skilled people majored in business does not mean most business majors are super skilled/motivated.

It could be that both 1) People genuinely interested and determined to get into business, and 2) People fucking around major in business. This matches my anecdotal experience.


> so much of the 'worth' of your college degree is essentially a function of how valuable it is in the current workplace.

I wouldn't call it "valuable in the current workplace", but "valuable in the current world" instead. The former makes it sound like the situation would be solved if only corporations/government created more jobs for those unemployed/not valuable people. However, people with useful/practical skills can freelance as well, or start their own businesses. The problem is no one (even other people) is willing to pay them money for their skills, talents or output.


> If you major in 'business' or 'communications' then you are majoring in 'fucking around'. There aren't too many jobs that I know of are looking for this.

Businesses aren't looking for finance guys, salesmen, and accountants? My technology company has quite a few, including me. I guess I should tell them they're wasting millions of dollars a year.


but of course any intelligent person can do those jobs without a "business" degree.


Go become an accountant without an accounting degree and tell me how that works out.


this happens all the time in the UK. big accounting firms and F100 companies recruit people in unrelated degrees all the time.


I went to school to learn, spent long hours in the library and lab, and was a whore for knowledge. Many of my friends were/are the same way, and are very successful post college. We also partied our asses off, made a million and one friends, and had a hell of time doing it. And some even managed to be competitive athletes at the D-I or club level. Don't begrudge us for it, or think there is an inverse correlation between beer consumed or frat you joined, and willingness to learn/do work.


University taught me a huge amount, and only part of that was related to my degree. The person I emerged after 4 years of dealing with life on my own, making (and losing) friends and even partying is very different to the person who started. The utility of university is far, far greater than simply "a place to learn". It's a place to forge out on your own in a semi-protected environment, somewhere to learn the art of making friends, of meeting people, and somewhere to discover what you want to do in life. Even if I hadn't gone to a single class I would still say that I learnt a lot at university. Universities are (obviously) places to learn in the academic sense, but an undergraduate degree is also a framework for developing into an independent adult. I'd argue that society benefits from that.

Perhaps the difference between the US and UK higher education systems is that I did all that for $5000/year in fees. The ludicrous debt that some people get into is not particularly justifiable for social or educational reasons.


> The person I emerged after 4 years of dealing with life on my own, making (and losing) friends and even partying is very different to the person who started.

Wouldn't you have done all of that even without going to university?

> Universities are (obviously) places to learn in the academic sense, but an undergraduate degree is also a framework for developing into an independent adult.

By the time you're 20, you should already be an independent adult. I think modern parents are generally not doing a good job raising their kids, if people hit 18 and then need 4 more years to "become adults".


>By the time you're 20, you should already be an independent adult

What are you basing should be on?

The age at which you're a functioning adult varies greatly among cultures, and it's usually based on necessity. In some cultures, children continue living with their parents well into their 20s and by definition aren't independent. There are also places where people we would consider children get married and start families of their own.

The age of adulthood is also constantly changing. I've seen polls that show that modern American's don't consider adulthood to really start until your mid 20s, while 150 years ago 12 year-olds went to work and were responsible for providing for the family.

As life expectancy and wealth goes up, the age before you are forced to take on adult responsibilities goes up.


And in my surroundings, I'd argue that adulthood (vague as that concept might be) often has not fully emerged even at thirty.


>By the time you're 20, you should already be an independent adult.

Is this really a fair expectation? Your mind hasn't really fully matured until your early or mid 20s (25 is the most oft-cited age if I recall). I'd say that yes, when you're 18, you need about 4 more years to become an adult. Maybe spending $40k on a degree you don't really care about isn't the best way to do that, but I hardly think 18-year-olds are adults.


I suppose parent might also be making a criticism of the way society works. The phenomenon of delayed adolescence is a uniquely modern concept. For centuries, people were expected to be independent adults by the age of 16/18 or earlier.

I'm in college and the apathy I'm surrounded by, despite being at a top college, is quite disappointing.


Oh, this. My first few years at a university I was a horrible student. I'm talking C's, D's, lots of non-completes. I was a mess, academically. Then around 22, a switch clicked in my head and I made it happen. Dean's list, 3.8 average quarterly GPA, etc. I finished my last two years as a student trying to clean up the mess I made in my first three years.

