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  1. #1
    Join Date
    Feb 2008
    Location
    Lewisville, NC

    Is higher education a bubble?

    Perhaps this will devolve into a PPB debate and get locked up, but I find this to be an interesting, and relevant topic.

    http://www.washingtonexaminer.com/op...-95639354.html

    From the linked piece (author Glenn Reynolds)

    The product grows more and more elaborate, and more and more expensive, but the expense is offset by cheap credit provided by sellers eager to encourage buyers to buy.

    Buyers see that everyone else is taking on mounds of debt, and so are more comfortable when they do so themselves; besides, for a generation, the value of what they're buying has gone up steadily. What could go wrong? Everything continues smoothly until, at some point, it doesn't.

    Yes, this sounds like the housing bubble, but I'm afraid it's also sounding a lot like a still-inflating higher education bubble.

  2. #2
    Join Date
    Feb 2007
    Location
    Austin, TX
    http://chronicle.com/article/A-Self-...er-Runs/65793/

    --Dunno if there's a bubble, but I liked this article on a MIT grad doing 10-min lessons on you tube for his relatives which have turned out to be insanely popular. Towards the end, somebody is quoted as being interested in the project because of this bubble possibility.

    Will say that with a young kid, the thought of saving for her college kinda makes me ill.

  3. #3
    Join Date
    May 2007
    Location
    Tennessee
    Nothing comes up for the link. Please check. Or could it be my adblock plus?

  4. #4
    I'm not sure if it's a bubble, but I'm so glad that I finally understand the phases of meiosis. That's been bugging me since 10th grade biology.

  5. #5
    Join Date
    Feb 2007
    Location
    Fairfax County, Virginia
    When the Campaign for Duke entered its "public phase" years ago, I was invited by President Keohane to attend a full-day kickoff meeting for volunteer leaders. The keynote speaker (I have forgotten his name, but he was from Standford) made a point that remains with me. He indicated that globally only a handful (perhaps 100) of institutions -- including governments -- that existed in 1000 AD remained viable in 2000 AD . . . and virtually all of these are either religions or universities.

    In that context, I suggest that adjustments, bubbles, technology infusions, and so forth are possible --probably likely -- but the enduring value of superior advanced education is demonstrated and established, as are the universities that provide it.

  6. #6
    Join Date
    Feb 2007
    Location
    Austin, TX
    Quote Originally Posted by cspan37421 View Post
    Nothing comes up for the link. Please check. Or could it be my adblock plus?
    Hrm...dunno. Can you get there from the chronicle.com homepage? Currently, it's part of the scrolling featured stories and in the right hand column, the 2nd "most viewed" article.

  7. #7
    Join Date
    Jan 2010
    Location
    Washington, DC
    The article touched on this in the first paragraph, but the real culprit here is when the government started guaranteeing more student debt. The idea was that more students would be able to access money, but in reality it also raised tuitions, simply because academic institutions could charge more.

    I don't think that anyone would discount the enduring value of higher education, but there's no good reason that college is 432% more expensive than it was in 1982. I think part of it might have to do with the fact that on my way into the marketplace freshman year I was greeted by an inspirational quote presented on a plasma TV.

    Don't get me started on Bell Tower

  8. #8
    This is a very interesting topic, but I'm not sure I would call it a bubble.

    Degrees are essentially a form of social capital, unlike real estate or commodities, and so they do not function according to the same economic laws.

    What IS happening, is that the states and federal government have used the expansion of credit in the last couple of decades to transfer some of the cost of education to the students. State budgets have been holding the line or cutting university budgets, because students can pick up more debt than they used to be able to. Universities are more reliant than ever on tuition. This is one of the reasons education costs have spiked.

    I think that student debt is a huge problem though, particularly when grads may spend a year or two finding a "real" job and not the part-time bill-payers we take while in college.

    I think debt is one of the big disadvantages american university students face when competing with European students. I met students from Europe in Argentina who not only DONT accrue debt studying, but they get stipends/paid to go school. This affords them many opportunities right after school to take jobs that are great experiences but may not pay well....positioning them to do better later on in life.

  9. #9
    Quote Originally Posted by CrazieDUMB View Post
    The article touched on this in the first paragraph, but the real culprit here is when the government started guaranteeing more student debt. The idea was that more students would be able to access money, but in reality it also raised tuitions, simply because academic institutions could charge more.

