Navigating the Education Bubble: Bursting the Myths of Higher Learning

Gluttonous colleges fueling higher education bubble

Popping the Illusion: Unveiling the Education Bubble

One of the critical ingredients for any crisis is greed; there are several more, but the rest don’t matter without greed. Colleges and universities are greedy players; they keep raising the cost of tuition while the actual quality is dropping. The U.S does not even make it to the top 10 countries regarding having the best education system. Greed is the basis for all boom and bust cycles ranging from the Tulip Mania to the housing crisis.

Getting a loan is as simple as scratching X on the signature line. When something is so easy, it propels people to take on debt because the assumption is that there is still time to pay it. However, if the students were forced to put down a sizeable chunk as a down payment, they would think twice about taking on new debt. This, in turn, would force colleges to lower rates instead of continuously increasing them as the pool of available students to milk would dwindle significantly.

As there is no such mechanism, colleges and universities are quite happy to raise rates, citing rising costs continuously, but the BLS states that inflation is not an issue. If inflation is not a problem, universities should be forced to lower rates instead of raising them. The chart below illustrates rising tuition costs versus the median American income.

4 Year Tuition Cost vs Median American Income Over Time
The chart below illustrates how income levels are dropping for all groups. When inflation is factored in, wages have fallen dramatically since 2008, but the decline began in the 1970s.

Median household Income declining: Obama Economic recovery a sham

However, all the blame cannot be laid on the colleges only; it takes two to tango, one to cry and three to have a party. For every con, there has to be someone willing to be conned, and students and parents need to sit down and look hard at what they are getting into. Most dream of getting jobs they will never get; think of education as an investment, and like any investment, the risk-to-reward ratio has to balance out.

If the risk to reward is not in your favour, you need to look for a better investment.  If nothing is done to address this issue one day, students might seek greener pastures by looking for cheaper alternatives outside the country. We already see this in the medical sector, and it spawned a new business called “medical tourism. A new term might come into being “education refugee”, sounds exciting.

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