Steadfast FinancesAcademic Inflation: The Mother of All Investment Bubbles

Academic Inflation: The Mother of All Investment Bubbles

Filed in Career , Consumer Education , Infographics & Chartology 6 comments

I keep a fairly watchful eye for investment bubbles, but the rise of America declaring war on work and degree factories pumping out diplomas (subsidized by Federal & State governments) not worth the paper their printed on have created an unsustainable academic system if Generation Y, and the generation behind them, can’t get a job to repay those student loans.

Bubbles have a nasty way of pulling future demand forward, so the short to medium term outlook might be bit uncertain to say the least.

(Notice how insignificant real estate inflation, and 2000-2007 real estate bubble, compare to the rise in college tuition & fees.)

Image Credit & Source
Economist Online
Galloping inflation in American college fees

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Posted by CJ   @   8 September 2010 6 comments
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6 Comments

Comments
Sep 8, 2010
2:47 pm
#1 Evan :

I couldn’t agree more! I even wrote about it about 18 months ago…How sweet will it be when we are finally proven right:

http://www.myjourneytomillions.com/articles/colleges-are-the-next-big-bubble-to-burst/

Sep 8, 2010
4:06 pm
#2 Matt SF :

The funny thing is I tried shorting one of the for profit institutions about two years ago, but the wisdom of the crowds was having none of it… got stopped out w/in a few weeks.

These days, hedge funds are supposedly bigtime short these guys. Funny how that after hedgies make a huge bet, they quickly hit the lecture circuit to update everyone on their newly discovered research (coughs: sales pitch).

Sep 10, 2010
4:28 pm

It’s so frustrating being in on something “too early”, like the guys who shorted the housing market in 2004-2005 and got clobbered. They were right! And so were you – but it took a couple years for the market to accept what was really going on.

I think a huge catalyst in the recent for-profit drop was the businessweek expose and the administration threatening to recall funding. That finally showed these guys are vulnerable.

Sep 13, 2010
3:13 pm

I wonder how long this will continue? I actually work at a huge state university – but the same thing happens here (except our increases are capped by the state)! Everything associated with higher education is rising at an alarming rate. Pretty soon prospective students and their parents will actually do the math and decided that it isn’t worth it and go into a trade!

Sep 14, 2010
1:07 pm
#5 Matt SF :

Yep. My failed short attempt is a good example of herding psychology. Doesn’t matter what delusions the market might have, as long as everyone believes it, you’re a fool to try and stop it.

Sep 14, 2010
1:15 pm
#6 Matt SF :

I think that’s certainly possible. I wouldn’t be surprised if some sort of cap is applied across the entire higher education system.

But once the For Profit degree mills are killed off by attrition (no more government loans), quality degrees from better qualified institutions will be in higher demand.

The one thing that irks me, especially after having interviewed graduates from the For Profit “schools”, is that they’re grossly under qualified. They promise a short cut to a four year degree, where in reality, there is no such thing.

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