Evidence of the Tuition Bubble
Commentators
have increasingly been wondering if the end might finally be in sight for the
many years' worth of steady and often not-so-slow increases in college
tuitions. How much longer, the thinking goes, will American students and
parents be able to afford -- and/or put up with -- rapidly rising prices and
expenditures on higher education?
Fifty-five
percent of the 1,000-plus respondents, for instance, said they believed a
college education is necessary to "be successful in today's world,"
up from 50 percent in 2007 and just 31 percent in 2000. That's the good news --
higher education is increasingly essential.
Here are 8
reasons to believe we’re in the middle of a college tuition bubble (that’s
about to burst):
1) Tuition
is, and has been, increasing at double triple the rate of inflation
On
average, college tuition increases at around 8 percent per year, which means
the cost of college doubles every nine years.
Because colleges know that students will simply borrow more money to
cover tuition increases, colleges have been relying on steady tuition hikes to
solve all their money problems. If this
continues a college degree will soon cost as much as a house.
Fot 1.
https://www.theatlas.com/charts/Bk57rH6Hg
2)
Students are borrowing more than ever to pay for college
The number
of college students graduating with over $25,000 in student loan debt has
tripled in the past decade alone. Today,
66% of students borrow to pay for college, taking on an average of $23,165 in
debt. Twelve years ago, 58% borrowed to
pay for college, taking on only $13,172 in debt.
Fot 2.
http://www.thecollegefix.com/wp-content/uploads/2016/01/Graph1.jpg
3) For
profit colleges are paying homeless people to take out federal loans to enroll
Because
student loans are so easy to acquire, enterprising colleges are paying homeless
people to enroll. The math makes sense
when you think about it: if paying someone a $2,000 “stipend” gets the college
$20,000/year in tuition courtesy of the federal government, that’s money well
spent. Unfortunately, many people who
accept such “stipend” offers never graduate, become overwhelmed with student
debt, and destroy their already bad financial records.
4)
Colleges are on a non-teaching staff hiring spree that far outpaces enrollment
Why hire a
full-time professor when you can hire an “environmental sustainability
officer”? According to the New York
Times article, over the past two decades’ colleges have doubled their
non-teaching staff, while enrollment has only increased by 40%.
5) For
profit reliance on federal loans has reached an all-time high
According
to Bloomberg, publicly traded higher education companies derive three-fourths
of their revenue from federal funds, up from just 48 percent in 2001 and approaching
the 90 percent limit set by federal law.
The fact that colleges are almost completely relying on borrowed money
to finance tuition, up to the legal limit, means we’ve almost hit the breaking
point.
6) Schools
are spending on luxurious amenities to lure in more students
Flush with
student loan money and wanting to attract even more, colleges are increasingly
spending on luxury dorms, gyms, swimming pools and other amenities.
Freakonomics
author Stephen Dubner noted that when he went back to his college, a chancellor
told him that “[the gym] was a top priority because parents and prospective
students increasingly think of themselves as customers, shopping for the most
amenities for the best price, and the colleges that didn’t come to grips with
this would soon see their customers going elsewhere.”
7) College
president salaries are sky high, even in a historical economic downturn
USA Today
reported that 23 Private College Presidents Made More Than $1 Million in 2008,
while 110 made more than $500,000. In
case you were wondering, this is not the norm — as recently as 2002, there were
no million-dollar presidents.
Often the
discussion about high tuition leads to a flogging of for profit colleges. And while for profit colleges are often the
worst about shamelessly fattening themselves at the trough of student loans,
it’s not a for profit vs. nonprofit issue. In fact, for profit colleges account
for less than half of student loan defaults.
Fot 3. Na zdjeciu.
I know
that the tuition problem does not apply to Polish reality so far but eventually
it will. In 10 or 20 years. As a Student of private university
What do you think about another
market bubble but this time, we the students are exploited?
Do you think the same problem will
arise in Poland in a couple of years?
Resources:
Comments
I think that it's not fair if there's a huge margin between the price and the amount of expenses, but we can't do anything about it - it's a free market and we can only hope that the tuition bubble will pop.
To be honest I don’t see why some students take loans just to study in collage and major in some stupid subject, which won’t bring many employment availabilities.
I think in Poland we won' have this kind of situation because of two reasons - we are don't have any special loan offer for students and I have doubts if it would appear anytime, second things is that number of young people is decreasing now. Both private and public universities are fighting for students. High education in Poland is free and I think that's why as long as they will be, private ones won't raise the prices.