Guest Post: The US Education Bubble

Tyler Durden's picture

Submitted by Doug Hornig and Alex Daley of Casey Research

The US Education Bubble

In the world of finance, there is always talk of bubbles – mortgage bubbles, tech stock bubbles, junk bond bubbles. But bubbles don’t develop only in financial markets. In recent years, there's been another one quietly inflating, not capturing the attention of most observers.

It's an education bubble – just not the one of student debt that has graced the pages of the New York Times and so many other publications in recent months.

The problem is not that we are overeducating ourselves as many would have you believe. Rather, it’s that we are spending a fortune to undereducate ourselves.

The United States has always been a very educated country. But it is becoming less and less so, especially in the areas that matter to our individual and collective economic futures. Our undereducation begins with a stubbornly high dropout rate among secondary education students. About a quarter of those who begin high school don't finish.

In an educational system where graduation from high school at a minimum level often means no grasp of mathematics beyond basic arithmetic, no training in basic personal finance, and no marketable professional skills, this is an obvious problem We can and should do more to prepare high school graduates for the world they now live in.

The big problems aren't rooted in high school education, however, but with the decisions we as a nation are making in the education we get beyond the compulsory level.

Of those students who do make it through high school, 30% will not go on to any further education. That means 70% enroll immediately in a two- or four-year degree program, a major increase from the about 49% three decades ago. Despite rising college entry rates, we are not graduating any additional college students. That's largely because among those who immediately enroll in college post high school, some 40% are not expected to get their degrees within six years.

The result: our overall college-educated cohort has flatlined over the past 30 years. The number of American citizens aged 25-34 who have attained a college education – including either a two- or four-year degree program – is exactly the same as the percentage among 55-64-year-olds, at 41%. (The US is also the only developed nation where a higher percentage of 55- to 64-year-olds than 25- to 34-year-olds has graduated from high school.)

Thirty years ago that 41% figure led the world in college grads; now we're 16th and trending lower.

Many have suggested that it's because we have a less than stellar college education system. But nothing could be further from the truth. While it has some problems for sure, the US remains a leader in post-secondary educational quality. One need look no further than the increasing number of foreign students pursuing advanced degrees in the US. For the 2009-10 school year, about 690,000 non-US citizens were enrolled at colleges in the US – the highest level in the world and up 26% from a decade ago.

Not only are foreigners attending our schools in record numbers, they are far more apt to pursue high-level degrees than US students. Foreign students constitute 2.5% of bachelor's degree students, 10% of graduate students, and 33% of doctoral candidates.

Despite a top-notch educational system in the US, we're failing to take full advantage of the opportunities it provides. But the bad news doesn't end there.

In the 21st century, intellectual capital is what truly differentiates in the job market and what helps a country grow its economy. Investments in biosciences, computers and electronics, engineering, and other growing high-tech industries have been the major differentiator in recent decades. In order to be competitive in those fields, however, a nation must invest in so-called "STEM" studies (Science, Technology, Engineering, and Math).

During the latter half of the 20th century, as more and more US high-schoolers opted to at least start college and were able to afford to go, their choice of academic pursuits have tended away from STEM subjects and toward the less-rigorous liberal arts.

When fewer students attended college and even fewer jobs required technical skills, private employers, and especially government, could soak up the overflow, putting people to work provided they had a degree, any degree... for a while. English literature, sociology, psychology, communications, fine arts, gender studies, and the like were majors that led, inadvertently, to nontechnical jobs – the blue-collar work of an information economy, marketing, and business, and of course to teaching the increasing numbers of new college students.

However, more careers than ever now require technical skills. Economic growth has slowed and unemployment rates have spiked, making employers much pickier about qualifications to hire. Plus, boomers have chosen or been forced to work longer in those professorships and other jobs.

There is now a glut of liberal arts majors. A classic bubble, born of unrealistic expectations that the investment of a hundred grand (or more) must result in a cascade of job offers. Or at least one.

