Earlier this month, I wrote about Peter Thiel, the founder of PayPal, who worries that higher education has become the next economic bubble to burst. Back in February, I wrote about Malcolm Gladwell’s article in the New Yorker about college rankings and their inherent bias toward the wealthy.
Now, n+1 has published an article by Malcolm Harris that brings the spotlight again to the question of higher education as an economic bubble, but with some new angles and insights, including the disturbing projection by the US Department of Education that administrators will outnumber instructors at four-year, non-profit colleges. The effects of the game tilting from education to administration is predictable:
When you hire corporate managers, you get managed like a corporation, and the race for tuition dollars and grants . . . has become the driving objective. . . . The goal for large state universities and elite private colleges alike has ceased to be (if it ever was) building well-educated citizens. . . . Instead we have, in Bousquet’s words, “the entrepreneurial urges, vanity, and hobbyhorses of administrators: Digitize the curriculum! Build the best pool/golf course/stadium in the state! Bring more souls to God! Win the all-conference championship!” These expensive projects are all part of another cycle: corporate universities must be competitive in recruiting students who may become rich alumni, so they have to spend on attractive extras, which means they need more revenue, so they need more students paying higher tuition. For-profits aren’t the only ones consumed with selling product.
Harris takes for-profit universities to task, but saves his ire for non-profits, which he believes have drifted from their ideals of education to an ethos of exploitation — from interns (“students pay tuition in order to work for free”) to graduate students (“recent PhDs, overwhelmed with debt, have no choice but to accept insecure adjunct positions with wages kept down by the new crop of graduate student-workers”), they are, in Harris’ eyes, no longer providing the education their high tuitions purport will provide students with advantages later in life.
There are some facts sprinkled throughout the piece that will certainly burn themselves into your cerebrum:
- In August 2010, student loans surpassed credit cards as the nation’s single largest source of debt.
- Since 1978, the price of tuition at US colleges has increased over 900 percent, 650 points above inflation.
- Default rates for the class of 2008 are projected to reach 13.8%, about double the usual level.
Harris draws parallels between the US housing bubble and the higher education bubble, noting that there are already Student Loan Asset-Backed Securities (SLABS) being traded to the tune of US$250 billion in the last quarter of 2010. And there are federal guarantees. As Harris writes:
The loans and costs are caught in the kind of dangerous loop that occurs when lending becomes both profitable and seemingly risk-free: high and increasing college costs mean students need to take out more loans, more loans mean more securities lenders can package and sell, more selling means lenders can offer more loans with the capital they raise, which means colleges can continue to raise costs. The result is over $800 billion in outstanding student debt, over 30 percent of it securitized, and the federal government directly or indirectly on the hook for almost all of it.
For people depending on higher education for income, this bubble is something to watch. It is quickly becoming a meme, an idea that is evolving and spreading. As an interesting article in the Smithsonian describes it:
As the arc of information flow bends toward ever greater connectivity, memes evolve faster and spread farther. Their presence is felt if not seen in herd behavior, bank runs, informational cascades and financial bubbles.
As the public continues to notice, consider, and absorb these realities, and as this meme spreads, some form of accountability or correction seems inevitable. What form this takes may be depend largely on whether leaders take action to correct these trends now, before events spin out of control.