The Higher Education Bubble, Glenn Harlan Reynolds, Encounter Books, 2012, $5.99.
As former British Prime Minister Margaret Thatcher once quipped, the problem with socialism is that eventually you run out of other people’s money. Today’s colleges and universities are facing the same problem. If Glenn Reynolds is right, many of these institutions will never recover from what he believes is an inevitable loss of student dollars.
Reynolds, a popular blogger and a law professor at the University of Tennessee, argues in The Higher Education Bubble that colleges and universities are a part of a still-inflating financial bubble that must inevitably burst, in much the same way that the housing bubble burst a few years ago. “Bubbles form when too many people expect values to go up forever,” he writes. “Bubbles burst when there are no longer enough excessively optimistic and ignorant folks to fuel them. And there are signs that this is beginning to happen already where education is concerned… bubbles burst when people catch on, and there’s some evidence that people are beginning to catch on.”
Colleges and Universities have seen a steady influx of federal student loan money for years. It’s easy to borrow federally-backed money to pay for college. It’s so easy, in fact, that schools have increased tuitions for decades without suffering from a corresponding drop in enrollment. But as prices and enrollments have increased, the quality of education offered has plummeted — and too many of today’s unemployed graduates owe huge sums for degrees that are worth very little.
This can’t continue forever, and students are already looking for alternatives. For example, the number of students taking the LSAT, a law school admissions test, has fallen 25% in just two years.
It’s only a matter of time, argues Reynolds, before scores of students decide to take advantage of cheap online education, apprenticeships, or trade schools rather than risk going into debt during times of high unemployment. Most universities have planned for dramatic tuition increases to continue forever, but student loan demand is beginning to soften as students realize that expensive degrees will not help them find jobs.
This bubble is not only financial, but also intellectual, as the proliferation of departments in subjects such as diversity and women’s studies illustrates. “The higher education bubble isn’t bursting because of a shortage of money,” Reynolds explains. “It is bursting because of a shortage of value. The solution is to improve the product, not to increase the subsidy.”