It's not happening. A study from Georgetown University listed the five college majors with the highest unemployment rates (crossed against popularity): clinical psychology, 19.5%; miscellaneous fine arts, 16.2%; United States history, 15.1%; library science, 15.0%; and military technologies and educational psychology are tied at 10.9%.

Unemployment rates for STEM subjects? Astrophysics/astronomy, just about 0%; geological and geophysics engineering, 0% as well; physical science, 2.5%; geosciences, 3.2%; and math/computer science, 3.5%.

STEM jobs also pay more. The list of the 20 highest mid-career median salaries, by college degree, features no careers from the liberal arts. Instead, according to a survey from, at the top we find: petroleum engineering, $155,000/yr.; chemical engineering, $109,000; electrical engineering, $103,000; material science & engineering, $103,000; aerospace engineering, $102,000; physics, $101,000; applied mathematics, $98,600; computer engineering, $101,000; and nuclear engineering, $97,800.

Liberal arts degrees provide few prospects for graduates. Yet the bubble continues to inflate.

In 2009, 1,601,368 bachelor's degrees were conferred in the US, a 30% increase from 2000, which should be a good thing. But of these, a large plurality, 590,678, or 36.9%, was awarded in one or another of the liberal arts. That's higher than 2000's 36.1%.

Moreover, the next most popular major was business, with 347,985 degrees, or 21.7% of the total (up from 20.7% in 2000). And it was followed by health professions at 120,488 (7.5% vs. 6.5% in 2000); and education at 101,708 (6.4% vs. 8.8% in 2000). The business bulge would be okay if students were trained in how to start their own businesses. But it's more likely that they dream of a lavish Wall Street job, one few will ever attain. In fact, that PayScale survey listed business as only the 59th best-paying college degree.

At the other end, these are the bachelor's degrees earned in STEM subjects, as a percentage of 2009's total, compared with 2000: engineering, 6.4% (down from 8.8%); biological and biomedical sciences , 5.0% (down from  5.1%); computer and information sciences, 2.4% (down from 3.1%); physical sciences and science technologies, 1.4% (down from 1.5%); and at bottom, math and statistics, 1.0% (up from 0.9%).

Americans don't get it. Foreigners studying here do. True, the highest concentration of foreigners is the 21% in business and management. After that, though, comes engineering  at 18%, nearly triple the level of US students; physical and life sciences (9%), and math and computer science (9%).

More than one in three foreign students at US colleges are entering these fields. Compare that to to fewer than one in six US collegians. Fine and applied arts, English, and humanities collectively account for only 12% of the foreigners' total.

There are any number of reasons for the emergence of the US's liberal-arts bubble. One is easy money. Students have been encouraged to attend college by the availability of loans, both governmental and private sector, and the disproportionate wealth of their baby boomer parents' generation.

In addition, many companies began requiring a degree – any degree – for entry-level jobs that could adequately be filled by a bright high-schooler.

Institutions of higher learning bear some measure of blame as well. Liberal arts programs are much more profitable than hard sciences – professor salaries are lower as their non-academic options are lower, less equipment is required, and of course, recruiting is easier.

Other factors might include the stigmatization of "nerds" who take on more challenging studies; the lack of quality math and science education in secondary schools (where are they going to get great teachers when there's so much money to be made with the relevant degrees elsewhere?); and the widespread misperception that any college degree will punch one's ticket to an easier life.

As more philosophy B.A.s wait tables, it'd be nice if we could wave a magic wand that populated high school science and math classes with teachers who inspire students and students who want to be inspired. But, alas, this a generational bubble.

Lacking that, high school counselors should begin warning students of the perils of spending four years pursuing an interest for which there is no market and advising their charges where the real opportunities lie.

Would-be liberal arts majors must face the reality that one of their few hopes for a future job is to teach the same subject to the next generation, and that competition for the few such specialized positions is going to be intense.

Furthermore, there remains a wide gap between males and females with regard to math and science. Since three females are now attending college for every two males, this is a vast untapped resource. If females currently are discouraged from becoming interested in STEM subjects from an early age, as much research indicates, that's reversible. If they can actively be guided toward those fields, that's doable, too.

