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Do we have a college bubble?
- By Tim Heston
- June 16, 2015
I remember hearing about cracks in the housing market, whispers of shady lending practices, and about the “soft landing” many thought the real estate market would take. I also remember thinking that, well, that made sense. Sure, home prices seemed to be ridiculous. But people have to live somewhere, right?
We’re now hearing about sketchy lending practices again, about “robosigning” of lending documents—not in housing, but in student loan debt. According to a recent Bloomberg report, federal student loan debt in the U.S. has more than doubled since 2007, from $516 billion to $1.2 trillion. Private loans add another $150 billion to the total.
The similarities between housing and higher education are a bit eerie. Housing prices have skyrocketed faster than wages and inflation. So has college tuition. Homes gave us the quintessential asset bubble fueled by financial wizardry, but underlying all that was the implicit (though not officially stated) government guarantee of all those loans purchased by Fanny Mae and Freddy Mac. Many higher education’s customers (students) attend thanks in part to federal loans.
We can point fingers all we want—to lenders, government, or whomever else—but in the end the responsibility goes back to us, the consumer.
As consumers we felt we needed a house. It was (and still is for many) the American thing to do. And the investment would pay off, right? We assumed homes would always increase in value. OK, not so much.
Today people say that if you want to go anywhere in this world, you need a four-year degree. The statistics show that people who graduate from four-year institutions do far better than most. So on the surface, the investment would seem to pay off—right?
There’s a subtlety here that I think we may be missing. There’s no denying the numbers. People who get at least a bachelor’s degree do indeed earn more in the long run, on average. The numbers vary widely, though, and some of the top earners may skew the averages. A petroleum engineering major has a different financial future than a philosophy major.
Also, does the college education itself cause the higher earning potential, or is it the characteristics of the people who happen to attend college? Petroleum engineers probably wouldn’t be doing as well financially without their degrees, but could we say the same for a business major?
Like housing, people view a four-year college as a necessity, the ticket to entry for a middle-class life. So if students engage themselves and do well enough in school to be accepted to college, they usually go. Those who don’t engage and do well go to community college or directly to a low-paying job. I’m really generalizing here, of course. Not every academic star chooses college. Organizations like UnCollege and others provide alternatives for them. And I’m also not considering many successful people in the manufacturing industry who attended a two-year technical school and went on to a successful career in metal fabrication, welding, machining, or another specialty.
Some are noticing, and the news has reached broad media outlets, including The Wall Street Journal. Hands-on skill, curiosity, and engagement carry people a long way, no bachelor’s degree required.
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The Fabricator is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The Fabricator has served the industry since 1970.
start your free subscriptionAbout the Author
Tim Heston
2135 Point Blvd
Elgin, IL 60123
815-381-1314
Tim Heston, The Fabricator's senior editor, has covered the metal fabrication industry since 1998, starting his career at the American Welding Society's Welding Journal. Since then he has covered the full range of metal fabrication processes, from stamping, bending, and cutting to grinding and polishing. He joined The Fabricator's staff in October 2007.
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