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Bubble In Higher Education: When Will It Pop?
The soaring bull market in higher education has been flying high for some time.
Courtesy of: Visual Capitalist
Many factors combined to make it the perfect storm: the demographic rise of the millennials, easy money from the Fed, the “Chivas Regal” effect in pricing strategy that many colleges and universities adopted, and the US government virtually taking over the market for student loans.
It’s a vicious circle as colleges raise prices, students take out easy loans, and the institutions raise prices again. However, it all seems to be coming to a head as several factors begin to show the chinks in the armor.
First, the US Federal Government now holds close to 45% of its total financial assets in student debt. This does not include things like land or the any of the Fed’s assets, but it is still extremely significant. Pre-crisis, it was only about one-third of those levels at about 15%.
The main reason for this increase is that the government seems to be the only organization backing student loans. Before the Financial Crisis in 2007, the government only owned $100 billion of student debt – now it owns over $800 billion.
Next, the delinquency rate has risen rapidly over the last decade. Even the St. Louis Federal Reserve branch is becoming concerned with this. In their research article from April 2015, they write: “A delinquency rate of 15 percent for all student loan borrowers implies a delinquency rate of 27.3 percent for borrowers with loans in repayment.”
The problem is that real wages aren’t increasing, and many youth are left unemployed or with low paying jobs. With an average debt load just short of $30,000, it is no wonder that graduates are still struggling.
Lastly, colleges are starting to run into problems making ends meet and often institutions are going bankrupt. Particularly at risk are for-profit colleges with low prestige, as well as liberal arts colleges. Corinthian Colleges agreed to sell or close 107 campuses, leaving 72,000 students in the dust. Sweet Briar College has been in a potential bankruptcy saga for months. Even Louisiana State University is in the middle of drawing up its bankruptcy plan.
In the end, it may be technology may be what truly blindsides schools and students. The cost of an online degree (or even self-education) is a fraction of the cost, and colleges and universities are becoming less relevant every day. Big names such as Peter Thiel and James Altucher have been outspoken skeptics of higher education for years.
This college frat party could be coming to an end soon. The question is: who will end up paying for the kegs?
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How do you figure the cost of an online degree is a "fraction of the cost" of tradtional college? That isn't usually the case, in fact the cost for online school can be MORE expensive, depending on where you get the degree.
http://www.usnews.com/education/online-education/articles/2013/08/28/us-...
Also, with the slack in the job market, more employers are using a bachelor's degree as a broad recruitment filter that doesn't necessarily match the skills needed for the job. So, choosing NOT to get a degree can make it tough to get anything other than a McJob without a future.
It will pop when 78% of taxi drivers, waiters, and waitresses have PhDs. Possibly sooner but the "youngins" getting all of these "advanced degrees" aren't bright enough to not keep going into debt for something that isn't in demand.
Germany offers 78 degrees in English that are focused in the sciences, business, engineering, mathmathics, etc., etc., TO ANYONE IN THE WORLD FOR FREE!
Anyone I know in the US who is in high school I tell them to come here.
http://www.studying-in-germany.org/study-in-english-in-germany/
https://www.daad.de/deutschland/nach-deutschland/angebote/en/12068-findi...
If you have a kid in high school, and are even remotely contemplating co-signing yourself up for "student loans" so you kid can party hard for 4 years -- when a better education is available FOR FREE -- you're a moron. Period.
Lets pay a game -- which number is smaller;
$100,000 or $0?
EDIT - They are also advertising health insurance for international students for 33€ a month. Compare that to ObamaCare.
Enough information to look at it, Mr Haus.
Hopefully there is no test required. Come one, come all.
My buddy's daughter received her two year degree from the local community college. 4.0 GPA.
Then, one week later, received her high school diploma ( 4.3 GPA) on stage with the other yoots.
Than got turned down on her application to Maryland. She was the " wrong" something, I suppose. What Does a kid have to do? Strings were pulled, and she got in, but Christ on a cracker.
So much, anymore, is so wrong.
Could be her SAT score wasn't too good. Good grades can't overcome that at competitive schools.
my local community college offers classes at $153 per credit hour. At 120 hours needed for a 4-year degree... that comes to less than $19k.
Note that the college is within 10 minutes of my house, not at all an anomaly. How many plane tickets do u suppose i'll need over the course of my four years of study in Germany... @ ~$3700+ per trip? And don't be sarcastic and answer 'zero' because its not absurd to want to see my family a few times over the course of 4 years.
So, $19k suddenly seems quite affordable. And for that matter, even if I borrow 100% it amounts to a few hundred bucks/month during my 20's and 30's.
In summary, I find your recommendation to be quite atrocious as a comment on an article discussing the COSTS of a college education.
Community college is a good deal, but it doesn't offer upper level classes needed for a Bachelor's degree. So, half of those 120 credits will be a lot more expensive and, for many, involve having to pay more for room and board.