The US has led the planet in scientific research and technological innovation for a long time. But that is changing. Other nations, especially in the developing world, are minting new scientists and engineers faster than we are. Without major changes to our cultural attitude towards math and science, and some pretty serious changes to the educational system to support it, we risk becoming second-class citizens in a techno-society that we largely invented.

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SilverIsKing's picture

This one's going to be interesting to watch when it pops.

CPL's picture

You mean the fact no one is allowed to declare bankruptcy on student loans anymore?

Barry Freed's picture

More like the fact that these worthless student loans have been securitized into SLABS (Student Loan Asset Backed Securities) much like sub-prime mortgages were.

Unlike mortgages, which were based on homes which have actual value (albeit much lower then their declared value), the worthless pieces of paper (some) students receive has absolutely no value.

AldousHuxley's picture

SHhhhhh.....don't give away the secret sauce.....

  1. Create BS bubble underwritten by "prestigious" US "investment" banks (when they are just making shit up)
  2. Bundle it up to obfuscate contents (aka. securitization)
  3. Let US hedge funds, universities, pension funds have the first flip
  4. Use this "proof" to sell to other goods/energy producing countries and greedy foreign overlords
  5. Use capital inflow to buy real goods (US dollar for home construction material or oil)
  6. When bubble pops, backstop it with US Dollar
  7. Fed printing to cover banks (US elites' assets) and export inflation to the same goods/energy producing countries
  8. This allows US to move on to the next victim (target of democracy and free market) while the previous victim is economically paralyzed from losses they got dumped on.

See Japan, China, etc.

philipat's picture

And isn't education the only industry not to have adopted technology? I suppose because of the self-interest of bloated staff under a system of tenure. In fact, most, if not all lectures are a complete waste of time, the contents of which could be more clearly studied online. A dedicated hard-working student should be able to complete a Bachelor's degree programme within one year with minimal access to minimal "Teaching" staff.

Not For Reuse's picture

this is all just more hackneyed rehashing of the future promises compounding scenario.

College put people on track until that track was no longer viable.

Idiotic to dwell on education as if it were some sort of unique and special snowflake

Oh regional Indian's picture

Why are they called universities?


Everyone comes out singing the same song. One verse.

Wish I'd known that going in.



Not For Reuse's picture

Sure, but as a self-avowed collegiate you must realize that deconstructing latinate etymologies is the height of solipsistic onanism, n'est-ce pas?

ebworthen's picture

Would you like fries with that?

Oh regional Indian's picture

Thanks for the laugh. Indeed. The one class I wish I had taken for credit was Ghanian Drumming. ;-)


I did it by Occident's picture

sheesh, I'm glad I went the engineering route, I didn't have to endure too many nonsense "collectivism is good" indoctrination that the lib-arts folks have to take.   and my piece of paper (or rather what I learned) is worth something to boot!  From a state-school so wasn't too much tuition either compared with Ivy league.   I would pity those who paid for "presigious" lib-arts degrees.  All that money and not much to show for it. 

AldousHuxley's picture

that's why the elites view education institutions as "gatekeepers"....just a hoop to jump through to gain credibility.

universities are just outsourced research farms for corporations now with foreign labor mostly. because research dollars still dictate what gets researched, developed, and published.

  • STEM is for DARPA's military tech advances to keep US dollars circulating.
  • Humanities is for social control. how is affirmative action and humanities good for poor white farmers kids?
  • Education industry is politicians' vote buying to those who are not smart enough to get hired by competitive corporations.

But education alone does not make one an elite....into wage slavery middle class, but not an elite......most of whom inherite their position in society.


However, only in America do you have a bubble in education and her citizens are ever more so stupid. Creationism, christianity politics, financially illterate, etc.

Not For Reuse's picture

There is no bubble in education, there is a bubble in EXPECTATION which has imposed itself upon the historical conduit of generationally distilled knowledge.

If there's a bubble in education, why are most people who graduate from ivy league schools complete idiots?

This "bubble" has nothing to do with education, and everything to do with incorrigible idiots and their deluded and/ or influential families

AldousHuxley's picture

ivy league was always full of idiots. that's the secret...that it appears prestigious and smart but most are without real merit.

