Original. Student reported. Your daily dose of Right-minded news and commentary from across the nation
Respected Economist Says Higher Ed Bubble Starting To Burst

Respected economist Richard Vedder began his recent talk to University of Missouri students on the higher education bubble by comparing the subject to hemorrhoid surgery.

It only went downhill from there.

“Listening to someone drone on and on about high college costs is akin to having to endure the pain of hemorrhoid surgery,” Vedder said to the 50-plus students gathered to hear the Ohio University scholar and prolific writer on higher education trends delve into financial concerns facing today’s college students.

Vedder said federally subsidized college loans have forced tuition rates through the roof and wreaked havoc on college students’ checking accounts and future debt, but perhaps worst of all is how the program has hurt the very students it aimed to help: low-income ones.

“Federally subsidized loans, created sometime during the 1970s, were supposed to help poor young people get an affordable college education,” he said. “But, as the years go by, we have actually seen education become less affordable for poor people, not more affordable.”

“Prior to federally subsidized loans becoming the norm, 12 percent of young, low-income students were acquiring degrees, but now, 40 years later, and untold millions of taxpayer dollars later, that number has dropped to 7 percent,” he added. “Poor people are being hurt by federally subsidized school loans.”

There’s more bad news.

“Admissions rates decreased last year for the first time in several years, showing that students are beginning to shy away from getting a college education, simply because it is too damn expensive,” Vedder said. “The increase in college educated graduates means that nearly every vocation and job now require a college education.”

“Before you know it, you will need a college degree to be a garbage man or a janitor.”

According to Congressional Budget Office findings, the government stands to pull in more than $50 billion in profit from federally subsidized student loan repayments this year, so critics contend politicians have no motivation to fix the higher education bubble’s vicious cycle of doling out more loans to pay for rising tuition costs.

Loosely defined, the higher education bubble refers to the unsustainable combination of several factors all coalescing at once: the rising cost of tuition; the growing irrelevancy of a liberal arts degree; ballooning student loan debt; and skyrocketing unemployment for college grads.

Vedder said the bubble is already starting to burst, as evidenced by the fact that school admissions are down precipitously from last year, pressuring an already bloated system.

As for what students could do to get the same type of education without shelling out tens of thousands of dollars, Vedder said there are commuter schools, vocational institutes, apprenticeships and the like open to students who wish to get their foot in the door without having a college degree. Students should also consider starting out at junior colleges in order to determine if they are a right fit for academia, he said.

The news was sobering for many students in the room, including sophomore Rachel Michaels, who told The College Fix she was surprised to learn federal subsidized loans actually increased the cost of college.

“When he brought that to light, I was frustrated because I have always thought that government loans and grants were helpful to higher education,” Michaels said.

The talk was hosted by Young Americans for Liberty and conducted via Skype.

Fix contributor Christopher White is a University of Missouri graduate student and an editorial assistant for The College Fix.

Click here to Like The College Fix on Facebook  /  Twitter: @CollegeFix

Add to the Discussion

  • TexasPete65

    Right on! Mike Rowe, Distinguished Eagle Scout and star of Dirty Jobs, commented on this in his speech at the 2013 BSA National Jamboree closing show. Our country has has neglected the skilled trades and focused on four year college for everyone.

    As John W. Gardner, educator and Secretary of Health, Education, and Welfare for Lyndon Johnson, said, “The society which scorns excellence in plumbing
    as a humble activity and tolerates shoddiness in philosophy because it is an
    exalted activity will have neither good plumbing nor good philosophy: neither
    its pipes nor its theories will hold water.”

    You don’t need a four year degree to be a plumber, auto mechanic, HVAC technician, electrician, or other skilled tradesman. You can get a two year Associate Degree from your local community for low cost and work in fields that pay VERY well. Then if you want to complete a four year degree, you’ll be earning money for tuition. Today, in many communities, you can get your R.N. certification in two years, start working, and while earning money go on and complete your B.S.N.

