Sunday, October 21, 2012

The Higher Education Bubble

The Higher Education Bubble by Glenn Harlan Reynolds is an inexpensive new book in the "Encounter Broadside" series that fires all cannons at the high-priced ship that is the American university system.  According to Reynolds, a major "market correction" for higher education could be just around the corner, because "Bubbles burst when there are no longer enough excessively optimistic and ignorant folks to fuel them." Like many in our course, the American people are beginning to understand that a very expensive college degree that requires you to take on a boat-load of debt has become a risky proposition, especially during this protracted economic crisis.  Reynolds makes it clear that the higher education bubble is parallel to the housing bubble and its bursting is just as inevitable.  In fact, I don't think he does enough to draw the parallels, beginning with the way that government policies encouraging home ownership AND "college for all" have contributed a lot of hot air to both.  Unlike the housing bubble, though, when the higher education bubble bursts, not all houses will fall: the most likely to suffer severely and even founder during the coming set-back will be those institutions that are expensive and have not succeeded in preparing their students to pay back their debts  -- especially the weaker law schools (and Reynolds should know, since he is a law professor).  

Though a bit short on facts or specific figures, this pamphlet does a good job of painting the big picture in broad strokes.  It's the sort of thing I wish I had read a couple years ago, before I became interested in this topic and reached the same conclusions myself.  Reynolds's advice to both students and institutions is "do not take on more debt" with a possible correction around the corner -- which makes you worry about the $750 million bond that Rutgers and other state institutions are pursuing (though some of the project is more like refinancing than new borrowing).  Those interested in learning more about the "bubble" argument without buying a book should check out the excellent presentation and video on "The Higher Education Bubble" from

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