Thanks for the info.
One of the links started with these words:
"For those who want to study in Germany but prefer studying in English to learn two languages or because they know to less German to study in this language it is possible to study in Germany in English language."
"We have a full year’s worth of data for 2014. Across all workers (over age 25 and working full time), the unemployment rate was 5 percent. For workers who had a high school degree or some college, the unemployment rate was a little higher than average (6 percent); with an associate’s degree, it was a little lower (4.5 percent). Schooling is where we really see a difference: Workers without a high school diploma had an unemployment rate of last year of 9 percent, double the average of workers with an associate’s degree.
Have a bachelor’s degree? Great, your peer group had an unemployment rate of only 3.5 percent. Master’s degree holders saw that fall to 2.8 percent, while doctoral graduates were at only 2.1 percent unemployment. Professional degree holders’ unemployment rate was the lowest at 1.9 percent.
Anyone who believes school doesn’t matter should recognize that enormous unemployment range of 1.9 to 9.0 percent.
If that does not convince, then look at compensation. Weekly wages are very similar in their distribution to unemployment: the average was $839 per week for all workers, but only $488 for those without a high school diploma. Those who held a professional degree averaged more than triple that amount at $1,639 per week. Bachelor’s degree holders averaged more than double at $1,101 per week."
http://www.washingtonpost.com/business/get-there/whether-youre-feeling-t...
Not sure if you got downvoted because you are quoting Wash. Times or that the author must be quoting government statistics, or that the comment doesn't reflect reality.
1) Washington Post, not Washington Times (only cretins read the latter)
2) Assume I got downvoted by those who celebrate ignorance (and marginal employment). ZH attracts a sizable number of those types.
Annual average salary of $57K for bachelors and $88K for professional degree holders is not even remotely close to reality, especially for recent grads.
Looking for online study that is a 'fraction of the cost' compared to the local CC.
+1 on the link that confirms my findings that online is not necessarily cheaper per credit than the local CC.
What they're referring to is the "cost to provide" education through online means, as compared to brick & mortar.
does university of phoenix have football teams? cheerleaders? frat houses?
it's not a bubble if everybody wants more of it
They have online frat houses where the pledges are abused digitally.
Now bend over, Pledge.
hahaha
Male cheerleaders... just too gay.
Debt is not an asset. Complete retardation.
But bad debt is an asset:
http://www.zerohedge.com/news/2015-05-17/presenting-77-billion-p2p-bubble
Take a breath, catch a grip, this isn't any where near the same planet Kansas was on any more.
It's all about pushing these bubbles/schemes to max.
Housing kept climbing until it blew up. Same with education.
Keep raising education prices until it all blows.
Newer, larger bubbles needed.
Institutions are going bankrupt supporting the legacy costs of ridiculous pensions and healthcare for those retired.
In many Universities this is one of the largest expenses.
I don't know how long it can go on, but I do know that many cities across the nation will go into bankruptcy without the cash flow expressed from the Federal teat.
Institutions of Higher Ed. are debt machines, churning money and leveraging it up, no different than Banking, Housing, and the rest of the corporatocracy.
Pass the buck!
If you’re to dumb to do the math before you go into debt, economics is just the course you need to follow.
Or politics
Cream of the crop.
It can't pop until Q99X2 is done graduated and headed on out o the country--to Peru.
The education bubble is just a facet of the global credit bubble which is bursting as I write this. Bubbles always burst, most quite violently. This one will be no different. This Anatomy of Bubble explains why...
http://www.globaldeflationnews.com/anatomy-of-a-bubble-how-the-federal-r...
Hillary will nullify all existing student debt and make college free. Problem solved.
You had me at nullify.....
Easy, just make the first two years "free". Should solve this issue.
If you can't afford it, stay away from it?
Including
Warren
Warren Buffet
George
George Soros
Public funded
Public funded private armies
Public funded weapons to Israel and nowhere else (know where the crown's money is)
Public funded weapons sold by Israel to everywhere else, just to keep the sucking going
Everyone seems to forget that the government can keep this going much, much longer. All they have to do is "forgive" all current educational loan (already suggested) and the process will be renewed. In that process they will have "acquired" a few miliion new liberal voters who will look forward to the next debt forgivenes cycle - - - providing the right people are in the (elected) position to make that happen.
Frat parties and kegs? Where? Frats were banned years ago and you can't drink in the dorms anymore.
Colleges and universities are now politically-correct prison camps where any guy can be falsely accused of rape and arrested with no legal recourse.
I wouldn't go near one of those places today.
Frat parties and kegs? Where? Frats were banned years ago and you can't drink in the dorms anymore.
Colleges and universities are now politically-correct prison camps where any guy can be falsely accused of rape and arrested with no legal recourse.
I wouldn't go near one of those places today.