    I don't think that anyone would discount the enduring value of higher education, but there's no good reason that college is 432% more expensive than it was in 1982. I think part of it might have to do with the fact that on my way into the marketplace freshman year I was greeted by an inspirational quote presented on a plasma TV.

    Don't get me started on Bell Tower
    Yes tuition inflation is very concerning...especially when you learn that colleges are increasingly turning to adjuncts and grad students to teach classes for next to nothing. Students are getting less quality and paying more for it.

  10. #10
    Join Date
    Aug 2007
    Location
    Indiana
    Quote Originally Posted by theAlaskanBear View Post
    Yes tuition inflation is very concerning...especially when you learn that colleges are increasingly turning to adjuncts and grad students to teach classes for next to nothing. Students are getting less quality and paying more for it.
    Moreover, because of the emphasis on research (and securing research grants), many professors are given tenure even though they are mediocre or worse in the classroom. Conversely, excellent teachers and public goods providers who do not meet arbitrary standards of research production are fired.

  11. #11
    Join Date
    Feb 2008
    Location
    Lewisville, NC

    Interesting chart on tuition growth

    Came across a chart that compares college tuition growth over the last 23 years to U.S. home prices and the CPI for all items.

    Can this continue?

  12. #12
    Join Date
    May 2007
    Location
    Tennessee
    Quote Originally Posted by roywhite View Post
    Came across a chart that compares college tuition growth over the last 23 years to U.S. home prices and the CPI for all items.

    Can this continue?
    The thing about such graphs is that much is hidden in the details. What's more relevant is, what are you getting for that tuition, and do you need all of it? My guess is that there's been an explosion of administrative overhead that has shown no signs of abating. It seems like there's a dean of everything these days, along with assistant deans, etc., in positions that didn't exist 23 years ago ... and 23 years ago (coincidentally when I was at Duke) there were probably tons more admin than a generation before that.

    People costs are probably the big thing. But even little stuff: our dorms had torn-vinyl covered furniture and little else - maybe a crappy 25" TV. Nowadays, you've got flatscreen TVs everywhere, nice furniture, WiFi, pool tables, whiteboards, pianos, art on the walls, you name it.

    Funding for clubs. Far better workout facilities. Perhaps there's better advising these days. And on and on. You have to compare apples to apples .... I would love to see a breakdown of tuition costs by direct faculty, housing, overhead, etc., through the years. The only trick is that the % may not change much if they're all growing rapidly (such as much better housing etc). However, I still suspect overhead has grown very substantially. I could be wrong, but from time to time I see stuff for which I question the necessity.

    And let's not forget that we have to take into account what we mean by tuition: sticker price vs. actual price paid. Some pay full sticker (high income AND those who were merely prudent in saving hard and sacrificing along the way) and others (some who are lower income, and I suspect some others who were merely imprudent) get to enjoy a discount off the sticker price through grants, work-study, and sometimes loans.

    Bottom line: tuition may have skyrocketed, but what students are "getting" for it (whether they avail themselves of it, or need to, or not) has probably also skyrocketed. I'd also be curious to see if schools vary much by their overhead vs. direct cost. Are some "leaner" administratively? And does it make a difference in the educational experience one way or another? Does it trickle-down to tuition prices?

    Aside - Housing: well, didn't the "McMansion" thing occur in the last generation? Housing prices rising means little without the context of, at the very least, square footage.

  13. #13
    Join Date
    Feb 2007
    Location
    Southern Pines, NC
    Quote Originally Posted by roywhite View Post
    Came across a chart that compares college tuition growth over the last 23 years to U.S. home prices and the CPI for all items.

    Can this continue?
    I pray that it doesn't. From my experience paying tuition, I started out paying nada, zilch, nothing. The GI Bill would give me a free ride. Even if I paid tuition, it was only $500, the limit that the Veteran's Administration would cover. They also paid a stipend of $75 per month. Based on covered time served in the military. I had 51/3 years of eligibility. Other costs, such as books and supplies were covered, but reduced eligibility a token amount. This was under the WWII GI Bill in the fall of 1949.

