Sunday, November 14, 2010

Prick that higher education bubble. Soon.

Higher education, particularly here in Oregon, has been in an economic crisis for years now, and has resulted in it becoming an expensive investment, especially for those from lower-income backgrounds.  To a large extent, it is only the private sector that can help out—by shedding the requirement of college education and degrees for many jobs where such expensive credentialing is not required.

Often, we operate with a misconception that community colleges are significantly less expensive than a teaching university like Western Oregon University (WOU) where I am employed, and that research universities will be the most expensive among public institutions.

It ain’t so!

Consider, for instance, the tuition rates at WOU and its two immediate neighbors, Chemeketa Community College and Oregon State University.  For an Oregonian who is a full-time student taking fifteen credits per term, the annual tuition at Chemeketa will amount to $3,645, while it is $6,135 at WOU and $5,760 at Oregon State. 

Of course, decrease in state support is a big reason for tuition increases in the public system.  Rapid increase in non-academic expenditures is a significant factor as well. 

In addition, over the years, government subsidizing higher education has also contributed to tuition increases.  Political Calculations” noted that between 1976 and 2008, there is “a really unique correlation between the average annual tuition at a four-year higher education institution in the United States and the total amount of money the U.S. federal government spends every year.” 

Government's role in subsidized loans to students has an effect which is not that different from how low interest rates led to higher home prices during the real estate bubble years. 

When monthly payment amount is a critical variable in the home purchase process, low interest rates make it possible for buyers to go after larger-value homes.  However, soon the homeowners also sense this, and home prices are correspondingly adjusted upwards. 

The later entrants to this crazy market do not realize that such a system will only help those who are already homeowners and, before they know it, those who joined this game towards the end find themselves "underwater."

In higher education, colleges and universities, like homeowners looking to sell in a bubble market, have been similarly adjusting their tuition upwards.  The net result is that increasingly students now are like the late entrants to the real estate bubble, and end up graduating with debts, loans, and underemployment that do not justify the costs.

In such a higher education bubble, we are wasting considerable individual and taxpayer investment through requiring college degrees for many jobs where such qualifications are way more than needed for productive performance. 

One better model could be for employers to appropriately scale down the higher education requirements.  And, by offering to pay for college courses as rewards for productivity on the job, they could actively encourage employees to value education as a life-long learning experience.  After all, there is infinitely more to education than pecuniary calculations, which is why I teach, and that too in Geography!

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