Higher Education: The Next Bubble?

Higher Education has long been seen as one of the crown jewels in the American Dream. Go to school, earn more money, have a better life. For several decades this paradigm has held true. These days the picture is a little more like watching Standard Definition TV in our HD/3-D world: it’s just not good enough.

Recently, renewed inspection — and criticism — of the higher education landscape has taken a number of forms. We’ll look at some of the criticism being leveled, but, more importantly, take a look at a couple key things you should know to help you avoid some of the downsides currently plaguing higher education.

Perhaps most significant, given the calamitous pop of the housing bubble a couple years ago, are the alarming rates of student debt plaguing the country. As Malcolm Harris discusses in this n + 1 article, the current student loan debt in this country is over $800 billion dollars, a figure that, last August, helped student loan debt surpass even credit cards as the largest source of American debt. That’s right, in the next few years our collective student debt will soar past $1 trillion (yup, with a ‘T’). As it now stands, college seniors are graduating with an average of $24,000 in outstanding loans, and this speaks nothing of the soaring debt loads people take on for graduate degrees (regularly $50,000 or more per annum for many elite institutions).

While student debt is nothing new, many people are now questioning the value of the debt. In the past, graduates had access to jobs that would give them a chance to pay off their debt – both because it was smaller, and the job market was more amenable. Nowadays, many researchers indicate that the job market no longer allows people to secure jobs that provide opportunities to pay down their debt, so the debt keeps growing and growing.

Another hot topic is the quality, cost, and relative value of higher education as we know it. Articles such as these two on The Economist’s Shumpeter blog delineate a litany of shortcomings — from bloating administrative and tuition costs, to the decline in faculty-student ratios and 4-year graduation rates. Harris also points out a host of problems with the current value of higher education in his article.

Combine all these factors with the frightening amount of student debt (to get a visual how much $1 trillion dollars is, click here) and the absolutely gratuitous way the government and loan companies have adopted policies that screw students on that debt (for a graphic on just how bad they’re screwing students, click here; be warned: it’ll piss you off), and it’s no wonder many people are calling education the next bubble. Among those are PayPal co-founder Peter Thiel, who gave a number of his very convincing reasons in this article by Sarah Lacy, and accurately predicted the last two bubbles, dot-com and housing.

So it would appear that all this doom-n-gloom doesn’t bode well for people looking to go to school, whether graduate or undergraduate. While that may be true, we’d like to point out a few things to perhaps put it into perspective:

1) Education – and its importance – isn’t going anywhere any time soon. Education will, for some time, play a significant role in determining people’s job prospects. The merits of the current system can be debated, but the facts remain: those with degrees earn more, on average, than those without. Beyond mere dollars and cents, the collective education of the populace directly impacts the fate of that nation. Higher education is a vital and valued part of our cultural fabric. Until that changes, the best bet is to play the game as best as it can be played.

2) The right preparation can make all the difference in the world (and in your finances). To the end of playing the game the best way, preparing the right way gives you the best chance to go to school for less. From thorough research of your higher education options, to understanding the best way to fund your education, preparation can save you a bundle. Part of that preparation means achieving the highest qualifications possible by application time. Increasing your GPA and other aspects of the application criteria, including standardized test scores, give you a better shot at scholarships, grants, and other tuition subsidies. Higher GMAT scores often yield funding offers from MBA programs, while higher SAT and ACT scores often open up the door to university-based merit scholarships.

3) The economy will rebound…eventually. And when it does, more education and a greater skill set will allow you to take better advantage of the opportunities available to you and make the most of the upswing. Even in a rough economy, education can’t hurt. The most recent numbers from GMAC on the job prospects of MBA graduates attest to this, along with an improving economic climate. 54% of 2011 graduates already had at least one offer of employment at the time of surveying, compared to only 32% of graduates a year ago. Likewise, average salaries are expected to rise as well (to over $91,000). In an economy still experiencing near double-digit unemployment, it doesn’t look too bad to be in possession of an MBA right about now.

The bottom line: while the value of a college and graduate degree may have diminished over time (which makes sense since they are no longer as unique as they once were), you’d rather be more educated than less, and rather spend less money to accomplish it. Both can be accomplished with preparation, and can still yield considerable return on the investment.

For more information on how Bell Curves can help you make the most of your higher education preparation, visit us at www.bellcurves.com.

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