The Higher Ed Bubble

Well we got no choice
All the girls and boys
Makin' all that noise
'Cause they found new toys
--Alice Cooper

Spot on commentary by Walt Williams on the glut of college grads. As he notes, a signficant portion of college grads are 'underemployed.' Their jobs may never generate enough income to pay back the economic resources that went into their college educations.

The 1/3 number that Williams cites is consistent with the fraction of students in my classrooms that, in my estimation, have no business being in a college classroom.

What WEW leaves out is a discussion of the government controlled student loan market and its role in creating this oversupply. Government offers college loans at rates and terms below the market. As a result, many students who would not have attended college otherwise find the cheap borrowing rates irresistable. Thus, they lever up with loans to attend school.

This off course jacks prices higher as credit artificially stimulates demand. Universities, in turn, spend lavishly on facilities to handle more capacity. And then jack tuitions higher again to pay for the build outs.

Welcome to the higher ed bubble. Like all others, this bubble will surely pop.

So, not only do are we producing a large fraction of college grads that are underemployed, but students who routinely graduate with five or six figure liabilities. Large numbers of defaults seem certain. As does a large contraction in future enrollments. Which means campuses will be lugging too much capacity.

Bottom line: scarce economic resources are being squandered on a large scale.

Just one more example of the folly of central planning. In this case, it is based on the flawed belief by planners that people have a 'right' to a college education. That flawed belief drags down general standard of living.