Gluttonous colleges fueling higher education bubble

Gluttonous colleges fueling higher education bubble

One of the key ingredients for any crisis is greed; there are several more but without greed, the rest don’t matter. Colleges and universities are the greedy players; the 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. The process to get 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 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 in place, 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, then universities should be forced to lower rates as opposed to raising them. The chart below illustrates how tuition costs are rising versus the median American income.

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

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 student and parents need to sit down and take a hard look at what they are getting into. Most are dreaming of getting jobs that 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, then 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 its spawned a new business called “medical tourism. A new term might come into being “education refugee” sounds like an interesting term.

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