Colleges Fail To Deliver The Goods

I’ve long thought that there is a higher education bubble.  My basic premise is that the price of a higher education degree is highly correlated to the availability of cheap financing and subsidies.  This is nearly identical to what caused the housing bubble to inflate.  When cheap financing for housing disappeared, reality set in and house prices collapsed.

What’s interesting now is that we’re seeing early signs that the same economic factors that hit housing — a tightening of credit and a reduction in subsidies — is starting to hit higher education.  How important is the federal funding to the for-profit colleges?  From The New York Times a couple of weeks ago:

A majority of Apollo’s revenue comes from federal student aid. The University of Phoenix, which accounted for 91 percent of Apollo’s net revenue this year, gets the bulk of its own revenue from Title IV programs. Just 1 percent of cash revenue at the University of Phoenix comes from student loans that aren’t channeled through the federal government.

Top for-profit colleges like Apollo’s received $26.5 billion in government-funded student aid in 2009, the Department of Education says.

Over the summer, the government finally decided that there needs to be some accountability in the for-profit education space.  Check out this article about a GAO undercover investigation, and this article about new rules designed to measure gainful employment after graduation.  The Department of Education is now going to measure student loan repayment rates to determine whether attendees of the for-profit colleges get a good job in their chosen field.

The impact is that we’re starting to see these types of headlines: For-profit schools reel as rules affect enrollment.

But what about the public education sector?  Surely the nation’s private and public non-profit universities are doing a better job at helping people find gainful employment, right?

Eh, not so much.

17 Million Kids Went To College And Became Waitresses Or Flight Attendants.

I’ll admit, that the author has a clear bias in the article.  But you can’t argue with the data.  An appallingly large number of people who went to college spent money they or their financial backers (i.e., mom and dad or the government) didn’t need to spend.

And for the record, I’ve got nothing against flight attendants.  I love them!

— uo

Published in: on November 2, 2010 at 9:18 pm  Comments (1)  

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One CommentLeave a comment

  1. hehehe! Flight Attendants (one in particular) love you, too!

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