In grad school, I was a 4.0 student. I got it.

I had the huge luck of being able to go to my local four-year, decent university for virtually free because my father was a campus architect. If it wasn't for the fact that I could squander my time taking random classes without fiscal penalty, I would have probably dropped-out or gone to a two-year school to get my act together. I only detail that to emphasize the mental shifts that sometimes happen with extremely-young adults.


I had a similar experience. I didn't really trash my GPA but saw the writing on the wall starting my third year. I dropped out, withdrawing in time to avoid a semester of bad grades. I worked, got an apartment, lived on my own, and at around age 23 decided I was ready to go back and finish. I often wonder if people would have more success at university if they took a couple of years after high school to go experience the real world and grow up a little.


Then how did they do it for most of recorded (and unrecorded) history?


Are there truly that many useless philosophy/liberal arts majors? According to stats I read, most students actually go for majors that are currently in demand. What happened during depression is that majors in demand changed and the one that looked good when you started is not good anymore. Plus, some law schools exaggerated success of their students.

Not all STEM majors and not all computer related majors are in demand btw.


I know how zerohedge is autobanned on hn, but they included some charts that should make people think (especially for those who have been looking away)[0][1].

Personally, I dropped out of Brown 2 years ago, and pursued other opportunities that wouldn't leave me and my family in a mound of debt upon graduation for returns that wont be monetarily or mentally satisfying (Not many interesting options for ChemE's beyond working for big oil/big pharma/big food co). Still grinding it out, but I wouldn't go back unless things change, and considering how things are now (and how they continue to be more of the same) and what I have done since, some college grads I've worked with say I'll come out ahead, but at least I know I'm not getting behind…

[0] http://www.zerohedge.com/sites/default/files/images/user3303...

[1] http://www.zerohedge.com/sites/default/files/images/user3303...


I would like to point out that those graphs are very misleading if not carefully read.

For instance, the first is tuned to make it appear that college and high school graduates are on exactly equal footing in mid-2006, whereas in fact in 2006 the median income of a high-school graduate with no higher education is $37,000, but the median income for a bachelor degree holder with no higher education is $60,000.

It's useful for comparing the change in the two values over time, but it is not useful for comparing the values of the two at any given time. All I'm saying is, be careful not to let your intuition get in the way, and think carefully about what the graph is saying.


An actually useful graph that basically refutes that idiotic Zerohedge one;

http://i.imgur.com/s3GqHl2.png


I'm pretty sure both charts mention that they are rates or % change, if one needs a degree to read things carefully to not be mislead, we have bigger problems…

All I'm saying is, if one wants to work 40+ years of their life putting a significant portion of ones increasingly diminishing difference of median income levels (which for those with high expectations for oneself, the difference is a joke anyways in the scheme of things) into 401k/403b/RothIRA's "invested" for them in the thing we call a stock "market", while paying off increasing larger debts for things one does not need to survive or to enjoy life and that's if one is apart of the decreasingly smaller group of those "successful" enough to come out "ahead" in that game, that's ones prerogative, not mine.


No, the graph is very misleading. The first one is not of rates of change, it's % relative to 2007. Which is a really really weird way to graph things.


Yet it clearly stated what it was measuring in the title regardless of if "really weird" or not. If I was reading a graph that measured % moles of two different substances in a solution over a period of time that was adjusted at t=x and mentioned for in the title, sure, some might see that as "really weird", but one will still be able to extract information from it and apply it in a context of a report (as BoA did in theirs and mine in my statement).

But let me not sit here and type away on the internet and think that some graph is going to wipe away the cognitive dissonance of populations…


The graph is misleading because it misleads the reader into believing that college grads and non-college grads made the same real wage in 2007, disguising the fact that there was a substantial gap between their wages at 2007. The fact that both wages fall a similiar percentage relative to 2007 only tells us that the gap between both wage classes remained the same, in effect telling us nothing.

There are entire classes of misleading graphs that are misleading despite being technically, literally, valid.

Your snark is not helping.


Telling us nothing, or you nothing?

Let's have an example… x = 60,000, y = 30,000 with difference, d = 30,000

>the fact that both wages fall a similar percentage relative

Let's pick some random rate and apply it to both, r = %10.