Mayeb a quarter of them are genius types, the rest are affirmative action, jocks, alumni's kids, wealthy donor's kids, famous executives, etc.


It is elite's way to social engineering next batch of elites.


the bubble has all to do with the PRICE of education which drives EXPECTATIONS. 

If college was free, we'd hear less complaints on its value.

tarsubil's picture

Thanks for the article. It applies to most PhDs probably. In my field, you used to get a prof job right out of grad school after 3-4 years of study. Then it took 5 years to get the PhD. Then you needed another 2 years as a post doc. Then you needed another 2 years for two post docs. Now, you probably need three or more and you aren't a prof until your late 30s if you are lucky enough or dumb enough to have lasted that long. Good luck finding a job outside the university too. Total joke like just about everything in this dark world we've constructed.

Not For Reuse's picture

No, it's the other way around. Expectations drive the price.

If students/ parents in the aggregate didn't expect a positive ROI on their tuition costs, they wouldn't pay to play.

Price is nominal.

Also, you are being far too generous with your estimate of "a quarter"

Sokhmate's picture

Philipat, I'd like to give you 1000 green arrows.

dolly madison's picture

I agree that most lectures are a waste of time.  I hope that education starts using technology much more before my kids go to college.  I do not agree that a hard working student should be able to complete a bachelors degree within a year.  I cannot imagine having learned all the science and math for my engineering degree in a year.

rune420's picture

Don't know about you, but I sure wouldn't want to be the first person to drive across a bridge built by a construction engineer with a "teach yourself in 60 days" bachelor e-degree.

Barry Freed's picture

Unfortunately our primary educational system has failed as well.  Most college Freshman lack even basic and critical thinking skills.

nmewn's picture

Its even deeper than that.

Public education (read government education) was constructed in this country to provide a good employee for corporations and a docile citizen for the state.

Nothing more.

Mr Lennon Hendrix's picture

And so that rich families can meet and marry each other.

nmewn's picture become the mutant ogres they are.

AldousHuxley's picture

rich value money over everything....even the attractiveness of their spouse. Marrying for money pretty much on both sides.

YBNguy's picture

School IS for fools. I left college a few years ago amid my Jr. year after the professor in a mandatory Philosophy class rambled about how dissent was UNAmerican.


Took Micro and Macro Econ prior to that. Funny how I learned more on my own by reading books I chose (and did not spend $125 on them like the textbooks, oh yeah on texts: I had to buy one WRITTEN by said Phil. prof), and reading websites like this...


So thanks everyone here, I learn a lot from these blogs and also your comments (and laugh my ass off).

Not For Reuse's picture

Earning a degree right now has nothing whatsoever to do with smarts, book smarts, or even street smarts.

If you have a competent thesis advisor, he will advise you to gtfo of academia asap and do something useful.

Mine did, over a decade ago.

My life goal as a student was to live in a cardboard box in Europe, and fuck bitches. Piece of advice: do the latter in college, realize that 90%+ who graduate from ivy league schools are idiots, and forego the former in favor of sensual pleasures.

If you live in the US, no one has it better than you RIGHT NOW in terms of value exput vs value input.

This is not something to cry about, this is something to EXPLOIT

Sokhmate's picture

I always thought of upper edjubication is a va gina fest.

tarsubil's picture

If you can make it, being a prof is a total v fest. It seems it is part of the spoils of making it that far. You'll get older and your students will stay the same age while varying in looks. Best of all, it is the same regardless of which foot you kick with.

Barry Freed's picture

This is the 21st century.  We have plastic boxes now.

piceridu's picture

My wife and I read The Underground History of American Education I believe 15 years ago as we started on our quest as parents of 4. We home schooled them all.  So far the experiment has been nothing but a wonderful journey with much fun and success...BTW, and a whole lot of freedom. The oldest soon will recieve PHD in CS Engineering, 2 pro athletes and the youngest just got his AA degree at 18. 