    To Duke's credit, they kept the tuition at that level until there were no more WWII vets applying for admission, some time around 1955. I had been reactivated in the Marine Corps in 1952, and by the time I could get back to get my degree in the late fifties, tuition had increased to $1,500. That's 200% in about 3 years. Today's rate, $55,000 about, has kicked up about another 3,500% in 55 years, counting with my fingers. Am I right? How does that compare with inflation over that period of time? I don't know. That's an important point. I'll try the car I purchased in 1954, a new '55 Bel Air that cost $2,350. An equivalent car today might cost about 28,000. That's up about 1,100%. That doesn't make the $55K look good, does it? The comparison is probably not fair when one considers the value added to a Duke education over the years versus the value added to the Chevrolet. So there must be another way of looking at it, as cspan37421 has discussed earlier this evening.

    Then there is the problem with those massive endowments that so many universities have. Could those endowments be a source for funding for more financial aid? I don't know about the policy and economic issues that would be involved, but I'm just wondering.

    An aside, before I go -- I've noticed some changes in this composition screen. I approve, and have used one of the new wrinkles. It's late, and I feel as if I am rambling, so goodnight folks.

  14. #14
    Join Date
    Feb 2007
    Location
    Durham, within a couple of miles of Cameron
    I was told years ago by a friend and investment 'guru' that a year's college tuition over the past 50 years was equivalent to a mid-priced Buick, and that seemed to be true -for private schools- during the 80's or so. Now that my kids are nearly through college, it seems that there has been a bit of a jump in that analogy. Everytime I despair when writing a new check to the (private) institutions my kids chose -and one found one more expensive than Duke!- I realize that there really isn't a better investment I could make for me or my kids. I keep telling myself that. Keep your commentary flowing, Jarhead!
    JStuart

    Quote Originally Posted by Jarhead View Post
    I pray that it doesn't. From my experience paying tuition, I started out paying nada, zilch, nothing. The GI Bill would give me a free ride. Even if I paid tuition, it was only $500, the limit that the Veteran's Administration would cover. They also paid a stipend of $75 per month. Based on covered time served in the military. I had 51/3 years of eligibility. Other costs, such as books and supplies were covered, but reduced eligibility a token amount. This was under the WWII GI Bill in the fall of 1949.

    To Duke's credit, they kept the tuition at that level until there were no more WWII vets applying for admission, some time around 1955. I had been reactivated in the Marine Corps in 1952, and by the time I could get back to get my degree in the late fifties, tuition had increased to $1,500. That's 200% in about 3 years. Today's rate, $55,000 about, has kicked up about another 3,500% in 55 years, counting with my fingers. Am I right? How does that compare with inflation over that period of time? I don't know. That's an important point. I'll try the car I purchased in 1954, a new '55 Bel Air that cost $2,350. An equivalent car today might cost about 28,000. That's up about 1,100%. That doesn't make the $55K look good, does it? The comparison is probably not fair when one considers the value added to a Duke education over the years versus the value added to the Chevrolet. So there must be another way of looking at it, as cspan37421 has discussed earlier this evening.

    Then there is the problem with those massive endowments that so many universities have. Could those endowments be a source for funding for more financial aid? I don't know about the policy and economic issues that would be involved, but I'm just wondering.

    An aside, before I go -- I've noticed some changes in this composition screen. I approve, and have used one of the new wrinkles. It's late, and I feel as if I am rambling, so goodnight folks.

  15. #15

    MSRP

    The problem with the graph it shows the "manufacturers suggested retail price", when the reality is most people do not pay "sticker price" anymore. Years ago there was no title IX so no female athletic scholarships and there were no merit scholarships. So I agree there is a huge problem just that the graph overstates it a bit.

    One kind of interesting thing is I have two kids who took a year off and applied directly to Beijing Language and Cultural Institute and the tuition and living expenses were very modest I am thinking like 8K total. While there they met students doing a year abroad from places like Middlebury, these kids were taking the exact same courses but because they did it through their school they were being charged like 48K so yeah higher education can seem like a rip off. But it is a game and can be played by the savy student if parents and students are really motivated.

  16. #16
    Join Date
    Feb 2007
    Location
    The City of Brotherly Love
    Quote Originally Posted by roywhite View Post
    Came across a chart that compares college tuition growth over the last 23 years to U.S. home prices and the CPI for all items.

    Can this continue?
    If I could have, I would shorted college tuition years ago and lost a lot of money as a result which is another way of saying that I thought the trend would abate years ago.

