Higher education: the next subprime bubble

This story will break your heart: A Generation Hobbled by the Soaring Cost of College. We live in a country where it’s hard to find work that pays living wages without a college degree, and yet few jobs actually require the use of any knowledge obtained while earning that college degree. It’s a hard life for young people these days. Education is no longer a guaranteed path out of poverty, and it can actually help keep a person in poverty with the onerous burden of student loans. A number of people have already made the comparison to the subprime mortgage crisis, and this article does the same:

Much like the mortgage brokers who promised pain-free borrowing to homeowners just a few years back, many colleges don’t offer warnings about student debt in the glossy brochures and pitch letters mailed to prospective students. Instead, reading from the same handbook as for-profit colleges, they urge students not to worry about the costs.

Some of these students are paying $40-$50k a year for their educations only to graduate into an employment market that forces them to take near-minimum wage jobs that they have to use in order to pay their $900/month student loans. This should be criminal. Much like mortgage brokers have to give their customers Truth-in-Lending-Disclosures and Good-Faith-Estimates, the government ought to require colleges to disclose the fact that a college education does not guarantee a high-paying career.

Moreover, our politicians really really really need to stop talking about education and start talking about jobs and industry. We already have lots of educated people. We don’t need more people to take on debt. What we need is dialogue on productivity and how to make use of the smart people who probably wouldn’t learn much in college that they wouldn’t be able to teach themselves. As a writer/lover of humanities, I realize that the humanities are hard to promote if everyone is broke and suffering from excess debt–so jobs should be the focus. I truly sympathize for these poor, unsuspecting college students whose lives have now become defined by the debt they took on by trying to do the socially acceptable thing.

I think more people ought to explore Peter Thiel’s ideas about education, and perhaps more business leaders ought to jump into the fray by also speaking out against this new bubble. Business leaders could really help this movement by pledging to hire a certain number of non-college-graduates or people who demonstrate exceptional life experiences. I don’t know if “10% of our employees didn’t waste their time on college” would ever be a bonafide bragging right for a company, but it would be a step in the right direction of dismantling the education bubble before more people get hurt.

10 thoughts on “Higher education: the next subprime bubble

  1. While I do agree that education is overpriced, I will play devil’s advocates here, for all the University graduates who have to pour coffee for a living after getting their degree, what exactly is their area of study?

    The article linked seems to ignore very important information. Purely conjecture, but I imagine most of those folks who can’t find jobs are not in Engineering, Accounting, Nursing, Law, business, or any other “professional” fields. I think this is an important point that should be made clear.

    The more accurate title should be that humanity and liberal art higher education is overpriced and oversupplied. Is it the fault of the naive student who believed a PHD in history would guarantee him a well paying job but now have to use food stamps? Or the fault of the education system that charge premium for an oversupplied degree that has little use in the real world? Or perhaps both should shoulder some of the responsibility?

    Education is also an investment, and like any other investment one must be careful with the choices made. It is not a guaranteed thing.

    To draw parallel with the sub-prime mortgage, yes, the bankers that give out loans with no chance of being paid back is irresponsible, but so are the people who took out loans and knew they had no chance of paying it back.

  2. I do agree with you, Ei, to a certain point. I have heard that some lawyers and engineers are having problems finding jobs these days, what with the outsourcing of labor (engineers) and the automation of old legal functions (lawyers), but I too would guess that it’s mostly the humanities people who are suffering.

    The issue, I think, is this: one basically NEEDS a college education these days to be respected in society, but one doesn’t NEED an education to be productive. So why does a college diploma carry so much stigma when it’s a waste of resources for a lot of people? It’s like do-or-die: you get the degree and the debt, or you live your life without respect.

    Now there are tons of jobs that command less respect but pay very very very well. Plumbers, electricians, copy machine repairmen, and the like all make tons of money but aren’t as prestigious as, say, doctors, dentists, accountants, or lawyers. But what if you’re just not equipped to do that sort of work? What if you don’t have the hand strength to tighten nuts, can’t troubleshoot annoying machinery, or don’t like crawling into crawl spaces?

