The Ticking College Time-Bomb

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With all the
talk of bubbles bursting in terms of stocks, equities, currencies
and real estate, one very troubling trend is brewing: the rising
cost of college. America has always been treasured for its emphasis
on individualism contributing to a robust middle class society.
It was in America where one had the mobility to move the most freely
between the social classes. Over the past century, a college education
was the fundamental gateway towards a middle-class American life.
One was told “Work hard, get a good education, obtain a degree
and you will be virtually guaranteed a high standard of living in
the United States.” With the United States struggling through
its worst financial crisis since the Great Depression, the everyday
American continues to struggle with the rising costs of food, clothing,
energy and utilities. The rising cost of attending college is on
an unsustainable path. The impending college collapse is a multi-tired
phenomenon that will unilaterally evolve one of America’s most
treasured institutions.

America has
just turned the page on the first decade of the 21st Century, one
Time Magazine referred to as “The Decade from Hell.”
It was during this past decade where Americans have witnessed the
purchasing power of their dollar diminishing against other major
currencies (37 percent against the euro, 31 percent against the
Canadian dollar, and 17 percent against the British pound). The
weakened value of the currency has lead prices of everyday goods
to skyrocket forcing a decline in the standard of living. Simply
put, it takes more dollars to purchase fewer goods (a symptom of
inflation). While the cost of living has skyrocketed, the wealth
and savings of individual Americans has fallen through the floor.

For the better
part of the last decade, it was seen virtually as a “right”
to own a home. The average American was allowed to put almost nothing
down to obtain an adjustable rate mortgage. As a symptom of the
bubble, the price of housing rose exponentially, creating a phony
illusion of wealth. Owners of these adjustable rate mortgages were
able to extract liquidity from their home and use the profit to
proliferate the distorted American Dream. This illusionary prosperity
sadly expired, when the adjustable rate mortgages inevitably reset
leaving the majority of homeowners underwater. In concert with the
illusionary wealth created by a ballooning housing bubble, so too
can be said about the false sense of security a college degree offers.

According to
the US Census, college enrollment has increased 17% between the
years 2000–2008 alone. At the same time enrollment has increased
so too has the cost of attending a college. Forbes magazine highlighted,
“College tuition has increased by more than three times the
rate of inflation for the last 20 years, despite U.S. wages flat-lining
since 2000.” In the past year the Huffington Post broke it
down more specifically stating, “Average tuition at four-year
public colleges in the U.S. climbed 6.5 percent, or $429, to $7,020
this fall as schools apologetically passed on much of their own
financial problems to the students and at private colleges, tuition
rose 4.4 percent, or $1,096, to $26,273 from 2008–2009 alone”

The tightening
squeeze on University budgets is already beginning to spiral out
of control. On November 19, 2009, the University of California,
Los Angeles announced a 32% tuition hike if passed would raise costs
from $7,788 to $8,373 by Winter Quarter and to $10,302 from summer
2010 through the following academic year. This news was met with
an unpleasant reaction from the student body. In the wake of the
announcement, students clashed with campus police bordering close
to an all out riot leading to the arrests of at least 14 university
student protesters.

Perhaps the
greatest threat to the university establishment, or how Trend’s
Research Institute director Gerald Celente aptly coins it “The
University-Industrial Complex,” is the rise in alternative
outlets for education. Rather than becoming subservient to bloated
tuition fees and useless curriculum requirements, alternative education
puts the student in the driver’s seat. Online College has exploded
with opportunity and innovation through out the last decade. Major
institutions such as the Massachusetts Institute of Technology regularly
post lectures of some of their advanced science courses. Popular
media sites such as YouTube put the individual in the driver’s
seat providing a gateway of an endless array of instructional, educational,
and informative video content.

As a consequence
of the past few decades of capital misallocation, the United States
has decreased productive goods-producing private sector jobs in
favor of government service sector jobs. This has resulted in an
ever-increasing trade deficit impairing our economy from real economic
growth. As result, production-oriented skills have been in increasing
demand in the ailing U.S. Economy. Trade and skill-oriented training
is on the rise striking a major blow to the University establishment.
An article in USA Today mid-2009 illustrated the appeal to
this alternative form of schooling, “Going to school for school’s
sake is not what they want," "They want something to get
them back to work.” The author’s opinion looks more like
a consensus, especially in an economy with 54% unemployment for
young adults under the age of 25!

President Barack
Obama recently announced a plan to curb college tuition fees in
a plan that strives to slow the rate of yearly tuition increases,
guarantee fixed tuition and financial aid for five years, increasing
financial aid by increasing fund raising, and lessening the amount
of debt students graduate with. This of course, will have the opposite
effect by subsidizing the already bloated system and providing no
mechanism for competitiveness. Consequently, this will drive tuition
costs higher yet, even faster than they have previously accelerated.
Unfortunately, this cannot continue indefinitely and will only make
the system even more broken and will lead to more difficulties to
sort out down the road.

In conclusion,
which ever way one chooses to assess “College Collapse,”
there should be little debate to the evolving paradigm. There is
no question that the belt-tightening for most universities will
continue at least through the year 2010. Universities will continue
spending cuts, layoffs and tuition hikes into the foreseeable future.
Consequently, this is a mounting burden on a collapsing middle-class
America where jobs are continuing to disappear, wages decline, the
cost of living rises, savings decrease and economic conditions deteriorate.
Students are beginning to face the question of whether it is worth
investing 4 years+ of their time and money only to graduate heavily
in debt in a depression era jobless environment. A liberal arts
degree is simply uncompetitive in an already bloated public service
sector and the typical university curriculum does not translate
into a wounded economy starving for goods production and export.
Thankfully, alternative education is rapidly evolving and starving
establishment Universities of their monopoly over the higher-education
system. The inevitable end result will cripple the University establishment
by way of the free market. Institutions will compete to enroll students
by offering incentive – lower prices, more freedom, less bureaucracy
and most of all more learning! The unfortunate short-term consequence
will be the fate of several university employees as many universities
will drastically cut pay, downsize and some close their doors forever.

February
5, 2010

Brian A.
Krol is a free market libertarian columnist and host of the daily
Truth Is Liberty podcast.

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