    My first year of tuition at Duke was $1,100 per semester. It had doubled by senior year and has grown, as it has at most selective private colleges and universities, at roughly twice the rate of inflation ever since. I'm convinced the education isn't proportionally better. For example, it cost 15 times more for my son to take Dr. Bonk than me, and while technology obviously advanced extensively, I'm pretty sure Bonk was as excellent in my era and wasn't paid 15 times more in my son's.

    The facilities are enormously better but that's what the capital campaigns were for. Presumably the administrations have become blotted and many more students are on financial aid. A comprehensive analysis of the money trail would be interesting.

  17. #17
    Quote Originally Posted by 77devil View Post
    If I could have, I would shorted college tuition years ago and lost a lot of money as a result which is another way of saying that I thought the trend would abate years ago.

    My first year of tuition at Duke was $1,100 per semester. It had doubled by senior year and has grown, as it has at most selective private colleges and universities, at roughly twice the rate of inflation ever since. I'm convinced the education isn't proportionally better. For example, it cost 15 times more for my son to take Dr. Bonk than me, and while technology obviously advanced extensively, I'm pretty sure Bonk was as excellent in my era and wasn't paid 15 times more in my son's.

    The facilities are enormously better but that's what the capital campaigns were for. Presumably the administrations have become blotted and many more students are on financial aid. A comprehensive analysis of the money trail would be interesting.
    People have written books on why the cost of attending private colleges (especially "elite" private colleges) have increased so dramatically over the last 30 years. However, I think it really boils down to one simple premise - elite colleges have raised their costs (tuition, room and board and incidentals) so rapidly in the last 30 years simply because they could. Just look at how applications to these colleges - the Ivy's, Stanford, Duke, little Ivys, etc. - have increased dramatically over the last 30 years in spite of the fact that the cost has gone up each year (at roughly twice the general rate of inflation). If you were running a business and could raise your prices every single year and still grow your sales and number of customers each year, why would you NOT do it? I would bet my life savings that, if applications had dropped significantly at these colleges (because of the higher cost), then the colleges would NOT have increased the cost to attend as aggressively as they have. Admittedly, many students attending these schools, because of financial aid and other forms of scholarship, really do not pay the "advertised cost" of attending these schools (as others have noted in this thread) and so the colleges are really segmenting who pays how much to attend, with the affluent families subsidizing less affluent families. Also, there has a huge expansion in the academic budget, athletic budget, non-academic budget, etc. at most of these schools. I'm sure the Duke of today is quite different than the Duke I attended in the 70's (just as cars of today are different from cars of the 70's but also a lot more expensive), although the basic education provided may not be much different. I would be interested to see what percentage of Duke's annual budget is tied to personnel costs and how many of the people employed by Duke are actually directly involved in teaching undergrad and graduate students. My guess is that a relatively small percentage of the people working at Duke are actually involved in the ultimate purpose of any college or university - teaching students.

  18. #18
    Quote Originally Posted by cspan37421 View Post
    The thing about such graphs is that much is hidden in the details. What's more relevant is, what are you getting for that tuition, and do you need all of it? My guess is that there's been an explosion of administrative overhead that has shown no signs of abating. It seems like there's a dean of everything these days, along with assistant deans, etc., in positions that didn't exist 23 years ago ... and 23 years ago (coincidentally when I was at Duke) there were probably tons more admin than a generation before that.

    People costs are probably the big thing. But even little stuff: our dorms had torn-vinyl covered furniture and little else - maybe a crappy 25" TV. Nowadays, you've got flatscreen TVs everywhere, nice furniture, WiFi, pool tables, whiteboards, pianos, art on the walls, you name it.

    Funding for clubs. Far better workout facilities. Perhaps there's better advising these days. And on and on. You have to compare apples to apples .... I would love to see a breakdown of tuition costs by direct faculty, housing, overhead, etc., through the years. The only trick is that the % may not change much if they're all growing rapidly (such as much better housing etc). However, I still suspect overhead has grown very substantially. I could be wrong, but from time to time I see stuff for which I question the necessity.

