Will the college bubble burst "messily"?

[billy ross]

Higher education: The college-cost calamity | The Economist

"The average cost of college per student has risen by three times the rate of inflation since 1983. The cost of tuition alone has soared from 23% of median annual earnings in 2001 to 38% in 2010. Such increases plainly cannot continue.

Student debt has reportedly reached a record $1 trillion."

"Still, the doomsayers may be onto something. Four-year residential colleges cannot keep on forever raising their fees faster than the public’s capacity to pay them, especially when online degrees are so much cheaper. Universities that fail to prepare for the hurricane ahead are likely to be flattened by it."

What is this coming hurricane? It's all about value added. If there's no value there then students will vote with their feet. I don't see a collapse like happened with the housing market. I see adjustments. Some may be painful, but I don't see mass bankruptcies and failures.

[BarryG]

I see trouble ahead for Drexel. Penn is worth the money. Temple is a great value and keeps getting better.

[OffenseTaken]

I see trouble ahead for Drexel. Penn is worth the money. Temple is a great value and keeps getting better.

Drexel seems to do a superb job of preparing nerds for lucrative careers, which is the smartest thing a university can do when it's trying to build its endowment. If they really do end up rehabbing their side of University City, they'll be in a better position to compete with GWU, NYU, and BU for students of comfortable means.

I see much more trouble ahead for all the third-tier private schools that charge top dollar for a state-satellite education. This metro area alone seems to have a thousand of them.

Anyone who doesn't think Penn is worth the money needs their head checked.

[concourse]

The article kind of muddles two things: will the student debt 'bubble burst' or will colleges survive their debts. For the latter I'm not really sure and I'd guess that some colleges will fail or have to sell off assets. I think student loan debt is quite different from mortgage debt. The article says, "Higher education has not delivered extra value to match the extra costs". Which just means students will be paying a higher proportion of their aggregate income gains to loan repayment. BLS June 2012 stats show 8.4% unemployment rate for high school diplomas and only 4.1% for college graduates. Also from BLS, "By educational attainment, full-time workers age 25 and over without a high school diploma had median weekly earnings of $483, compared with $659 for high school graduates (no college) and $1,164 for those holding at least a bachelor's degree." That doesn't mean that some people aren't making bad decisions about how much to pay for what college, but it's very different from a housing bubble.

[raider.adam]

"Still, the doomsayers may be onto something. Four-year residential colleges cannot keep on forever raising their fees faster than the public’s capacity to pay them, especially when online degrees are so much cheaper. Universities that fail to prepare for the hurricane ahead are likely to be flattened by it."

Are online degrees that much cheaper? From universities that are accredited, I haven't noticed the rates all that much better and sometimes even worse.

For example, University of Phoenix online is $585 a credit hour. Temple is $500. Sure I have seen some online degree programs much cheaper, but they also weren't accredited.

What is this coming hurricane? It's all about value added. If there's no value there then students will vote with their feet. I don't see a collapse like happened with the housing market. I see adjustments. Some may be painful, but I don't see mass bankruptcies and failures.

Part of the problem with the value add is that the long term debt masks it a lot of it. I have even seen college advice articles by professionals that say "get into the best college you can and don't worry about the cost".

I see trouble ahead for Drexel. Penn is worth the money. Temple is a great value and keeps getting better.

Drexel seems to do a superb job of preparing nerds for lucrative careers, which is the smartest thing a university can do when it's trying to build its endowment. If they really do end up rehabbing their side of University City, they'll be in a better position to compete with GWU, NYU, and BU for students of comfortable means.

Anyone who doesn't think Penn is worth the money needs their head checked.

I never understood the people who pay the tuition rates for a liberal arts degree at Drexel. Going to Drexel for the sciences makes a lot of sense. Great reputation and the co-op program isn't just some crappy intern job where you fetch coffee. Real money and real experience.

As for Penn it is an Ivy League school and part of what you are paying for is the Ivy League network and name.

[Tartan69]

I never understood the people who pay the tuition rates for a liberal arts degree at Drexel. Going to Drexel for the sciences makes a lot of sense. Great reputation

Very well put. I've said the exact same thing about my alma mater on the other end of the state. Why in blue blazes would you spend absurd amounts of money to be educated in a program that wasn't ranked?

and the co-op program isn't just some crappy intern job where you fetch coffee. Real money and real experience.

