How long can the cost of higher education keep going up at the rate it does? And how long will people keep paying for it?
Glenn Harlan Reynolds, law professor at the University of Tennessee, argues that higher education cost is another financial bubble, and the bubble is about to bust. As Reynolds writes in the Washington Examiner:
Something that can’t go on forever, won’t. And the past decades’ history of tuition growing much faster than the rate of inflation, with students and parents making up the difference via easy credit, is something that can’t go on forever.
Right now, people are still borrowing heavily to pay the steadily increasing tuitions levied by higher education. But that borrowing is based on the expectation that students will earn enough to pay off their loans with a portion of the extra income their educations generate. Once people doubt that, the bubble will burst.
I suspect it’s a little more complicated than that. People may very well continue to borrow to attend college, at least in part because there are so few truly affordable colleges left in America.
Until the bubble bursts, however, Reynolds recommends simply avoiding accruing very much debt. As he puts it, “there’s a good chance you’ll find yourself deep in debt to no purpose.” This is not just his advice to potential college students, however. It’s also his advice to colleges themselves.
American colleges have, for the past few decades, borrowed and encouraged students to borrow vast sums of money to pay for lavish buildings and glamorous faculty. It’s hard to encourage colleges to stop this behavior at least in part because the lavish spending and intense competition seems to work.
The easy money won’t be coming forever. And when the bubble bursts all of this will end. The most successful colleges, and the most successful college students, will be those who are prepared. [Image via]