    And let's not forget that we have to take into account what we mean by tuition: sticker price vs. actual price paid. Some pay full sticker (high income AND those who were merely prudent in saving hard and sacrificing along the way) and others (some who are lower income, and I suspect some others who were merely imprudent) get to enjoy a discount off the sticker price through grants, work-study, and sometimes loans.

    Bottom line: tuition may have skyrocketed, but what students are "getting" for it (whether they avail themselves of it, or need to, or not) has probably also skyrocketed. I'd also be curious to see if schools vary much by their overhead vs. direct cost. Are some "leaner" administratively? And does it make a difference in the educational experience one way or another? Does it trickle-down to tuition prices?

    Aside - Housing: well, didn't the "McMansion" thing occur in the last generation? Housing prices rising means little without the context of, at the very least, square footage.
    When I was at Duke (98-02), the waste was absolutely astounding. Couches and 50 inch TVs being thrown out every year. Furniture, pool tables, ping pong tables, and foosball tables being trashed...

    And who needs fine art on the walls and pianos? These are dorms for 19 and 20 year olds. Give them a 50 inch LCD, and Xbox, a DVD player, and a copy of "Old School", and they'll be happy.

    As for expenditures on clubs and all of the administrative positions, I'm sure you're right. All of this stuff adds up, and I find most of it wholly unnecessary. Get the best teachers, well-equipped classrooms, well-equipped athletic facilities / gyms, and pay top dollar for fund raising personnel (ie. alumni affairs). There's a lot of room to trim fat. Corporate America has been going through it, and it's only a matter of time before it comes to higher education.

  19. #19

    the primary purpose of a university is research

    I don't completely agree with the following, but I thought I would provide the opposite argument from a science perspective (Note: a duke undergrad, but experience since has been at other major research universities). We are NOT at the University to teach undergrads (for the most part). We are at the University (Med Center) mainly to 1) perform research 2) increase knowledge/ find cures 3) train graduate students, post docs, fellows, etc. My current boss barely even sees an undergrad except the two that work part time in our lab.
    To provide an outstanding experience for grad students and post docs (part of the university mission) you must provide world class researchers who may or may not be good classroom teachers. It is a different dynamic and a different skill set. To illustrate I will describe my graduate school mentor. He was a brilliant man and an excellent mentor to graduate students and post docs. Almost every graduate student wanted him on their thesis committee. He was great for other faculty and advanced students. However, the poor man could not teach lectures to beginning grad students or particularly undergrads. If you look on "Rate my Professor" he gets terrible marks from undergrads although the comments are generally nice..."enthusiastic", "cares about the students"..., but "too smart to teach". The comments are true. He really cares about teaching, his mind just can not explain things in a logical manner unless you are already a PhD in the topic. This is not because he doesn't prepare...he spends more time preparing for lectures than anyone I know...they just are not comprehensible to beginning students.
    I bring up my old mentor because he provides excellent training to future scientists, pushes boundaries of his discipline, and is an excellent intellectual resource for other faculty. All things that really have nothing to do with undergraduates, but are vital to the University mission. Science and Medicine is probably somewhat an outlier in our mission compared to more of the humanities, but I just wanted to point out that there is more to a University than the Undergraduate Students.

  20. #20
    Quote Originally Posted by duke79 View Post
    If you were running a business and could raise your prices every single year and still grow your sales and number of customers each year, why would you NOT do it?
    I think the key thing for higher education (at least at the elite schools) is that many people do NOT pay full sticker price. Education is not like other goods were the price is essentially fixed. The average financial aid package at Duke is upwards of $34,000, bringing the cost down to a more reasonable $16k or so. As financial aid policies have improved in recent years, the customer base of the lower and lower-middle class has grown considerably for elite private schools, especially when it costs less to attend Harvard than it does to go to State U. The upper class doesn't care as much since they can afford it anyways. It's the upper-middle class that gets squeezed, though. But the lower and upper ends of the socioeconomic ladder make up for that squeeze in numbers. I don't see prices coming down anytime soon. A question - and this isn't meant to go into public policy territory as to whether it makes sense or not - do those they pay full freight essentially subsidize those on financial aid? In other words, if financial aid didn't exist, would prices be lower? Or perhaps not based on how it works (i.e. Duke still receives $50k from each student it's just from another source; if financial aid didn't exist, there may not be those sources/endowed scholarship funds in the first place). This question coming from somebody who is eternally grateful for Duke's financial aid.

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