Now what decreased more: %10 of x or %10 of y?

>the gap between both wage classes remained the same

Really? Do the math, and d is now = 27,000.

I'm sure such math helps BoA in its positions in the private student loan market (and beyond) in such an environment.

Let's not pretend that my snark stands in the way of your understanding, clearly you had that going for you anyways…


I won't respond to this more than I already have. It's pretty clear you're reading too much into it emotionally.


Haha yes, this has been pretty amusing to answer tangential nitpicking with basic arithmetic.


The discussion was about intellectual honesty, not math.


His obstinance aside, here is a better graph of the value of college diplomas:

http://i.imgur.com/s3GqHl2.png


The fact that both wages fall a similiar percentage relative to 2007 only tells us that the gap between both wage classes remained the same

Well, no. In dollar terms, the gap would have become smaller.


I'm not attacking your position, just trying to clarify some graphs that are obviously confusing (whether deliberately or not I don't know).

The whole purpose of a graph is that it makes information visually available and easily digestible. If you have to "read it carefully to not be mislead," that is a faulty graphic.


There isn't an agreed upon purpose of a graph, but luckily for us, there is for what a graph is: a diagram showing the relation between variable quantities, typically of two variables, each measured along one of a pair of axes at right angles.[0] I missed the part on "makes information visually available and easily digestible", but considering that you recognized it as a graph means that it did its job and everything else can be stroked upon to infinity, and like I said, we have bigger problems…

I'm not attacking your clarification, just clarifying my original personal anecdote that was dependent on state of the status quo and its direction (rates and % change, respectively).

[0] http://www.oxforddictionaries.com/definition/english/graph


#2 - some people go to college for networking (BA turned politician types), I doubt you can become a senator by learning hard.


That is true, however this is orthogonal to the problem because:

1. Relatively few colleges where you can get required networking. 2. People that do that generally do not have a problem with loans. 3. To build a network you got to be motivated.


When I attended MIT, approximately half of the men were in fraternities. The rate of alcohol consumption was also quite high, both in the FSILGs and the dorms. I don't think either of these necessarily mean that MIT students lacked motivation. In fact, the average fraternity GPA was above the average on-campus GPA.

In my experience, there's a lot of value in giving students the opportunity to step up and run a small self-governing enterprise. It's one way to counter-act the extension of adolescence into the college years, and I'd like to think that MIT isn't a unique place in regard to the value of independent living. I think there's enough value there that I give annually to MIT's Independent Residence Development Fund so that others continue to have the same opportunities I did.

Nit: Your use of the plural in "amount of fraternities/sorrorities[SIC]" is a hint that you've made an amount vs. number mistake. Also, sorority is the correct way to spell the word.


As someone who doesn't go ton MIT but has been to a few MIT frats and partied there before, MIT greek culture is not at all representative of the wider greek culture at American universities. In fact, MIT is an outlier. MIT is very much academics driven. At MIT, taking 6 or more classes (in a technical field) makes you an awesome badass. 50% of MIT is involved in greeks precisely because the greek culture there is very much tied into the wider MIT culture.

People who would have been "nerds" at other schools, forgive the crass stereotype, fit right into many MIT frats. Which is an awesome thing for MIT, but doesn't really help your argument.


The article phrases things in terms of economics (as WSJ is wont to do), but there are more issues.

> The Obama administration has dubbed college "the ticket to the middle class,"

Indeed, the problem is that higher education is deemed a "ticket" to ride. Even the president is implying (whether he really believes it or not) that a college degree entitles someone to a good standard of living. Not effort, hard work, or other qualities commonly associated with the American dream.


Right, but, at least in theory, getting a college degree is a sign of having put in effort, hard work, and other qualities commonly associated with the American Dream.


You wouldn't characterize education as a commonly discussed component of upward mobility? It seems to me that an education is exactly how you'd expect your children to do well, as opposed to the "effort" and "hard work" of a mostly-unskilled job with an obvious ceiling on wages, etc.


