Education in America: The Next Bubble

I just read the most absurd article on CNN, by Richard Vedder, about “how to slash college costs”. In short, the author proposes the following ways to cut costs: 1) 3-year degrees, 2) allow online courses to count at all universities, 3) cut staffing by 40%, and 4) create an equivalence test, and 5) give student loan authority over to private business (cut out government). I have to say, not knowing someone at all, I couldn’t hate a guy more from what he’s written in a single page.

As one commenter wrote: “This guy has proposed nothing, not a single thing to reduce costs.. but has suggested plenty of ways to lower the quality of education.”

What follows are a few observations about our education system.

1) The cost of college education has risen 498% since 1985. Yet basic consumer inflation has increased only 114% since then. That is a jump of over 4x in costs. (Higher Education Tuition versus Medical Care/Home Price/and Consumer Prices)

2) The quality of education has NOT increased over that same period – in fact, based on current trends, it has decreased.. The United States now ranks 17th in science, 25th in math, and 14th in reading. (World education rankings)

3) Costs have also NOT gone up because of increases in faculty or staff salaries. In fact, faculty salaries have risen by only 6% since 1992, and in the past few years they have actually dropped due to furloughs and cuts. Thus, increased teaching expenses are not the reason for 4x cost increases. (2001-2002 Salaries Report)

4) The real reason for cost increases to students is that state funding has dropped between 35% and 50%! in only 10 years (since 2000) depending on the state. In 1990, states funded 79% of a students education. That is down to 39% now. (UC California Budget)

5) The cost per prison inmate in California is now $47,000/year. The amount of state funding per student is currently $7,000/year, down from $14,000/year.. Over 6x more is spent per prison inmate than to fund student education in this state.

6) Revenue at both public and private schools is increasing due to tuition and fees paid by students. (Trends in College Spending 1998-2008)

What does this data tells us about cutting college costs? 

There is no desire by governments, institutions, administrators, or banks to do so!.. In fact, the opposite trend is found. This is currently a source of wealth creation for these elite groups — at the cost of general education across the country. As shown, the quality of education is not going up, but its costs definitely are! And this is occurring much faster now than in the past.. This is, by every definition, the new economic bubble. 

The goal is the same as it is for health care and housing… Separation of the elite, wealthy class from the rest of the more impoverished public. The average student will no longer be able to afford a college education even if they desire one, or will remain in debt for the rest of their lives. However, the wealth can afford to send their children to the private schools they manage.

What does this suggest for the future? The overall outcome is a nation with a large, rapidly growing gap between the wealthy and the average person in knowledge, experience and skills. Those who already have money, or take on the huge debt, will enter the already competitive workforce for professional and highly skilled jobs. Those who don’t are being forced into an equivalent situation as low-income workers in other nations. Our nation is being silently divided by wealthy and ability.

The most valuable thing that we can learn – right now – is to understand this process. To understand not only that college is becoming much more costly, but why it is. This new educational burden is not due to inflation, or changes in quality, but simply greed. Understand this and you will be able to make wiser decisions about education.. Decide if you really want or need a college for your area of interest. Don’t go to college just because it’s the next thing to do. Have a clear, completely planned 20-year picture of total cost, total debt, and expected costs which is not created by your financial aid office.. Examine very carefully if job growth in your field is expected, and what the current employment rates and salaries are. 

I’ve found that fighting for justice and change is useless against the powerful and greedy. This is not a fight which will be won with picketing, rallies, and demands. The new elite class is too smart for this — we can shout all we like; freedom of speech is a guaranteed right, and while a few activists may have encounters with the police — the net result is that, all this time, invisible conmen and politicians will continue to raise prices.

What we can do, however, is be very careful not to hand over the human capital, or raw cash, they seek in the first place.

As with health care and housing, just like buying a car, the best education is one which has the highest quality versus cost. The wealthy class will tell you that “education is priceless”, just as they will tell you that “health is priceless”. We are tricked into buying into the now-outdated American dream that everything should be within reach. Freedom is not a guarantee, for the simple reason that this goes against everything we know about the realities of life – freedom is by definition an ideal, and while important to dream about, the reality is also that no individual can be free in the context of a society — life is a balance of goals and realities. Other countries already know that actual cost must also be a factor in health and education. Thus Canada has one of the highest quality-to-cost ratios in health care. South Korea has a very high quality-to-cost in education.

The only reason the such an abusive system of tuition increases was able to gain traction is America is that parents and students are largely uninformed about the true, lifetime costs of education both in terms of debt and quality in job placement.. The schools are not going to inform you – it is their job not to.. When we become self-informed, we become free to make good choices.

 

 

 

 

 

 

 

 

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