Are We in a College Bubble?
College is supposed to be our ticket to a good job.
But for the first time ever, among the unemployed, people with some college outnumber those with just high school diplomas.
This shift only fuels the argument hissed over $40,000 tuition checks: College isn’t worth it.
Common wisdom has always been that college is the best kind of investment in your future. But statistics have emerged over the last year that provide fuel for a debate over whether college is worth the price tag or whether college is a bubble, increasing faster than the rate of inflation and leaving students with a $1 trillion student debt burden.
It’s not just a disagreement among academics, either: Prominent billionaire venture capitalist and voice of the anti-college movement Peter Thiel is leading the charge that college just isn’t worth the cost.
We’ll look at just what the anti-college contingent has to say, why the student loan numbers are making some colleges rethink how they charge for an education and whether your college education was–or is–worth it.
Why Wouldn’t College Be Worth It?
If you ask Peter Thiel, (who is also the co-founder of PayPal and original investor in Facebook) there’s a disconnect between what college promises and what it actually delivers. Putting his money where his mouth is, he pays 20 promising students per year $100,000 each to follow in the footsteps of Facebook’s Mark Zuckerberg and drop out of college to found start-ups.
He’s the loudest voice reading a list of supporting evidence against college: the hourly wage of recent college graduates is decreasing (it now starts at about $17, approximately the same as in 1990); the annual costs of four-year colleges have increased three times as fast as inflation since the late 1970s; the unemployment rate for recent college grads hovers near 10%.
Thiel calls it a “college bubble,” using the terminology of the technology and housing trends that inflated too fast and popped, soaking everyone in their wake. “We have a bubble in education, like we had a bubble in housing in the last decade,” he told 60 Minutes. “Everybody believed you had to have a house. They’d pay whatever it took. Today, everybody believes that we need to go to college, and people will pay whatever it takes.” (Thiel does concede that careers with “specific credentials” such as medicine or law do indeed require a traditional college education.)
Colleges Tackle the Problem of High Tuition
It’s not as though colleges don’t recognize the need to change a system that mints grads with mountains of student loan debt and bleak job prospects. The President of Ohio State University, E. Gordon Gee, is at the forefront of college presidents looking to change their models of education for the better.
Gee, who keeps a framed quote that says “If you don’t like change, you’re going to like irrelevance even less” in his office, is looking to eliminate $1 billion in “inefficient spending” from Ohio State’s $5 billion per year budget. He says that colleges can’t continue to place the burden on students and their families by raising tuition–they need to find another way, whether that’s by increasing fundraising or cutting whole departments.
Other schools such as Harvard, Princeton, Yale, Brown and University of Virginia have instituted “no-loan policies,” that either cap or completely eliminate loans for low-income students by adding scholarships to their financial aid packages.
In an attempt to deal with the high cost of higher education, some colleges are now offering courses online for free. One of the first was Stanford University, which began offering full, graded courses online last year to earn “statements of accomplishment.” Massachusetts Institute of Technology (MIT) followed suit–they just released MITx, an online program where students can take full, free courses from anywhere in the country, with an option to pay a menial but as yet undetermined fee to take a specific program aimed at receiving a certificate (not a diploma).
“Social entrepreneurship” company Coursera is also on the online-courses-for-free bandwagon. The site, which has over 100,000 users, lets students take free courses online from Princeton University, Stanford University, University of California, Berkeley, University of Michigan-Ann Arbor and University of Pennsylvania. The company is so promising that it just raised $16 million in funding.
We have to wonder, though: Certificate or not, could a smattering of online courses have any significance without a degree?
The Price of Bypassing a Degree
Thiel may say that a university degree has “little more than ‘snob value,’” but it’s hard to counteract the lasting impact of a bachelor’s degree. College graduates make 80% more than high school dropouts and The Atlantic reports that, “a study from the Hamilton Project found that $100,000 spent on college at age 18 would yield a higher lifetime return than an equal investment in corporate bonds, U.S. government debt, or hot company stocks.”
Worried by the statistic showing that for the first time, people with some college outnumber high school grads among the unemployed? Maybe you shouldn’t be.
Another piece in The Atlantic clarifies that the frightening number describes everyone who has “ever stepped foot on a college campus.” Consequently, the shocking statistic comes from the fact that more people are attending college but not finishing (barely half of college students finish within six years), not that college graduates are actually lagging so far behind in employment. They point out the chicken-and-egg problem: People aren’t finishing on time because of the cost, but if they don’t make it through, they lack the skills to get hired.
In 2011, the unemployment rate for graduates of four-year degree program was a seasonally adjusted 4%, compared to the national average of about 8%.
So yes, college tuition has become overwhelming and a perfect storm of unfortunate circumstances has left Gen Y largely in the lurch, but it isn’t time to throw in the towel quite yet—college, however flawed it may be, is still worth it.