Higher Education Bubble Detail
The higher education bubble is a hypothesis that there is a speculative boom and bust phenomenon in the field of higher education, particularly in the United States, and that there is the risk of an economic bubble in higher education that could have repercussions in the broader economy.According to the theory, while college tuition payments are rising, the rate of return of a college degree is decreasing,[1] and the soundness of the student loan industry may be threatened by increasing default rates.[2] College students who fail to find employment at the level needed to pay back their loans in a reasonable amount of time have been compared to the debtors under sub-prime mortgages whose homes are worth less than what is owed to the bank.[3]As discussed below, the "higher education bubble" is controversial and has been rejected by some economists. Data shows that the wage premium—the difference between what those with a four year college degree earn and what those with only a high school education earn—has increased dramatically since the 1970s, but so has the 'debt load' incurred by students due to the tuition inflation.[4][5][6] The data also suggests that, notwithstanding a slight increase in 2008–2009, student loan default rates have declined since the mid 1980s and 1990s.[7][8] Those with college degrees are much less likely than those without to be unemployed, even though they are more expensive to employ (they earn higher wages).[9] The global management consulting firm McKinsey and Company projects a shortage of college trained workers, and an excess supply of workers without college degrees, which would cause the wage premium to increase, and cause differences in unemployment rates to become even more dramatic.[10]In 1971, Time ran an article "Education: Graduates and Jobs: A Grave New World," which stated that thesupply of post-graduate students was around twice larger than the expected future demand in upcoming decades.[11] In 1987, U.S. Secretary of Education William Bennett first suggested that the availability of loans may in fact be fueling an increase in tuition prices and an education bubble.[12] This "Bennett hypothesis" claims that readily available loans allow schools to increase tuition prices without regard to demand elasticity.
The higher education bubble is a hypothesis that there is a speculative boom and bust phenomenon in the field of higher education, particularly in the United States, and that there is the risk of an economic bubble in higher education that could have repercussions in the broader economy.According to the theory, while college tuition payments are rising, the rate of return of a college degree is decreasing,[1] and the soundness of the student loan industry may be threatened by increasing default rates.[2] College students who fail to find employment at the level needed to pay back their loans in a reasonable amount of time have been compared to the debtors under sub-prime mortgages whose homes are worth less than what is owed to the bank.[3]As discussed below, the "higher education bubble" is controversial and has been rejected by some economists. Data shows that the wage premium—the difference between what those with a four year college degree earn and what those with only a high school education earn—has increased dramatically since the 1970s, but so has the 'debt load' incurred by students due to the tuition inflation.[4][5][6] The data also suggests that, notwithstanding a slight increase in 2008–2009, student loan default rates have declined since the mid 1980s and 1990s.[7][8] Those with college degrees are much less likely than those without to be unemployed, even though they are more expensive to employ (they earn higher wages).[9] The global management consulting firm McKinsey and Company projects a shortage of college trained workers, and an excess supply of workers without college degrees, which would cause the wage premium to increase, and cause differences in unemployment rates to become even more dramatic.[10]In 1971, Time ran an article "Education: Graduates and Jobs: A Grave New World," which stated that thesupply of post-graduate students was around twice larger than the expected future demand in upcoming decades.[11] In 1987, U.S. Secretary of Education William Bennett first suggested that the availability of loans may in fact be fueling an increase in tuition prices and an education bubble.[12] This "Bennett hypothesis" claims that readily available loans allow schools to increase tuition prices without regard to demand elasticity.
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
Higher Education Bubble
No comments:
Post a Comment