There's education and there's education. Academic learning is only one kind of intelligence, learning physical skills is intelligence too. Which is why plumbers are so well paid. Here in the UK the Labour government told all the working class kids hey, don't bother to learn a trade like your parents, go to an ex-poly and get a degree in media studies! Now they're unemployable and all our tradesmen come from Poland, where they do still understand education and they do still respect the trades. And without them, the UK is in a lot of trouble.


I mean that going through the education system is not enough alone to guarantee success, but this is implied by the use of the word "ticket."

A phrase that makes it clear there's no entitlement would be "opportunity to reach the middle class" when this is more like "pay money and you'll get there just like everyone else."


Probably one of the most productive skills one can learn, that will pay off for your entire career, is selling. No matter what career path you choose, having sales skills will help considerably.

Even if it's just selling yourself to a potential employer.


There's a third path here which the author ignores, but is already well underway both online and throughout the rest of the world - an increased emphasis on non-degreed training programs. Yes, the "for-profit" education model is rife with its own problems, but for much of the world, many don't have the option to attend a 4 year degree school and beyond. For those who don't (or increasingly, won't due to rising costs and lower advantages) the option to get skill specific training for their job or specific interests is becoming increasingly attractive.

Even big time universities are getting into this - witness executive programs offered by many prestigious programs. On the flip side, companies like Treehouse and more exotic options like MOOCs and "learn a language as a service" style instruction are becoming formidable, low risk options.

I think the future will see a reversion to 4 year institutions serving those students who always used to go to college, a reduction in the amenities arms race that others on this thread have pointed out, and an increasingly level playing field (and better perception) of those people who didn't go to college, but do have highly valuable (and demonstrable) skills acquired through for-profit teaching avenues.

Many here will find this distasteful. That's OK. Many who are over 40 find internet dating inherently distasteful too, but that hasn't changed the perception among younger people or stopped its explosion as a real alternative to traditional dating.

Disclosure: I work for an educational technology company who serves a lot of commercial training providers but also many four year institutions.


I have strong opinions about the whole college bubble issue. In my opinion, the single biggest reason for this mess in America is the whole "student loan" scam. Let me explain. Colleges don't really care about what their actual cost is because whatever they bill, they get paid by the govt. (aka student loans) for the most part. Yes, the students have no choice but to get those loans and get enrolled. Imagine if the easy supply of these loans was stopped AND the colleges were actually demanded to justify their tuition costs, I bet the student enrollment will not go down while the costs will go down significantly.

Imagine this. Lets say a good private college costs $40,000/yr (making up but pretty close) on paper. The actual amount that a student pays out of pocket is wayyyyy less say $10,000. The rest is covered by student loans/grants etc. So the student still ends up with a huge debt of $40,000 while the college makes a profit from the govt. This is true for both private/public colleges.


There are exceptions. Applications to top universities are booming, as employers recognize these graduates will become our society's future innovators and leaders.

How strong is the evidence to support this statement?


Which statement, the increase in applications to top universities or the employers recognizing they are the cream of the crop?

https://newscenter.berkeley.edu/2012/01/12/freshman-applicat...


The latter, of course.


I don't doubt that applications to top universities are booming. Kids routinely apply to a dozen schools these days. Employers might well figure that the kids they hire of these schools are better prepared. They might also find it a way to hire their own or their friends' children.


As a UCLA grad, I can tell you that for something like the past 8 years UCLA has set a new record for undergraduate applications to a college. They get over 100K applicants a year now, and when I applied in 2006, they had just been the first school to receive 50K applicants.


Interesting that few of the comments here address the question: "What is the true goal of higher education?"

One of the root causes of the "college bubble" might just be completely overlooking this question, or taking any number of half-hearted answers for granted... or thinking that the relativistic mindset which has beset academia in the last 50 years is the final frontier.

Currently reading "The Closing of the American Mind" (as an American, wearily) and finding the history of the university as laid out there very interesting.

(Trying to formulate a general opinion but the deeper I go, the harder it is.)

There are countless difficult questions and choices which face man, and in most institutions of higher learning, they've taken a backseat to questions of employability & cost.

On an unrelated note, the new undergraduate business school building at my alma mater cost $55 million.


On an unrelated note, the new undergraduate business school building at my alma mater cost $55 million.

That's probably one of the most relevant things you could mention. Many schools don't get $55 million a year in tuition. Imagine how affordable education would be if these schools spent more money on research and education than they did on architecture?