    Here’s a link to Mike’s speech – http://www.youtube.com/watch?v=85dCjsCgvXQ

    • AdamSmith23

      I just had a plumber to the house at $140 an hour! No, college doesn’t necessarily pay off.

      • D R Allen

        Yes,but you are paying them in USD 2013. If (using the price of gold to translate) you were paying them in 1980 dollars, they would only be receiving ~$4.48/hr (IIRC that’s not quite double the 1980 minimum wage). You need to look past the massive devaluation of the US$ when evaluating financial measurements.

    • Aussievick

      That was a terrific quote from Gardner. Thanks! We’ve been saying that for YEARS! My husband retired as the President of one of the Kaplan Schools. Before that, he was head of two ITT Schools. The students that were in IT, HVAC, CAD & other skills that do NOT require a B.S. were recruited right from the schools. One day I was cleaning off the chest in our bedroom & found a card from a gentleman who was from THE C.I.A. Yes, “THE” C.I.A. I’d always thought they only recruited 4 yr. college grads.

      BTW, Professor Vedder is from our old Alma Mater; nice to know that some schools are still actually TEACHING something besides “Underwater Basket Weaving.” That’s also why our youngest, a Dean’s List student at Penn State, came home one day saying “I’m quitting college. I’ve had enough of this liberal $hit; I’m joining the Marines.” Twenty years later, their training in electronics has allowed him to steadily increase his skills & training to become a Sr. Systems Engineer, making well into the six figures & regularly getting calls from Head Hunters. He’s proof positive that a college education was something, some time long ago in our parents’ past, that was the golden ticket to success both personally & professionally. Ain’t true anymore.

      P.S. I’d kill for a good plumber.

    • Mark Hillyard

      My stepson went to an HVAC school which cost approx. $6000.00 and 6 months. He’s now working for a major research Hospital in CA and making well over $65,000.00 per year. He also continues his education in that field. College might work for some but there’s nothing wrong with skilled labor.

  • P.A Taylor

    I was required to teach a “Careers” class at our local high school for about three years before they dropped the course. While doing some research I discovered the following statistics from the Bureau of Labor Statistics:
    5% of all jobs require no formal education
    5% of all jobs require an advanced degree (MA.MS. PhD EdD etc.)
    25% of all jobs require a college degree (BA,BS)
    65% of all jobs require a high school education and 2 years of on the job training or experience.
    So our high schools try to put 70-75% of all graduates into college? Seems to be a big problem on emphasis.

    • guest

      College is a scam perpetuated by Banks who know that their is no possibility of a student filing bankruptcy (they can and do garnish peoples Social Security checks for decades old student loans) and Colleges/ professors. Predators. College is a SCAM.

      • Wyck Holland

        Thanks to the essentially unlimited funds the federal government makes available to college students, Uncle Sam is projected to make a record $50 billion off student loan interest rates in 2013.

    • Mary Jo Froehlich Irmen

      P.A. Taylor do you remember where you got this info? I would love to site a source in a blog I am writing. Thanks!

  • wayno347

    There was a time in America when one couldn’t get a decent living with out a HS diploma so people stayed in school. Then they were told no good jobs can be had without a BS degree so people got BSs. Then only good jobs went to those with Master’s degrees. Now all the really good jobs go to those holding PhDs. Now, how to rise above the fog to get a good job beyond the PhD remains to be seen, but I’m sure the emphasis will be placed on that in the not too distant future. All I can recommend is to buy into the pencil concession.

    • DcoBeasley

      I do not think the good jobs go to PhD’s. Other than teaching college, there are no jobs out there for PhD’s. I have two doctorates, and after a divorce shut my business down, I sent resumes out the jobs I felt I was qualified for. No bites. I did get a call back from one Human Resources Director, who happened to a been a student in a Masters in Public Administration class I taught. She said she got my resume. I asked her if I was living in an interview. She said there was no way I was going to get the job because I was more qualified than the city manager and he certainly was not going to hire me. So I started my own business again, my divorce was over in April, had my business up and running in all my debts paid by November. In reality, the best way to secure your financial future and contribute to the economy is to start your own small business. I did now it is a big business.