If reading that book doesn't change/save your life(and the lives of your children), nothing will.

piceridu's picture

....and without one dollar of debt.

Matt's picture

So if I understand correctly, a SLAB is where a bunch of student loans are bundled then securities are sold on the pool of loans? If this is correct, are there STEM SLABS that only hold the debts of graduates with a bachelor or better in hard science?

I did it by Occident's picture

If not, I'd be willing to bet that a greater than expected proportion of the AAA-rated SLAB tranches would have a greater proportion of STEM representation, as one would expect people with jobs would be able to keep paying the loans.  And those with low unemployment are the STEM folks. 

shanelee's picture

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Barry Freed's picture

More like the fact that these worthless student loans have been securitized into SLABS (Student Loan Asset Backed Securities) much like sub-prime mortgages were.

Unlike mortgages, which were based on homes which have actual value (albeit much lower then their declared value), the worthless pieces of paper (some) students receive has absolutely no value.

AldousHuxley's picture

India and China churning out "college grads" by billions



supply and demand says college degree is going to be worth less than some farmer who inherited good piece of farm land.

I did it by Occident's picture

No, you're not buying a piece of paper, you are buying a person, or rather the ability of that person to service his debt.  So, since a person can't renege through bankruptcy on student loans, you are buying debt-serfs.  Kind of like back in Russia serfdom days, the nobles would buy and sell land, but the serfs would be part of the title to the land.  The serfs would be property of the land.  A slight distiction with the old US slave trade where the slaves themselves were "Sold down the river (Mississippi)" and moved around, families split up, etc.  Not much of a difference as both types of serf-slave still had minimal rights.  In any case, please welcome your new overlords, make them feel at home.  :)

navy62802's picture

This is the policy known as bleed them until they die. College tuitions will continue to rise until only the select few can afford to attend. We're already to the point where the entire American family must sacrifice something in order to send a child to college.

AldousHuxley's picture

yearly tuition is comparable to expected salary so just inflation


The loss of value comes from the fact that inflated salary is going to put you into a higher bracket almsot as soon as you start working. Thus the higher income gained from college degree is negated.


Judging from OWS, police jobs are going to attract the next best and  the brightest. lifetime job security as necessary to protect oligarchy, get to beat the shit out of others, six figure pension, retirement at 52 with handicap parking for life due to "disability". Plus, most of them spend last 5 years trolling around the airports to ramp up overtime. You get some easy job afterwards and you get to double dip into social security as well.


Fuck private corporate work. That's for suckers in China and India.


Taint Boil's picture

Rock on bro .... me make money drinking coffee and reading Zero Hedge all day. Work, hard work, is for suckers.

AldousHuxley's picture

Tyler is Martin Luther of capitalism.


Turns out free market, capitalism, globalism, is all bull to keep elites in power and society under control via debt just like the teachings of the Church.


401k = after life "rewards"

central bank = Roman Catholic Church

central bank chairman = Pope

war in middle east = crusade to secure access

capitalism = divine right of kings

NYC = Vatican

wall street tax = your local church collecting 10% as tithe

Janestool's picture

Reformist Theology Sucks....

Incubus's picture

Same type of parasite and system, with different names.


The next system will be the same thing. 



I did it by Occident's picture


Who is the devil, hell, demons, angels, saints, Christ, Anti-christ in your theological system? 

Just wondering for my own curiosity.  It seems to be an interesting perspective.


olo - that's the bird's picture

Still doesn't mean they collect. my mother's got over 100k in student loans. When she dies the loans default.

AldousHuxley's picture

life insurance?

her husband won't get social security spouse benefits unless the debts are paid first

any assets won't transfer to you unless debts are paid off first.


you thought banks were loan sharks? wait until you don't pay government the money back......

au_bayitch's picture

Thank you for your input. But is anyone still counting on social security? Any other future promise? Hell... is my 401k safe?

Bob's picture

Of course your 401k is safe--it's not the social security "ponzi scheme" is it?  A 401k is an investment in the genius of capitalism itself! 

By all means, send your money to Wall Street . . . they're the guys who know what to do with it.