The Commons

A recent posting on The Chronicle of Higher Education blogsite worries, “Is it possible that higher education might be the next bubble to burst (pdf)?”  Now, I’ve never been one to denigrate hyperbole – believing it, in fact, to be the most outstanding rhetorical device that has ever been employed!!! – but this strikes me as a notion in line with Chicken Little’s panicked response after being conked in the noggin by an acorn.  Is The Chronicle suggesting that there’s no more value in a college degree than there is in mortgage-backed derivatives or vulture loans on ridiculously overpriced McMansions?  Last I saw, the “average annual earnings premium of a four-year college graduate…equals almost three years of tuition and fees at the average public college or university,” and expected lifetime earnings of baccalaureate holders are 1.73 times those of high school graduates.  Patrick M. Callan, of the National Center for Public Policy and Higher Education, might not have written the “bubble” headline – for that misdirection he can thank The Chronicle editors – but basing a whole critique of the worth/value/cost of higher education on the cost factor alone is an incomplete analysis.

Yes, tuition, room and board, and fees at the very top, undiscounted, elite colleges and universities are nearing $50,000 annually. But how many students and their families actually pay that price?  The average discount rate reported by NACUBO (in The Chronicle, I might add) is nearly 35% – making the overall cost as actually paid much lower than that scary full-price tag.  And yes, again, endowment earnings are down for now, but most colleges and universities that I know about have dedicated even greater resources to student financial aid in recognition of these challenging economic times.

What’s more likely than a bursting bubble is a shift in the market in which mid-tier private institutions are going to have to compete ever more strongly with regional public universities and regional publics are going to have to compete ever more strongly with community colleges.  In fact, according to McKinsey reports, the industry that gains most in a recession is education.  Take a look at the stock prices of the major for-profit providers – Apollo Group, DeVry, and Career Education. While they are not busting the market moving forward, their trajectory is far better than that of the financial and industrial giants that got us into this mess.  And a college education is still the best bet in any market.

-Rob Moore, Ph.D., Managing Partner

Tags: economic downturn, education spending, higher education, trends