<p>The charts are amazing.</p>
<p>No wonder so many people have problems paying for college.</p>
<p>And then there is law school…med school…</p>
<p>[CARPE</a> DIEM: The Higher Education Bubble: It’s About to Burst](<a href=“http://mjperry.blogspot.com/2010/06/higher-education-bubble-its-about-to.html]CARPE”>CARPE DIEM: The Higher Education Bubble: It's About to Burst)</p>
<p>It has been a lot of years since I took economics, but I do think there are differences. One would be that one reason college costs have gone up so much is because the cost of what we paying for has gone up. Dorms and campus facitilies, workout rooms, labs, dining facilities are lot nicer than when I went to college. Faculty and staff are paid more (not sure how it compares with inflation, would be interested if someone else knows). Campus health care clinic costs have surely gone up. Admissions departments have likely grown with the growth in applications, too. And I am sure college presidents make more than they did when we went to college, even counting for inflation :)</p>
<p>Housing values are more speculative, and more based on what people are willing to pay. Don’t think I am defending college cost for moment, though. I am just observing that what underlies that cost is different.</p>
<p>The fact that a lot of people are taking on debt they will never be able to pay off… that is a similarity. And the demographic dip coming toward colleges could be a factor for some schools.</p>
<p>I would love to think the bubble would burst, and prices would come down. Many a parent whose first born is just getting to college wishes this well! But I don’t have any real anticipation that it will, especially at the more highly ranked colleges.</p>
<p>Homes are bigger today and homes have more amenities too.</p>
<p>That does play a part in the increases in cost as you state.</p>
<p>The author references the possibility of a college tuition bubble. Just because the price of something goes up rapidly does not necessarily mean that a bubble will follow. Couldn’t it be that the number of college seekers has increased steady while the number of colleges has not increased at the same rate?</p>
<p>I think there is some of that. I think it is more…the availability of credit…making college look affordable at higher prices.</p>
<p>dstark, I think you are right that “easy credit” has allowed a lot of people to get in over their heads in college loans. I guess one difference is that if you default on that loan, you don’t lose your degree. And there is no real consequence for the college… why should they reduce their costs? After all, they didn’t make the loan</p>
<p>So here are some ways I can see the college cost “bubble” will burst:</p>
<ul>
<li>People who CAN pay lose their money in a major economic collapse and can’t any more. Hmm… after the past few years, I guess it would be a Depression, since this last recession didn’t do it!</li>
<li>People who CAN pay decide it isn’t worth it, and their kids cease to apply and/or accept offers from those colleges</li>
<li>People who CAN’T pay can no longer get loans (the easy credit dries up)</li>
<li>People who CAN’T pay decide they don’t want to borrow any more</li>
<li>People who CAN’T pay no longer can get government grants or grants are reduced if government spending is reduced</li>
</ul>
<p>Probably multiple of these would need to happen to really bring down prices. Me, I am not holding my breath. I intend to keep socking away money for tuition.</p>
<p>I wish they would drop tuition rates by at least half, that way more people would be able to go and afford it. I’m really glad i didn’t go to my states state school (i’m at one of its branches, they mearly are in the same system). I would have had to bay 10k more just to be able to do so.</p>
<p>“And there is no real consequence for the college… why should they reduce their costs? After all, they didn’t make the loan”</p>
<p>This looks like a problem to me too.</p>
<p>Colleges have no incentive to cut costs. </p>
<ol>
<li><p>They are nice to their worker constituents - professors and union line workers - because that is their general political leaning anyway and because they are non-profit. So costs run up faster than inflation.</p></li>
<li><p>Demand for their product is inelastic. They can raise the price faster than inflation and still attract enough demand. The only problem is the moral issue of driving poorer applicants out of their price range, but this is solved with scholarships and grants and raising the price further on full-price payers.</p></li>
</ol>
<p>I agree the problem is easy credit and the perception that the government will come in and wipe away the debt. Another problem is the perception that inexpensive CCs are only for poor, dumb, unmotivated students.</p>
<p>Call it a bubble call it whatever but the model is not sustainable. There is enough historical evidence to show they you cannot continue to raise the price of a product up and up and up. Consumers can ascribe characteristics to justify the increasing cost…up to a point where they can no longer afford or justify the price. While more and more and more kids are going to college the demand has been up but college-bound kids is a relative finite number. Frankly, though I wish it had not happened at this point in my life, I’m glad for the housing bubble. Decades ago a house was something you bought, paid off the mortgage and held onto. The idea of house as “bank” left me scratching my head. The model broke in my opinion when adults starting using their home as the bank for college.</p>
<p>This gets down to supply and demand. In the last 10 years we’ve had more college age kids than any other time, and number of colleges have not increased. Top colleges have not reached a level of tuition that they couldn’t fill their freshman class, therefore there is no reason for them to lower their tuition. On top of that, we have become more global, when Americans couldn’t afford the tuition there is always the internationals. </p>
<p>People may think college tuition is too high and it’s not worth it, but just read the thread about Hight Point U, it is basically a glorified post high school babysitting place for parents who do not know what to do with their kids for 4 years. It is like a Disneyland, with beautiful facility for kids to hang out for 4 years, and there are people who are perfectly willing to pay for it. </p>
<p>No, I do not believe it is going to burst because there are enough people who are still willing to pay the sticker price.</p>
