I’ve heard quite a few speculations about higher education as the next economic bubble, and it makes quite a bit of sense. The key element in a bubble is the rate of price growth far exceeding the rate of inflation, which certainly applies, so I’ve been generally receptive to the idea. But unlike houses, dot com stock, or tulip bulbs, you can’t resell a college degree. While many people do think of a degree as an investment, it doesn’t have a value that can fluctuate. So what would a bubble bursting look like in higher education?
I’m not sure. I haven’t seen a lot of data about what might happen, but I’d like to put together a few of my thoughts on it.
First, when we think of the bubble bursts we’ve see before, it’s always about a massive shock as people loose money in an asset value crash. But if the value of a college degree were to crash, what would that mean, and how would we even recognize it? I’m not sure that a higher education crash would happen all at once, or that it would be recognizable if it did.
Beyond that, is such a crash possible? As long as there’s a massive shortage of jobs and many jobs require a college degree, does it matter how much it costs? Crippling debt plus a job and a decent salary are generally a more livable situation than long term unemployment. And even if the job market were to improve, wouldn’t competition for good jobs keep the demand for college degrees relatively high?
I’m tending to think that a crash in higher education is going to come primarily as a change in demand for the type of institution students want to attend. More focus on affordable tuition from students who have largely ignored it as long as they could get loans, or more people looking for small colleges, or movement away from universities towards community colleges perhaps. Or maybe a push-back against jobs unnecessarily demanding college degrees? It seems to me the most likely way for a bubble in college education to burst is a long slow period of deflation. Even then, I’m not sure it will deflate that much, as for most people college is necessary for a good career.
So while I think the idea of college as a bubble might be correct in some interesting technical ways, I also think that the implication that we’re heading for some sort of sudden disaster as higher education crashes is probably incorrect.