Is The Higher Education Bubble Finally Bursting?

Earlier this week, the Wall Street Journal reported that private colleges are seeing precipitous declines in enrollment.

From 2010 to 2012, more than a quarter of all private colleges saw their incoming classes shrink by 10 percent.

In contrast, from 2006 to 2009, fewer than 20 percent of private institutions experienced decreases of this magnitude.

This decline resembles similar trends in the other higher education sectors. In March, USA Today reported that from 2012 to 2013, for-profit and community college enrollment declined by 8.7 percent and 3.6 percent, respectively, and Inside Higher Ed showed that four-year public college enrollment declined by 1.1 percent in that same time period.

In many ways, these declines are long overdue. For decades, consumers of higher education paid exorbitant sums for an education that had an increasingly questionable value.

It seems that they’re finally catching on. As the Journal piece noted, the private institutions most affected by enrollment decreases are middle-tier schools that have weak academic offerings and little scholarship money but charge tuition comparable to that demanded at better schools.

Perhaps parents and students are seeing the dreadful statistics on student debt and deciding that their money is best spent elsewhere.

Since college enrollment overall is down 2.3 percent, it’s possible that many students are not simply going to cheaper institutions, but are forgoing college entirely.

To be sure, it’s not entirely clear what’s driving these declines. However, it seems that the strongest candidate is the Great Recession.

Some background is necessary. Neither the outrageous cost of college nor burdensome student debt are new phenomena; both have been building for decades.

Before the financial crisis, though, the labor market could easily absorb the many graduates from second- and third-rate schools with limited skills.

Moreover, the federal student loan program provided a cushion for poorer families who couldn’t otherwise afford college.

Consequently, policymakers, students and families could turn a blind eye to the mounting costs. The recession, however, exposed the bloat in higher education.

For one, the default and delinquency rates on student loan debt increased dramatically from 2007 to 2012, indicating that students were either assuming debt without taking reasonable steps to repay it or seeing any such plans evaporate due to the weak job market.

In any event, it became clear that their investment in higher education was not paying off. The question of whether college was "worth it" also became salient once researchers found that nearly half the jobs recent college graduates obtained do not require a college degree.

It therefore makes sense that parents and students would begin to reconsider the value of higher education.

Sadly, though, the students who have opted out of college entirely are probably making a mistake. In general, a college education is a wise investment.

Indeed, many studies show that if one wishes to obtain long-term economic and social gains, college is a good bet.

One small indicator is that although following the recession employment rates decreased for high school graduates by 9 percent and for non-high school graduates by 14 percent, they actually increased for college students by 9 percent.

Furthermore, a more highly educated workforce yields greater human capital, an engine for economic growth.

To that end, we shouldn’t cheer the fact that families are forgoing higher education, even if they’re doing so for justifiable reasons.

Instead, we should promote responsible higher ed reform so that college students can obtain the skills they need to advance their careers without committing themselves to decades of debt.

This piece originally appeared in Washington Examiner

This piece originally appeared in Washington Examiner