  • Steven Wilkins

    How much of what you know did you learn in school? The knowledge and abilities we actually use in our work, we mostly learned outside the classroom. Our youth would be much better prepared for life if they spent less time in school, more time at work, from an early age.

  • Rick Reed

    Rule #1

    The ONLY thing that should be free in any country is education.
    Rule #2
    People talk to much.

    • bubba2020

      NOTHING is free, it’s only a matter of who pays for it.

      There is, however, an actual free education, in fact you get paid for it.

      It is called work EXPERIENCE, by far the best education of all.

      • blueangel69

        Military is a good option as well if you choose wisely.

  • Just Saying

    I have a BS and nearly a MS in Industrial Engineering yet today I drive a truck. For me, college was a bust. I enjoy what I do now (home every day) and make good money. My regret is I didn’t do this 20 years ago (I’m 46). If I had, I’d have my home paid for, and I wouldn’t have such a huge student loan hanging over me. Technical schools win hands down and their cheaper.

  • will

    In the 1960’s College Board who owns AP, SAT, etc., came out with their College Level Examination Program (CLEP) 33 Exams; yet around 50 years later hardly anyone knows about it. The fact is that when people go to college they will have to take over again many of the same courses they just took in high school.

    For around $2,000 people can leave high school and start college as a junior. I did it and it was easy.

  • Ruler4You

    Too expensive and too inadequate. College just isn’t a ‘good’ deal any more. Having a ‘skill’ “IS” a great thing, though.

    Thanks to government we need to rebuild America. And people with ‘skills’ are the ones who will do it. Sure, ‘if’ there are people who can ‘engineer’ they could be useful.

    But business “IS” discovering that ‘graduates’ can’t do the work of an entry level job. After spending (at least) 4 years and tens of thousands of dollars for which you will be paying for YEARS more you’d at least like to be able to make coffee well.

  • roy nirschel

    As a longtime educator who both bought and sold the kool-aid I want to comment. Every decade someone predicts (Clark Kerr, George Keller, et al) the decline and/or demise of private colleges and universities in the US. It has not happened, but, like the massive readjustment to the economy that is underway, this time it IS different,.

    America has over 4500 colleges and universities (probably too many). Within 50 miles of Boston there are over 100, many of them private, costly, non-selective. They have been kept afloat by the widely perpetuated myth that “college is for everyone”, by federally subsidized loans to students, by inflated housing prices that gave parents home equity borrowing opportunities, by public relations ploys, and colleges borrowing money at low rates for bonding, offering deeply discounted prices, or identifying new markets for certificate, graduate, “adult” programs to underwrite undergraduate education.

    At some non-selective privates, nearly everyone is accepted but half the students graduate, and many are unemployable in their chosen fields (despite misrepresentation of data by institutions – undergraduate and law school that have evoked legal action) If they do graduate, the do so with extraordinary debt.

    Realizing that student debt is growing, and that the economy (which “required” college degrees) isn’t, universities, are entering a new propaganda campaign such as “freezing” tuition. This scam “freezes” tuition at inordinately high rates, does not “freeze” onerous “fees” for every service imaginable, and effectively reduces student aid.

    University costs are out of control; the Higher Education Price Index eclipses the CPI annually. The factors are many; the rise of the educational bureaucracy with myriad assistants, associates, directors, vice presidents and other non-academic positions; student expectations for sports, recreation, and co-curricular; federal regulations and reporting; health and retirement benefits; and the willingness of a public to “invest” in their child’s education – whether it is necessary or not.

    Yes, this time it is “different”

  • Mary Jo Froehlich Irmen

    Great article! Parents and students need to look beyond how to fill out an application for aid. It’s far more complicated then that. I too am addressing this in my blog.