As before, this post draws on my FTTE reports, which is where you can find extensive sources for these comments.
Is higher education experiencing a bubble?
This concept, which I began to track in early 2012, built across multiple fronts in 2013. The bubble idea holds that colleges are overpriced, that student demand is questionable, and both could drop together. I have tested this concept throughout 2013 through social media and in-person presentation, using multiple trends and analyzes, and even developed an alternative model (peak higher education). My verdict now is… the bubble might be happening.
A series of major trends supported the bubble concept in 2013:
- College and university tuition and fees continued to rise, despite several tuition freeze experiments. This is consistent with a rising bubble, among other interpretations.
- Student debt rose throughout 2013, inspiring widespread anxiety. This is also consistent with a bubble (as well as other models: consumer behavior in a captive market, and also consumers reacting to media panic, etc.)
- A number of institutions took drastic steps to stave off financial crisis, including merging with other campuses, ending academic programs, and laying off faculty (I dubbed the latter two “sacrificing the queen“). These events could be advance signs of a bubble about to pop.
- The number of students taking classes went down across many sectors (see “Enrollment decline” above). If this continues, then that’s a sign of a bubble popping.
- Some graduate programs suffered badly in 2013, most notably law schools, who saw declining revenues, applicants, graduates, and jobs.
- Outside of campuses, political pressures remained steady. Some of this occurred in partisan terms, as Republicans extended their criticism of public K-12 to all of higher education, sometimes with an anti-union dimension. Indeed, I find bubble arguments most often made by conservatives. However, 2013 also saw Democrats joining in for a full-court bipartisan press on higher education, from a presidential charge to build a new institutional assessment system to high-profile governors and mayors calling for reduced higher education fees.
For an example of the latter, president Obama this past August:
[O]ver the last three decades, the cost of higher education has gone up 260 percent, at a time when family incomes have gone up about 18 percent. So […] if you’ve got one line going up 260 percent and another line going up 16 percent, you start getting a bigger and bigger gap. And what’s happened as a consequence is that either college has become out of reach for too many people, or young people are being loaded up with more and more debt.
All of these trends – each and every one – seem likely to continue in 2014, and perhaps beyond.
At the same time several powerful trends countered the preceding.
- The college premium – that lifelong boost to a person’s earnings from having completed an undergraduate education – remains in evidence, despite anxieties about rising tuition and student debt. So one measure of higher education’s value remains.
- College and university endowments grew in 2013, after several years of stagnation. On the one hand, this gives some of them the financial strength to expand student aid and/or reduce prices. On the other, these institutions suffer less bubble-related anxiety.
In other words, Americans increasingly think college is too expensive and fewer of us enroll, but the benefits remain and no alternatives have seriously challenged higher education. 2014 will likely see these trends continue to struggle against each other.
What do you make of this concept, as 2014 dawns?