    To become a secretary, graphic artist, technician, paralegal, day trader, financial planner, banker, web designer, office manager, SEO consultant, marketing director, music producer, radio DJ, writer, or sales executive (in most fields) probably shouldn’t require a four year degree, and yet it does for most companies. It’s a waste of resources. I think there’s a lot that the careers I just mentioned could gain from college–Steve Jobs mentioned that it was his college calligraphy class that helped him develop the Apple computer–but should a college degree carry that much weight just to get in the door? I see what you’re saying about the humanities people, but isn’t there something we can also say about a society that needlessly requires college as a basic entry point?

  3. In the past, a high school diploma was sufficient for getting a job. Things changed and a HS diploma wasn’t enough. You had to have a college degree. Then things changed some more and even a college degree wasn’t enough. You had to go to glorified vocational institutes also known as law or business school to get a job. Anything that follows this pattern of escalation is ultimately unsustainable. Unless reform happens, the “system” will eventually “reset” itself on its own.

    Because of this thing called the “American Dream”, and the fact that all the striving, unwashed masses latched onto higher education as their meal-ticket, the college degree became a commodity by the same economic forces that rendered things like a DVD player, once a high-ticket item that cost hundreds of dollars, into a $30 item that you can pick up at Walmart.

  4. Let’s think hypothetically. Let’s say they had quotas, such as a company of X number of employees has to make sure at least 10% of its workforce doesn’t have college degrees. Perhaps one of Peter Thiel’s companies could try this as an experiment. It would be good because it would encourage people NOT to waste their money on expensive schools.

    Seriously, kobu, you’re right. Now, it’s like even a BA or BS isn’t enough. When will the ridiculousness end?

  5. Its degree inflation. China is excellent example of degree inflation. Some companies wouldn’t even look at your resume unless you have a masters or PHD unless you either have good connections, unique experience, or is from the top Universities. Of course, a lot of University graduate also refuses to take job they consider to be beneath them.

    So why should a company accept high school degree when there are more than enough people with liberal art/humanities degree looking for work?

    The supply of humanity/liberal art degree exceeds the demand for them, when you have an oversupply of sellers the buyer can be choosy. And University can overcharge it because people keep buying into it despite its inflated value.

    One can argue that University should lower the tuition of those degrees, but it still does not solve the oversupply of graduates with those degrees, all it does is means the waiter is now 10,000 dollars in debt instead of 50,000 dollars in debt. And the lost revenue from lower tuition must come from somewhere, who will pay for it? Tax payer? International students? Engineering and Business faculty?

    The overall mentality needs changing. Highschool students need to be made aware that liberal art/humanities degree is not guarantee for a job, and a degree in those fields does not entitle one a job, and at same time, negative stigma against trade professions needs to go.

  6. See, guys like Peter Thiel have a lot of trouble making their point because they are over-educated and have attained the very degrees that they say are worthless. There was another young dude who makes a living writing books about how education is a waste of time, but he too graduate summa magna cum nonsense from Brown or something.

    I don’t know if I’m being pie-in-the-sky, but it would be nice to see some successful people without these degrees coming out and urging businesses to hire more based on experience and drive than a four year degree. Maybe that could change the mindset.

  7. Haha! Raguel, I had to look up the magnus cum bragnus, and here it is–Michael Ellsberg:


    “Are you saying that having a college degree doesn’t help you get a job?

    It does in specific areas. Obviously if you want to be a doctor, lawyer, or engineer. The question is, can [a college degree] help you as much as going out and getting work experience, instead of spending four years racking up debt and writing papers on Shakespeare. About 80 percent of the job market happens informally…. through networking. You don’t need to go to college to build up a great network.”

    I don’t agree with him here at all. I might even argue that the woman in the OP who works three jobs has an advantage when applying for her waitress position over someone who doesn’t have that degree. It’s ridiculous, but that’s what it comes down to.

    He’s also wrong about that 80% quote. That USED to be the case. These days, much “networking” has moved to Craigslist, Monster.com, and even LinkedIn.

    And even though he’s wrong about 80%, if he were right, it still doesn’t change the fact that many people network through college and college relationships. Zuckerberg and Gates both had access to that networking club. He can’t tell me that doesn’t help, NOR can he say that Brown didn’t help him. Even now, I remembered his Brown education before I remembered his name, and if Brown were all that unimportant, he wouldn’t be mentioning it in his bio. I’m not sure if he’s ignorant or if he’s just deceptively selling his philosophy.

  8. Pingback: Dropping out of college vs. just not going | bigWOWO

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