The education cost bubble

[30ashopper]

For the past several decades, colleges and universities have built endowments, played moneyball-style faculty hiring games, and constructed grand new buildings, while jacking up tuitions to pay for things (and, in the case of state schools, to make up for gradually diminishing public support).

That has been made possible by an ocean of money borrowed by students -- often with the encouragement and assistance of the universities. Business plans that are based on this continuing are likely to fare poorly.

Just as I advised students not to go into debt, my advice to universities is similar: Don?t go on spending binges now that you expect to pay for with tuition revenues later. Those may not be there as expected.

Post-bubble, students are likely to be far more concerned about getting actual value for their educational dollars. Faced with straitened circumstances, colleges and universities will have to look at cutting costs.
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http://www.washingtonexaminer.com/opinion/columns/Sunday_Reflections/Glenn-Harlan-Reynolds-Further-thoughts-on-the-college-tuition-bubble-100216064.html#ixzz0w2tYwRz2

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Found this interesting. Easy credit has played a roll in a lot of economic sectors over the last few decades - housing, consumer purchases, and of course, education. With consumers tapped out and their credit restricted, educational institutions may take a major financial hit. Fewer students and tighter state budgets means fewer will be going to school. Tenured teachers that don't produce will find themselves out of a job. Class sizes will increase, outlier subjects and programs will get cancelled, and so on.

 

[hkem1]

Many people with college educations are already jumping the tracks to become skilled manual laborers: plumbers, electricians, and the like.

Online education, and programs focused more on things that can help students earn more than on what faculty want to teach, will help to deliver more value for the dollar.

But a college degree is an expensive way to get an entry-level credential. New approaches to credentialing, approaches that inform employers more reliably, while costing less than a college degree, are likely to become increasingly appealing over the coming decade.

Interesting to see that this guy is so in love with these for-profit college "scams?" that have been taking such hard beatings in the media lately.

 

[beachmouse]

Time for my usual funding reality check link when this discussion comes up. A good chunk of the increase come from decreased direct funding per student from the government. Call it a user fee, and it should make fiscal conservatives happy.

Add funding, subtract politics - St. Petersburg Times

Anyone who has followed Florida higher education issues knows that our public colleges and universities have suffered both financially and organizationally. Today, Florida's average annual funding per student in the state university system, adjusted for inflation, is nearly $5,000 less than it was in 1990.

This precipitous decline has produced severe consequences. In 2007, the University of Florida had one of the highest student-faculty ratios of all the state research universities in the country: 21.7 to 1.

 

[scooterbug44]

I think the college tuition increases (like the real estate market) were long overdue for a reality check.

It used to be you could work construction during the summer and get some local scholarship money and easily pay for a year at a good school - now it is WAY too common to run up a $200,000+ tab to get a 4 year degree.

As far as I can tell, way too much of it is going to amenities like tricked out dorm rooms/suites and classrooms full of technology that is either not working or the prof doesn't know how to work. :roll:

 

[futurebeachbum]

When I was a Freshman at Ga Tech in 1974 in-state tuition and fees was $195/quarter and a dorm was $116.

Today they are on semesters (something I will never, ever agree with) and the costs are $4358 for tuition and fees and the same dorm room is $2,555.

So in 1974 a full year (3 quarters) of tuition, fees and room was $933.
Now a full year is (2 semesters) of tuition, fees and room is $13826.

That's an increase of 1482% in 36 years which figures out to about 7.78%/year inflation.

If you use a CPI calculator on $933 in 1974 you find that in 2009 it is worth $4013.78 in 2009 (latest full year.)

That says to me that college actually costs a bit more than 3x what it did when I was a freshman.

The sad thing is that in the same period the quality of US college education diminished from First in the world to Twelfth.

 

[ktschris]

When I was a Freshman at Ga Tech in 1974 in-state tuition and fees was $195/quarter and a dorm was $116.

Today they are on semesters (something I will never, ever agree with) and the costs are $4358 for tuition and fees and the same dorm room is $2,555.

So in 1974 a full year (3 quarters) of tuition, fees and room was $933.
Now a full year is (2 semesters) of tuition, fees and room is $13826.

That's an increase of 1482% in 36 years which figures out to about 7.78%/year inflation.

If you use a CPI calculator on $933 in 1974 you find that in 2009 it is worth $4013.78 in 2009 (latest full year.)

That says to me that college actually costs a bit more than 3x what it did when I was a freshman.

The sad thing is that in the same period the quality of US college education diminished from First in the world to Twelfth.

Wow...that's a lot of math.

I would bet that in 1974 the majority of students completed their degrees in 4 years, where as now the average time frame seems to be 4 1/2 to 5 years, adding even more cost.

 

[ktschris]

I think the college tuition increases (like the real estate market) were long overdue for a reality check.

It used to be you could work construction during the summer and get some local scholarship money and easily pay for a year at a good school - now it is WAY too common to run up a $200,000+ tab to get a 4 year degree.

As far as I can tell, way too much of it is going to amenities like tricked out dorm rooms/suites and classrooms full of technology that is either not working or the prof doesn't know how to work. :roll:

I agree. My first college apartment was a dump and should have been condemned.

Last weekend I helped my nephew move into an apartment at the University of MO that is bigger and nicer than the first house I bought!

 

[30ashopper]

I agree. My first college apartment was a dump and should have been condemned.

Last weekend I helped my nephew move into an apartment at the University of MO that is bigger and nicer than the first house I bought!

The credit bubble gave baby boomer parents the ability to spoil their kids rotten. That is going to change going forward.