<p>oldfort, I understand what you are saying - which may be true for the top 100 or so schools. There are thousands of colleges and trade schools where students are paying a ridiculous price to attend only because of easy credit. I dont see many international students coming to America paying 60K or more a year to attend a no-name-school in Spokane, WA.</p>
<p>I graduated in 1977, the year before this graph starts. I attended a LAC on financial aid, merit aid and loans. (Somehow back then I got merit aid that did not reduce my FA). I was a first gen student, although both parents eventually went back to school and got their degrees. I went on to med school on loans. I married a husband with student loans. We did not start a family until we were married 10 years and I was 35. We first paid of student loans, paid for life insurance, then began to save for retirement and college. Being self employed meant that every dime I put away for retirement was my dime. Any money matched by my PA/corp was still my money.</p>
<p>When oldest D was a high school junior, I had a rude awakening. My husband was now disabled and we had been a single income family for some time. But we lived comfortably and I had still been saving away. I was driving a VW bug and we lived below our means. But when I found out how much it would take to send my D to my alma mater ($50,000 a year with books and travel) I about fainted. Tuition had gone up by more than 10-fold. And I was in an industry where reimbursements were going down, as were incomes. </p>
<p>Two D’s now at state U’s. Hoping that their ability to graduate without loans for undergrad and grad will result in them having more choices for their children. </p>
<p>This is NOT SUSTAINABLE and yes, something has to give.</p>
<p>Sunnyflorida…I read your post, and I see the necessity for some to take out loans so they can accomplish their goals. </p>
<p>People need loans to pay for schooling. Because people can take out loans, tuition goes higher. Because tuition goes higher, more loans are taken out…because more loans can be taken…tuition goes even higher… We are going up an escalator.</p>
<p>Sooner or later…the escalator is going to go to a place people just can’t afford.</p>
<p>I agree. This isn’t sustainable.</p>
<p>When the credit is cut off, it’s over.</p>
<p>I have to pay for my schooling, because my mom can’t afford to do so. I’ll even go as far to say that i qualify as an independent student. She does help elsewhere though, snacks for dorm are just one area. I am greatful for all the help i can get.</p>
<p>It does sicken me though when parents pay for everything, then the student doesn’t go to class just because ‘they don’t want to’. Thats just messed up.</p>
<p>“This gets down to supply and demand.”
But:
“… there are enough people who are still willing to pay the sticker price.”</p>
<p>I agree with oldfort … no bubble crash. What will happen … and is already happening at some tier 3 privates … is that admission standards are changing so more full-pay students “qualify.” I also agree that middle-class high performers will be squeezed out … no loans plus no FA equals public university.</p>
<p>NewHope33, may be you and oldfort are correct, but I dont think there are that many upper middle class families that can afford to pay full freight without loans. If students and parents were unable to borrow money, that would force colleges to seek more non-traditional students and cut cost (reduce the overabundance of departmental staff, use more adjunct faculty, make professors teach more than 1 class a semester, and …)</p>
<p>There is a very significant difference between the housing bubble and the college tuition “bubble”. When someone buys a house they can’t afford and later defaults on the mortgage, they lose the house, their credit is messed up and they may end up filing bankruptcy. Then the slate is cleared, through foreclosure, short sale or bankruptcy - but they can learn from their mistakes and start over.</p>
<p>With huge college loans there is no starting over - there is no foreclosure, short sale or bankruptcy coming to the financial rescue. Loans for education will haunt you for life - whether that life is happy or not; excessive student loans are the modern version of indentured servitude.</p>
<p>Because of this difference I don’t see this as a bubble waiting to burst - it is a bubble that continues to expand, filling all the available space in the lives of unwary individuals who then find themselves unable to move, unable to breath, unable to realize the benefit of their way too expensive education.</p>
<p>Tututaxi, I respectfully disagree. I consider myself upper middle class (and I am currently divorced, self employed, and receive the bare minimum in child support for my one child under age 18). We managed to save ~$100,000 per child for college for each child by starting the day they were born and socking away several thousand dollars a year for each. To be fair, we did make some smart investments, although we got hit by the recession like everyone else. D1 attends one of those pricey private LACs, and got about 1/3 paid for in merit aid. I have covered the other 2/3 from her college savings and out of pocket, while still paying for private school for D2. She also made a smart choice to take an inexpensive study abroad semester. D1 does work for spending money and books. She should finish college with no loans. Assuming I stay healthy and can work (no reason to expect otherwise, but you never know…), I would expect to be able to pay for a private LAC even without merit aid for D2 (no more private school tuition then, plus D1 will be completely on her own financially by that time).</p>
<p>We are not the most common model, but there are other people in the upper middle class like me who consider their kids education their top financial priority. We lived in less housing than we could afford until I was 40, bought lightly used cars that weren’t expensive even when new, we ate out only occasionally & cooked mostly from scratch, and our vacations weren’t extravagent (I am going to Europe this summer for the first time in 30 years, and we spend a lot of time with our families while on vacation). I had a period of unemployment early in the recession, but had savings to draw on. I used that time off to pick up some new skills and certifications in my field which have paid off since then.</p>
<p>So… all I’m really saying is don’t assume that prices will drop because “no one” can pay them.</p>