I almost went to Drexel based on the co-op program idea. It's a huge differentiator. Too bad they got rid of their football program back in the 70s...

[Moonraker]

For 15+ years, I have participated in Career Day at my high school. My advise is simple

1. Go to the best college your parents can afford, do not screw your sibblings college fund.
2. Apply for a scholarship a week, there is money out there.
3. You need marketable skills. Find your passion and focus on filling your academic toolbox.

When the College of NJ was Trenton State College, their program generated nurses and superior-grade techinician-engineers, who became the heart of the NJ health &engineering industry. When laid-off they were rehired. Many went on for their Masters, at company expense and continued to success. These were the worker bees, not the people who went onto getting the Phds or working in academia or research. They married, lived comfortably within their means, and passed those values onto several generations since WWII. They demonstrated that hard work pays off.

Starting in the '80's, I am of the opinion that Jr Colleges exploded in number, mainly through Community Colleges, and became degree(paper) mills. Numerous college professors tell me the same story, how did these people get out of high school. The % of academic loosers is high, and I have seen the quiz papers which prove it. Not everyone is college material, and we have a growing service sector which does not require an advanced degree. America has a high demand for skilled labor. When we visit subcontractors, their machine/model shops are filled with operators older than me, very few if any younger. My friend's father went back to the coal mines in Western Pa at 55, by 58 he was a supervisor and the most productive person on the crew.

I agree that college costs have escalated at an abnormal rate. My salary since graduation should be 1/2 as good.

Finally, there are way too many 5-6-7 year students. Obvioiusly, lacking in focus. To them, I suggest 1 year of real life, Peace Corps, Americorps or equivalent. Several friends put up for a float year where their child worked for a year to verify their focus on life. Most became 4 year graduates, some went onto being successful in sales and management. Go back and read my List.

[John Goodman]

I wonder about Drexel...

Are there enough rich kids to keep some of these programs going...

Like the fashion program, music/entertainment program, law school...

They have a lot of BS degrees to grab money.

[OldMama]

My son went to private college and Ivy League grad school because I saved since he was a baby so he could. He also received some undergrad financial aid once his dad died and a graduate assistant position and fellowship in grad school. I don't regret a penny of the money we spent because he had life-changing experiences at both schools. However, he would not have gone to those schools (or at least his undergrad school) if we hadn't saved. I wouldn't have let him incur that kind of debt.

And when he's a pain in the butt, I call him "Condo" to remind him of the vacation home I don't have.

[raider.adam]

I wonder about Drexel...

Are there enough rich kids to keep some of these programs going...

Like the fashion program, music/entertainment program, law school...

They have a lot of BS degrees to grab money.

Why do you think only rich kids go to Drexel? Money from student loans is just as good.

[Dolemite]

I wonder about Drexel...

Are there enough rich kids to keep some of these programs going...

Like the fashion program, music/entertainment program, law school...

They have a lot of BS degrees to grab money.

I've heard that music industry program is one of the hardest to get in to.

Drexel enrollment keeps going up. The co-op program is a draw. As far as those liberal arts majors I think most have a bent toward being more technical or marketable such as Sociology Majors focusing on criminal justice, statistics, etc as opposed to what a bunch of old dead whites guys said once. They also push a "path to medical school" through any major.

[OldMama]

I know three Drexel music industry grads who are all employed in the field. It's not a terribly well-paying field but apparently there are jobs. And Dolemite is correct- it's hard to get into. The three kids I know (friends of my son) were all serious musicians, two were Masterman grads, all had good grades and scores.

[Jelly Roll]

Drexel seems to do a superb job of preparing nerds for lucrative careers, which is the smartest thing a university can do when it's trying to build its endowment. If they really do end up rehabbing their side of University City, they'll be in a better position to compete with GWU, NYU, and BU for students of comfortable means.

I see much more trouble ahead for all the third-tier private schools that charge top dollar for a state-satellite education. This metro area alone seems to have a thousand of them.

Anyone who doesn't think Penn is worth the money needs their head checked.

GWU has a very big advantage of being the main labor source for federal interns in DC and to be honest when I went there from 2006-2010 I do not think anybody I knew even looked at Drexel. That might have changed as Drexel has climbed the rankings but most people that go to GWU go there to be in DC and be involved in the political process.