Buildings are often payed for by donations, and they can't use the donations to pay for the basic upkeep.


One very large problem in University costs is administration spending. Cutting that spending would go a long way towards reducing the costs back to something acceptable and makes college a better economic choice.

http://www.washingtonmonthly.com/magazine/septemberoctober_2...


As someone who dropped out of high school and took a gradual, but relatively direct route to pretty well-paid work my opinion on College has changed quite a bit over the years.

So much so that at the moment, I'm working full-time and a full-time student.

I'm not sure what to say about this article. It makes a few points, but there's a lot there which is just odd.

I see this issue being less about what colleges are providing than the motivations and expectations of the students and particularly parents paying into them.

The common perception seems to be that degree is a binary thing, a membership with guarantees on either side. A princely income in a related field for members and a lifetime of poverty beneath a glass ceiling for non-members.

Recognize college as a multiplier more than a membership and none of this is particularly surprising.

Freakonomics did a pretty interesting series on College [0] providing an outlook far less dreary than this piece.

0: http://freakonomics.com/2012/07/30/freakonomics-goes-to-coll...


The college/university industry is self-perpetuating, like many other industries. A typical example...

A 6-month vocational course training people in some specific in-demand skill is started at a college/technical institute, partly funded by some big company, and everyone who graduates gets a job. A bottleneck is created at the admission stage as applications soar, and only some get selected. A year or two later, the course is converted into a one-year program, teaching/admin staff numbers increased, and the original staff rise up the ladder. The course is then converted to a two-year program, the curriculum generalized to include other related skills, and enrollments for each year increased. When the student loan system recognizes the course as eligible for loans, the fees go up. When the course becomes a 3 or 4 year diploma or degree, enrollments have gone up so much the bottleneck is now at the job-seeking or internship-seeking stage and the original program creators are attending frequent overseas conferences.


Since 2006, the gap between what the median college graduate earned compared with the median high-school graduate has narrowed by $1,387 for men over 25 working full time, a 5% fall. Women in the same category have fared worse, losing 7% of their income advantage ($1,496).

Does the median tell the whole story though? What about the skewness? Maybe non-degree-holders' income has a heavy negative skew, while for degree holders a heavy positive skew. So while the mean income may not be very different, the two paths still offer very different prospects. How much is the chance that your income will not have a low ceiling worth to you?


Even if not, the decrease in earnings per year of $1,387 is a 5% drop, that would indicate that the median college graduate earned $27,740 more than the median high-school graduate PER YEAR.

Of course, that is before the "narrowing" of the gap-- the number is now $26,382 PER YEAR.

This annual difference in earning is much, much higher than the median debt amount for almost any college.


The cab driver stat is really interesting, but I'd like to see the comparison between 2007 and now even more than the 1970 to now comparison.

We have a lot more degrees, but also a lot more unemployment and underemployment.


Cabbie is also not infrequently an immigrant's first or second job. I can remember a Ph.D. cabbie from West Africa--driving cabs in Washington, DC, wasn't the safest occupation, but for him it was safer than staying in his native land.


This was the first thing I thought when I saw that subhead.


1. Does working at the American Enterprise Institute qualify one as a member of "[t]he American political class"?

2. What is "working in retail"? A couple of cousins with business degrees started "in retail" out of college. They weren't that I know of stocking shelves or mostly operating cash registers, and both have done quite well, though only one works in a related field now.

3. There is a rage for credentials that goes a ways back and is not helpful.


Education has been labor intensive. Being labor intensive means that it is exposed to healthcare costs.

I wonder how much of the rise is cost is tied to our inefficient healthcare system?


Depends on the course. An intro-level lecture course like Econ 101 is very labor-efficient: one professor teaches 500 students in a huge lecture hall, with the help of a few very poorly paid TAs.

Also, colleges are increasingly hiring adjunct faculty who receive no healthcare or other benefits.


If you measure efficiency as the number of students per lecture, sure. I never found large classrooms to be all that useful while I was at university. I certainly remember more from my smaller classrooms where I was more closely connected to my classmates and profs.


The bump in median annual wage is still greater than the average total debt per student. It still seems like a no-brainer financially.




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