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The Housing Bubble Popped: Is Education Next?

Apr 23, 2009 Jennifer Williamson, Distance Columnist | 0 Comments

Economic conditions forced housing prices sky-high—only to plummet at the onset of the recession, leaving many homeowners paying mortgages in excess of what their homes were worth and others unable to sell their homes without taking serious losses. The question in the education industry is: are we next?

It’s not an unreasonable question. For decades, Bachelor’s degrees have been promoted to students as the only way to succeed in a knowledge-based economy. Multiple U.S. census surveys confirm that those with college degrees earn millions more over their lifetimes than those with only a high school diploma. Demand—and easy financing from the government and private institutions—contributed to drive up tuition prices; in recent decades, college tuition prices have grown at an average of twice the rate of general inflation.

How Did We Get Here?

In addition, prior to the recession, schools were receiving unprecedented endowment funds. This caused many schools to go on construction and faculty hiring sprees to impress donors, attract students and justify the raising of more funds.

The economic downturn is definitely affecting colleges financially. Lenders are now less willing to lend to students as a result of increased forfeiture in the mortgage market—so students are less able to pay steep tuition rates. Wealthy donors are less able to give to school endowment funds as they were in the past. While college tuition rates still appear to be increasing across the board, it’s not likely this can be sustained over the long term if parents of students continue to suffer heavy job losses, wage decreases and difficulty landing new jobs—not to mention the losses of retirement account funds and home equity.

A student protesting to lower tuition costs at his university

Many students are waking up to realize just how expensive college really is.




More Trouble for Job Seekers

But the economic hardships faced by those who pay tuition bills and fund endowments are not the only cause for worry. In addition, there are signs that the U.S. economy is saturated with Bachelor’s degrees. According to a 2006 report by the Occupational Outlook Quarterly, there are more prospective employees with degrees than there are openings for positions at the college level. The Census Bureau reports that 27% of all adults in the U.S. has a Bachelor’s degree or higher education level, and there are approximately 250,000 more people graduating from college each year than there are college-level jobs waiting for them. According to the Bureau, this trend has existed for over a decade—and it’s likely to get worse.

There’s no question that the U.S. workforce is more educated than ever. With Bachelor’s degrees a dime a dozen, simply having your degree is less likely to distinguish job seekers from the crowd. For this reason, many people make the decision to go back for Master’s degrees and Ph.D’s—which, depending on the student’s field, may or may not make them more employable.

Many students claim that they go to college because it will help them get a strong start on their careers. But it’s long been the attitude of Liberal Arts schools that the value of a college education isn’t preparation for work, but the learning itself. As a result, many degree programs do a lot to teach students the subject—but not a lot to teach them how to translate their knowledge into a successful career. The value of a Liberal Arts education is something that colleges and universities increasingly have to defend in the face of rising tuition hikes and reduced prospects for college graduates.

Looking Ahead

It’s difficult to predict with any certainty whether economic conditions will force tuition rates to stabilize or drop in the near future. But a close look at the workplace and educational environment facing college graduates, the increasing financial strains on families and the drying up of easy student funding reveal that it may not be possible for college tuition rates to sustain themselves in the future. As the economy worsens and students become more careful about how they invest in their own educations, colleges may find themselves having to drop their prices—or do a better job of justifying their tuition costs. John Stossel - Is College Worth It?


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