The myth of the higher education bubble
It's easy to see parallels between student loans and subprime mortgages, says Annie Lowrey at Slate, but the trendy analogy only goes so far
The buzzy claim that education will follow housing as the next bubble to burst (and that college is thus a giant waste of money) may be one of "this year's most fashionable ideas," says Annie Lowrey at Slate. Too bad it's not true. Sure, higher education and McMansions may have some things in common — the price of both goods spiked around the same time, and Americans rely on credit to finance them — but on a deeper level, "a house and an education are fantastically different kinds of assets or investments." And while many students are indeed overpaying for college, and student-loan debt is mounting, it's still "peanuts" compared to residential-mortgage debt. Here, an excerpt:
A house is an investment vehicle much more like silver or stock shares than it is like a degree. It can be readily bought and sold. Americans had a housing bubble not just because they bought more homes, but because they speculated on homes, snatching them up, fixing them up, and pushing them back onto the overheated market. The asset-price bubble burst when people started defaulting and stopped buying.
No such market for college degrees exists: You cannot trade your University of Phoenix B.A. for a Yale degree when you start making the big money. In the words of Kevin Carey of the think tank Education Sector, "College degrees have value... But they have no inherent worth. They are secondhand testimony of something valuable — the knowledge and skills associated with a unique person."