The Education Bubble
Zoe Fox (@zoebfox) of Mashable covers: Diploma or Dropout: The Entrepreneur's Dilemma:
"In May, Facebook investor and PayPal founder Peter Thiel launched the “20 under 20 Fellowship.” It awards $100,000 to students to pursue entrepreneurship. The motley crew of 24 fellows (20 total teams) will substitute traditional academics for two years of tutelage under Thiel’s oversight.
While the benefactor has two degrees from Stanford, he’s infamously outspoken on the over-hyped status of higher education. Thiel believes his fellowship will help solve the bubble of underemployed American degree holders and nourish the creative spirit in the America’s business environment."
Sarah Lacy (@saracuda), previously at TechCrunch, adds to the conversation: Peter Thiel: We're in a Bubble and It's Not the Internet. It's Higher Education.
"Like the housing bubble, the education bubble is about security and insurance against the future. Both whisper a seductive promise into the ears of worried Americans: Do this and you will be safe. The excesses of both were always excused by a core national belief that no matter what happens in the world, these were the best investments you could make. Housing prices would always go up, and you will always make more money if you are college educated."
The Education Bubble seems to be a discussion of Elitism - the old value system where the fruits of higher education is an unchallenged story. Now that story is slowly devolving into modern myth.
Sarah Needleman (@saraheneedleman) recounts a horrifying story in her Wall Street Journal column "The Accidental Entrepreneur". No, not the story of inventory software that did not scale with a small business (the primary intent of the story). But the story of an entrepreneur with $200,000 in student loan debt, who then borrows $60,000 more to open the fumee cigar shop. [Update: This "Best Kept Secret" in Austin really was well kept... it closed in 2011).
MarketWatch has a timely article by the firm LeClairRyan about the Tuition Bubble [2/2015: the story at this link is no longer available].
"Both the mainstream media and education-focused publications such as The Chronicle of Higher Education have noted the growing sense that higher education is overpriced and under-delivering, but the risks this poses to higher education risk management has yet to be adequately explored, the attorney contends. The cascading effects of a bubble collapse "would impact risk analysis and preparedness in manifold ways,"
Smith notes. "For risk management professionals, a useful thought exercise is to envision an environment marked by plummeting enrollments, shrinking endowments, and disappointing levels of tuition income. Over the long-term, what might such a collapse mean for higher education and society?"
The Bottom Line:
1 - Colleges are being run like a business, you have to decide if the ROI is good enough.2 - You have to sell a lot of $10 cigars to pay off $250,000 in debt.
3 - $250,000 buys a pretty nice house in Austin, Round Rock, or Cedar Park.
The sheepskin that you receive at Graduation should not be a Debt-Sentence.
~Xolo
[Updated 2/2015]