Higher Education Bubble Spawns Demographic Decline Among Educated Americans

by Hans Bader on August 28, 2012 · 8 comments

in Economy, Employment, International

The Washington Times takes note of the burgeoning higher education bubble in a recent editorial:

The cost of a college education has soared far in excess of the cost of health care. This is in spite of — or, more accurately, because of — massive government involvement in subsidizing and running schools. . . Doing more of the same isn’t a realistic answer. America is in the midst of what University of Tennessee Prof. Glenn Reynolds calls the “higher education bubble.” As with the housing bubble, cheap credit is the primary culprit in inflating the price of schooling. Federal student loans subsidized by taxpayers have made learning more expensive, not more affordable.

The Cato Institute’s Neal McCluskey estimates federal student aid increased by 372 percent between 1985 and 2010, from just under $30 billion to almost $140 billion. To put it another way, as Mr. McCluskey explains, “Taxpayer-funded outlays per degree rose from $58,755 in 1985 to $78,347 in 2010.” This flow of cheap money corresponded with rapid growth in tuition at rates well above average inflation. Mr. Reynolds reports that college tuition grew at almost 7.5 percent annually between 1980 and 2010, when average inflation was 3.8 percent. At less than 6 percent annually, even health care costs grew at a slower rate than the university tab.

Young people aren’t getting much in exchange for this huge outlay. While enrollment has increased, completion rates remain dismal. Barely a third of students complete their degrees in four years, and less than 60 percent earn their degree in six years, according to Mr. McCluskey. That means at least two out of five enrollees don’t finish and fail to reap the benefits of a post-high-school education. Even those who complete their programs of study and are fortunate enough to find employment find that in one out of three cases, their degree isn’t required for their work.

Earlier, I wrote about how exponentially growing student loans are driving up tuition and creating a demographic time bomb as well as a higher-education bubble that could explode in taxpayers’ faces.

As college costs and student loan debt soar (partly due to opulent university spending) and unemployment rises, young college graduates, crushed by student loan debt, are deciding not to have kids, resulting in demographic decline among the educated in America.  In recent years, student loan debt has skyrocketed from $100 billion to nearly $1 trillion, creating a potential debt bomb for the American economy.

France and England now have higher birth rates than America.  College-educated people in their 20s are definitely more likely to have kids there.  “American fertility is now lower than that of France” and the United Kingdom, notes The Economist, even though American fertility was higher than France or England in 2007.

Why the recent change?  Could it be because college graduates in England and France have less student loan debt? Tuition is lower there.  Per capita expenditures are lower at their elite schools. France and England spend much less on physical plant for colleges and universities. Faculty salaries don’t get as high there.

The buildings at my French-born wife’s alma mater don’t look very impressive, although she studied and learned a lot there.  If a French university outwardly looks more like a high school than a Harvard, that’s OK with them.  What matters to them is the learning that takes place within, not whether it looks like a college marketer’s movie-set image of what a university should look like. French students also study a lot more than American students, so they may be more accustomed to not having spare time (something that may help prepare them to have kids after they graduate, since parents of young children have little free time).

U.S. colleges are borrowing lots of money for fancy, unnecessary facilities, gambling that they can pay the interest on their increased debt by increasing tuition on future students.  This is already resulting in growing numbers of American universities facing “financial trouble,” notes The Economist.

As USA Today noted earlier, American college students learn less and less with each passing year, according to recently-released research. “Thirty-six percent” of college students learned little in four years of college, and students now spend “50% less time studying compared with students a few decades ago, the research shows.” Thirty-two percent never take “a course in a typical semester where they read more than 40 pages per week.”  Less time spent studying gives students more time to work to pay their inflated tuition.

Actions by the Obama administration have increased college costs and driven up tuition. The administration has also discouraged vocational training needed for high-paid, skilled manufacturing work, contributing to a severe shortage of skilled factory workers — thus making it harder for factories to expand their operations and hire workers, including the unskilled workers among whom unemployment remains highest.

Countries’ success has little to do with how many of their citizens graduate from college. As Washington Post economics columnist Robert Samuelson notes, “Some robust economies have workforces with a much smaller share of college degree-holders than the United States.”  Tuition in American universities has also been driven up by the cost of administrative bloat, such as the growth of a vast and costly “diversity machine” in college administrations, and red tape that results in some colleges having more administrators than teachers.

William Roberts August 28, 2012 at 4:03 pm

Between 2008 and 2010 the average tuition at a four-year public university has climbed 15%. At this rate, if the trend continues, the cost of college will double in the next 10 years.


The trends are unsustainable!

raymond nicholas August 30, 2012 at 8:24 am

According to the “Rule of 72″ the cost will double in five years, not ten years, assuming the inflation rate is correct. The Rule may be found in a good Finance Text, but not in a Humanities Text. The implications for taxpayers are profound.

I think individual motives and valuse need to be explored further. For one thing, when persons are not at financial risk they tend not to care as much if they fail, since they do not lose anything. Only when they have their own money at risk do people tend to give greater effort and act responsibly.

Imagine if students were put at financial risk for their own educations. I think two things would happen: they would be motivated to succeed and they would demand a better education that gets them real paying jobs in society. Professors would actually have to practice the art of teaching.

J1 August 29, 2012 at 9:35 am

Students there probably do have less loan debt, but it may also be what you point to a few paragraphs later: students aren’t learning much, and what they are learning has little if any value.

I don’t know many engineers or teachers who have much difficulty paying student loans, but there are a lot of other majors that can make it pretty tough. As the NYT noted (well, a couple they interviewed noted), liberal arts degrees are for people with trust funds. I’m not sure the headline “Higher Education Bubble Spawns Demographic Decline Among Educated Americans” is right, because many people with college degrees aren’t very educated. Maybe it should be “Higher Education Bubble Spawns Demographic Decline Among Americans Who Borrowed A Lot Of Money To Get A Worthless Degree”.

Talking about the “college educated” as though all college degrees are equal is a common mistake in this type of article. They aren’t. We need to be honest about the value of various majors with kids who want to go to college, both at the undergrad level (getting a decent job with a BA in English is going to be a battle) and the postgrad level (there’s no point in getting a PhD in English or, for that matter, engineering, unless you want to be a professor. And there aren’t that many professor jobs. And a lot of them don’t pay much.).

PJ August 29, 2012 at 9:42 am

When I was in Paris in 2008, I saw lots and lots of French babies. The government was apparently giving a bonus to women who had children, so of course people went ahead and grew their families.

Don’t spread it around though, or the government will start a new expensive program like that here! And I think we’re more broke than France.

debra August 30, 2012 at 3:27 am


la catholic state September 1, 2012 at 4:57 am

Abortion and contraception are one way tickets to decline and extinction. Cheerio.

Patricia September 1, 2012 at 8:29 pm

There’s a gigantic market out there for some entrepreneur who’ll buy up some of these empty elementary school buildings (thanks to contraception and abortion) and start modest and modestly priced colleges–like the ones in Europe. After the incredible hardships parents and students have been enduring paying for college educations for the last 3 decades, many people would gladly attend these schools if it meant graduating in four years at a modest cost and with no crushing education loans.

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